Workers in Australia are now receiving a greater share of national income than before the pandemic, with an extra $28bn flowing into their pockets over the past year. According to Westpac senior economist Pat Bustamante, the tighter post-Covid labour market has increased labour's share from an average of 53.8% in the 2010s to over 55% currently.
The Australian Bureau of Statistics divides national income between labour and capital. Labour share includes wages, salaries, and benefits, while capital share covers profits for owners of capital and land. Even small shifts in this division translate to tens of billions of dollars in a $2.8tn economy.
Unions had previously criticised a surge in profit share in 2022, and accusations of profiteering arose as inflation eroded real wages and mining revenues spiked. However, Bustamante noted that companies are now finding it harder to pass on higher wage costs, benefiting workers and easing inflationary pressures. Meaningful minimum wage increases have also contributed.
Bustamante suggested that a high labour share could become a new equilibrium, similar to periods of low unemployment in the past. This is a positive starting point as workplaces prepare for AI's potential impact. If AI boosts productivity as estimated by the IMF, a tight labour market could maintain the wage share.
Gianni La Cava of e61 Institute said the labour share is a good indicator of worker bargaining power, though debates over distribution are often political. He noted that sustained increases since Covid would suggest ongoing cost pressures for firms. Independent economist Saul Eslake highlighted that the distribution of national income is a political, social, and economic issue, with unions arguing for fair sharing of productivity gains.
