Research slams employers on wages

a bunch of 20 dollar notes

“Aggressive measures” by employers to cut wage growth are threatening “severe long-run damage” to the superannuation retirement system, new research suggests

Data collated by the Centre for Future Work at the Australia Institute hints that employer efforts to suppress wage growth and cut wages have been a key factor behind the wage slowdown in Australia over recent years.

The Centre says that this directly undermines superannuation savings and the future retirement incomes of affected workers.

The report simulates the impacts of eight specific wage suppression strategies on workers’ superannuation balances – ranging from temporary wage freezes to wage caps, to more dramatic actions (such as “widespread wage theft” in retail and fast food franchises, reduced penalty rates for Sunday work, and the termination of enterprise agreements). 

Employee pharmacists expressed significant concern earlier this year following the Fair Work Commission’s decision to cut award penalty rates, with AJP readers saying that the move could drive pharmacists out of the profession.

One pharmacy owner said the decision was a “kick in the teeth” to employee pharmacists.

Last week the AJP revealed that trying to make ends meet on low pay was the biggest stressor facing pharmacists.

Today’s report found that workers’ superannuation payments are negatively affected by the suppression in wages below normal trajectories. 

The damage is then compounded over many years by the subsequent loss of investment income on foregone superannuation contributions, it says.

The report estimates that for a 40-year-old worker experiencing one of the simulated wage-suppressing measures, superannuation balances would be cut by between $30,000 and $270,000 by the time they retire. Simulated effects depend on the worker’s starting income, gender, inflation, and other factors.

The worst impacts are experienced in the case of enterprise agreement termination, which the Centre says is “an increasingly common strategy invoked by employers to cut wages by 40% or more”. 

“If allowed to stay in place, wage cuts on this scale produce losses in workers’ superannuation savings that can exceed one-quarter million dollars per person,” it says.

“The most dramatic instances of wage suppression – the termination of enterprise agreements by employers, and resulting large wage reductions as workers are placed back on minimum award conditions – can reduce the superannuation balance of a retiring worker by as much as $270,000.”

A spokesperson for the Pharmacy Guild told the AJP that “the key requirement and responsibility of employers is to comply with the relevant award or workplace bargaining agreement, and to fully meet all statutory superannuation requirements”.

“The reality is that many community pharmacy employers pay over-award wages.”

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