WTF is the WPI? | Ask An Economist

What is the Wage Price Index, and what does it mean for the rest of us?

In this episode of Ask An Economist, Richard Denniss & Matt Grudnoff unpack the WPI, why wages are low, profits are high, prices are high, and what can be done about it all.

If you have a question you want answered, leave it below in the comments!

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[beesplaining]

We need royal commissions to investigate how governments lie about economics and to investigate the level of gullibility of the Australian public. Two related topics!

[M.-.D]

Multiple State (Labor) Governments are offering real wage cuts.
This is most evident in teachers, nurses, and junior doctor awards. 2.5% offered along with them trying to introduce a bunch of ‘cost saving measures’ which all result in worse working conditions.

I have always been against industrial action but after the contempt shown for the working class during the last two years and now being told ‘we’ need to shoulder the burden of inflation I have had enough. Profits are up, grocery prices are up at the same time as margins are growing, I deserve to go to work and not go backwards - especially when working as a public service worker in a public hospital!

[danwhythough]

If you see any CEO's out in the wild, please give them money to avoid being crushed under the oppressive weight of high wages.

[andrewwoods]

This was the inherent problem with electing Liberal Lite (Labor), they are conservative right wing, there for the one percent not the Australian Nation. Some things have advanced but of course there are the downsides, which negates the upside. No mater how you toss the salad the 3, Lib lite, liberal and national are wholly owned subsidiaries of the 1%. We are only marginally better off without the narcissistic two.

[davidwilkie]

Not just looking at it, a full reiteration of the Accord based on the "do or die" situation that democracy has been put in by dark money profiteering.

[JamielDeAbrew]

And when business complains about “skill shortages”, business needs to send more on training

[rmtsapphire]

Has this changed or on the way to being changed under Labor now?

[marleenling]

So people on pensions are doing it tuff.

[jinnantonix]

This is a load of nonsense. The WPI (like the CPI) typically matches inflation, which has been very low under the Coalition, hence the low WPI. However in the last few years, the government has needed to borrow heavily to pay for our COVID response and keep businesses employing people, and everyone agreed to this. But this borrowing has caused inflation to rise sharply, not just here but around the world. This places pressure on businesses, so they cannot afford to pay higher wages without shedding staff. This can lead to higher profits (as shown in the fabricated graph notice how 2018 happened twice lol) however that is good, because companies then need to pay more tax on those profits, and so the government is already collecting more tax revenue. Higher inflation with associated wage growth will quickly lead to higher unemployment, and yes it will also lead to wage price spiral (which it always does in the case of high inflation). But most people in Australia are private employees of small businesses, so the burden is either on wage earners, or they get more people on the dole - and in that case everyone pays more for consumer goods. There is no simple answer, we have to pay somehow for the excess borrowing. The problem was caused by a combination of the GFC and COVID encouraging overspending/borrowing, and so now the community suffers. The idea that this is some evil conspiracy by capitalists, resolved by offering more free services or raising wages in the public service, is propaganda for the gullible.