Wage suppression strategies and the termination of enterprise agreements could cost Australian’s $100 billion in lost retirement savings, according to a report from the Centre for Future Work.
The report estimates that superannuation balances could be cut by $30,000 to $270,000 for a 40-year-old worker subjected to one of the eight wage suppression strategies, such as wage freezes, wage caps, reduced penalty rates, and the termination of enterprise agreements.
Centre for Future Work director Dr Jim Stanford said in the report that “aggressive measures implemented by employers in recent years to suppress wage growth, and even to significantly cut wages” was a “key factor behind the wage slowdown in Australia.”
“These actions directly undermine superannuation savings, and hence the future retirement incomes of affected workers,” he said.
“The worst impacts are experienced in the case of enterprise agreement termination, an increasingly common strategy invoked by employers to cut wages by 40 per cent or more.”
The report also cited several resource, manufacturing and transportation firms that have frozen base wages in recent years, including Rio Tinto, Qantas, BlueScope Steel and Coates Hire.
Furthermore, if these wage suppression strategies continue, the government and all Australians will bear the brunt of “resulting costs: tax revenues on superannuation contributions and investment income will be lower, and payouts of the Age Pension benefits will be significantly larger (since workers’ own superannuation incomes will be reduced),” said Dr Stanford.
The report, which was commissioned by the Transportation Workers Union, “estimates the damage to government budgets at between $31 and $37 billion (in real 2017 dollar terms) if these wage suppression measures are allowed to stand.” It concluded by stating that the increasing use of wage suppression strategies was a relevant and concerning development “if the goal of the system … is indeed to maximise the retirement benefits of superannuation fund members.”