Company profits rise, wages stagnate

Posted: March 4, 2008 in society
Tags: , , ,

company-profits.jpgWe always hear about company executives’ salaries and enumeration packages rising astronomically compared to what the average age earner takes home, but I don’t see figures too often comparing company profits with worker’s wages. Every time unions talk about wage rises (and let’s remember that unions themselves are part of the system and therefore already often err on the conservative side with their wage claims), we’ve got employer organisations up in arms, painting scenarios of businesses having to go out of business and workers losing jobs if the claims go through. The spin to sell these wild exaggerations are tight profit margins and wages killing profits already.

The Sydney Morning Herald published figures this morning painting quite a different picture. Companies in Australia have seized on strong economic conditions to take their profits to a record proportion of the total economy, while the share paid to workers as wages continues to tread water. The ABS released figures yesterday showing the nominal GDP’s company profit share grew by 15.5% in the past 18 months (excluding mining companies!). In contrast, salaries and wages increased by 0.9% in the three months to December 2007, the smallest gain in 3 years. Company profits also increased during the same period, but by 3.9%, exceeding the economoists’ 2% expectation by almost 100%.

The big winners according to the Herald have been construction and retails firms, which raised their prices above and beyond their costs because of strong demand. ABN Amro’s Chief Economist Kieran Davies added that wages did not made a dent in company profits because of high immigration, the retention of older workers and the shift in bargaining power to business under the previous government. Will the Rudd government change this imbalance? No – it’s systemic.

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