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Economy-wide benefits of wage increases outlined to inquiry
The case against freezing teachers’ salaries was made on day 5 of hearings for the “Valuing the teaching profession — an independent inquiry”.
"Wage freezes permanently reduce the nominal wage base and accumulate in further income losses over time ... workers continue to suffer income losses many years after the wage freeze is lifted," senior economist at the Centre for Future Work at the Australia Institute Alison Pennington said.
“The depth and severity of [the current] economic crisis is so great that it’s really inconceivable that we would be considering cutting the wages of absolutely anyone,” Ms Pennington added. “Spending on wages bills in the public sector … should be pursued as a genuine economic reconstruction policy.”
On the broader issue of economic growth, Ms Pennington said: “The latticework of schools provides a pathway for economic reconstruction that doesn’t leave any … regions behind.”
“The redistributive effects of investment in public education…are critical. Time is of the essence in crisis and if we’re looking for the quickest way to get investment into a regional area and to generate jobs and keep businesses alive, increasing the public school funding base and the wages of the people who are running the schools is a very quick, simple and effective way to keep greasing the wheels of economic activity across the state.”
Ms Pennington explained that the severity of the global financial crisis (GFC), beginning in 2008, was initially cushioned in the local economy by wages growth built into public sector collective agreements. Initially private sector wages growth dipped but public sector wages growth provided spending that allowed private sector wages to bounce back. She described the wages recovery, anchored by public sector wages growth, as a “glory moment in public policy”.
The foundations of the current economic crisis — very low inflation — were seeded by the wages cap placed on public sector workers since 2011, the inquiry heard. The conditions of low wage growth expectations in the public sector were reproduced in the private sector, which lowered overall wages growth and hence further reduced consumer spending.
Ms Pennington said government expenditure on wage increases in labour-intensive fields such as public education would generate more jobs than money invested in construction, a more technology and capital intensive sector.
Ms Pennington co-authored a written submission to the inquiry with Centre for Future Work economist and senior director Dr Jim Stanford.
Kerri Carr is the deputy editor
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