{"id":3590,"date":"2017-09-07T12:29:16","date_gmt":"2017-09-07T02:29:16","guid":{"rendered":"https:\/\/testblogs.griffith.edu.au\/asiainsights\/?p=3590"},"modified":"2017-09-14T05:00:55","modified_gmt":"2017-09-13T19:00:55","slug":"explainer-how-international-competition-affects-how-much-you-earn","status":"publish","type":"post","link":"https:\/\/testblogs.griffith.edu.au\/asiainsights\/explainer-how-international-competition-affects-how-much-you-earn\/","title":{"rendered":"Explainer: how international competition affects how much you earn"},"content":{"rendered":"

Low wages growth has been a spectre hanging around the Australian economy for some time. In our series\u00a0What We Earn<\/a>\u00a0we unpick the causes for this and why some workers might be feeling it more than others.<\/em><\/p>\n

\n

The slump in wage growth is not just an Australian phenomenon \u2013 wage growth in most advanced economies has been\u00a0lower than expected<\/a>\u00a0in recent years. This is because globalisation has put us all in the same boat when it comes to\u00a0international competition<\/a>.<\/p>\n

\"\"
Earnings per hour.<\/span><\/figcaption><\/figure>\n

There are two ways that international competition can reduce wages – imported goods and migrant workers.<\/p>\n

In Australia, import prices of both items purchased by households and goods used in manufacturing, purchased by businesses, have\u00a0fallen over the past two years<\/a>. This means businesses in Australia are increasingly competing with imports. As a result these businesses are less able to afford wage increases and their workers are less likely to ask for them, in fear that they may lose their jobs.<\/p>\n

Low import prices are usually due to the goods we import (think t-shirts from Bangladesh, hardware products from China). Our imports, particularly of manufactured goods, are coming increasingly from countries where labour is plentiful and cheap, according to\u00a0research<\/a>.<\/p>\n

In fact about half of our manufactured imports come from low-wage countries, which is an increase from less than 10%, 40 years ago. This is important when we consider that\u00a080%<\/a>\u00a0of the value of Australia\u2019s imports comes from manufactured goods.<\/p>\n

When we import cheap products we are effectively importing cheap labour. This effective boost to the supply of cheap labour drives down import prices and wages in Australia. A similar effect happens when businesses outsource products or services to another country.<\/p>\n

Again this is a global phenomenon affecting all industrialised countries including\u00a0the US<\/a>and\u00a0Australia<\/a>. The most common primary motivation for global outsourcing\u00a0cited<\/a>\u00a0by companies is cost cutting. Business functions that are\u00a0typically<\/a>\u00a0outsourced are manufacturing procurement and services such as information technology, legal, facilities management, finance and human resources.<\/p>\n

International competition can also reduce wages through migration of labour to Australia, although here the empirical evidence is less clear. The effect of migration on wages depends whether it creates enough jobs to absorb the extra workers, but teasing this out is not straightforward.<\/p>\n

Net overseas migration has increased as a share of the population from\u00a047% in 2000<\/a>\u00a0to 54% in 2015. And the skilled migrant share of permanent migrants has increased from\u00a055% in 2000<\/a>\u00a0to 68% in 2015. Not only are migrants increasing as a share of the population, but a higher share of them are skilled.<\/p>\n

Please click here to read the full\u00a0\u201cExplainer: how international competition affects how much you earn\u201d<\/a>\u00a0article in The Conversation by Griffith Asia Institute member, Professor Ross Guest.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Low wages growth has been a spectre hanging around the Australian economy for some time. In our series\u00a0What We Earn\u00a0we unpick the causes for this and why some workers might be feeling it more than others. 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