Too many employers are offering workers annual wage increases of 3% or less in the current round of collective bargaining.

Any such offer if accepted will result in a reduction of real wages.

As shown in the table below from data compiled by the Australian Bureau of Statistics (ABS), Australia’s inflation rate as measured by the Consumer Price Index (CPI) is currently increasing at an annual rate of 3.1% (12 months to June 2010).

The table also shows that during periods of strong growth like the 2004-2007 resources boom, inflation tends to go even higher.

Workers know that higher prices are squeezing the household budget.

According to the ABS over the last 12 months:

• Beer prices are up 6.1%;
• Alcohol and tobacco up 8.7%;
• Electricity prices up 18.2%;
• Gas up 10.3%;
• Water and sewerage charges up 14%;
• Childcare up 5.5%; and
• Hospital and medical services up 6.7%. 

In addition, since 1998 the ABS does not include mortgage interest rates or consumer credit card charges in the CPI. For a worker with a 25 year 250,000 home loan, a 1% increase in mortgage interest rates costs an extra $37 a week.

Given these facts it’s not surprising that the Reserve Bank of Australia expects inflation to average around 3% per annum over the next two years.

Nor is it surprising that the Federal Governments database on collective bargaining continues to show that the average collective agreement continues to provide wage increases of around 4% per annum.

AMWU members have always sought wage increases above the cost of living to reflect a number of factors including economy wide and enterprise specific improvements in productivity or employers profitability.

ABS data again suggest that in the manufacturing industry in particular productivity is surging and better economic conditions are flowing through to profits.

Finally, it’s always worth looking at what senior management at your company is paying itself while telling workers to accept 3% or less. In Australia between 1990 and 2005 the average cash remuneration for a chief executive in a top 50 listed Australian company rose 564% while average weekly full time earnings for fitters, boiler makers and production workers increased by around 85%.

So if your employer suggests that you settle for wage increases of 3% per annum or less, use this information to argue for a much better deal.