Businesses hiring younger staff rather than bumping up wages: RBA
Businesses are taking on less experienced, cheaper staff rather than giving wage rises to existing workers, the Reserve Bank has found as it tries to dampen expectations of an official rate increase next year even as major banks push up the price of fixed mortgages.
In a sign the RBA believes it will be a slow grind for workers to fatten their pay packets, it used its quarterly economic update to argue claims of a nationwide wages breakout are overblown while revealing a spike in the number of people leaving a job for a better one.
The Reserve Bank says rather than paying higher wages, employers are looking for less-experienced staff.Credit:Gabriele Charotte
The bank this week axed one element of its quantitative easing program put in place to support the economy through the coronavirus recession. But it still believes the official interest rate will remain at 0.1 per cent until 2024 while it will pump $4 billion a week into the financial system until at least mid-February.
Financial markets are betting the RBA will start raising rates by the middle of next year in an attempt to stop a lift in inflation.
Any increase in inflation hinges on wages, with the RBA on Friday forecasting growth in incomes would not reach 3 per cent until the end of 2023 despite mounting signs of worker shortages in parts of the economy. Wages growth is currently 1.7 per cent.
It said wages would struggle to pick up steam, in part due to pay freezes put in place by all levels of government. Half of the workers on individual work agreements have also gone without pay rises. Across all employment methods, more than 50 per cent of workers had pay increases between zero and 2 per cent over the past year.
According to the RBA, businesses are finding alternatives to permanent pay rises to retain staff.
“These strategies include paying targeted sign-on and retention bonuses, offering increased workplace flexibility, providing more internal training and relying more on less experienced staff,” it said.
“Liaison reports suggest that, recently, wages growth has been strong for specific jobs where labour shortages are acute (such as some types of IT professionals, tradespersons and chefs).”
While reports are growing in the United States of the “great resignation” as people seek better-paying jobs, there has been little sign of this in Australia.
But the RBA noted that while local workers stayed with their employers last year, fearful of leaving in the midst of a recession, there had been a lift in the proportion of people now moving on because they could either find a better job or “wanted a change”.
Callam Pickering, the senior economist with global job website Indeed, said many human resources departments and businesses were struggling to find staff in what he described as the tightest job market since before the global financial crisis.
That could force hirers to take on people who might not be as experienced as they had hoped.
“You could find yourself needing someone with five years’ experience but can’t get them, so you take on someone with only a couple of years and then train them up,” he said.
Mr Pickering said unemployment could end up reaching 4 per cent much faster than anticipated by the RBA, putting extreme pressure on wages growth.
“Everyone is saying it’s really tough to get people. That’s got to feed into wages,” he said.
The RBA, which expects the economy to expand by 4 per cent in 2021-22 and 3.5 per cent over the following 12 months, has said interest rates will remain unchanged until inflation and wages growth accelerate.
But there is already upward pressure on fixed mortgage rates. The nation’s largest lender, the Commonwealth Bank, on Friday increased a range of fixed rates for owner-occupiers and investors by up to 0.5 per cent.
It was the largest move by any bank since March 2018 and follows an increase by Westpac in a range of its fixed rates. Over the past month, more than 20 fixed rates covering two, three, four and five years have been pushed up by lenders.
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