The Relationship Between Superannuation Contributions and Wages in Australia – Centre for Future Work (TAI)

ABSTRACT – Extract

Employers’ minimum statutory superannuation contributions, presently set at 9.5% of eligible earnings, are scheduled to increase to 12% in five annual stages beginning July 2021. Some policy analysts and business lobbyists oppose that increase. One of the arguments invoked by opponents of expanded superannuation is the idea that increases in compulsory superannuation contributions would necessarily and automatically be offset by equivalent reductions in direct wage and salary payments to covered employees. A higher superannuation guarantee rate is therefore selfdefeating, and produces (at best) a transfer of income from an employee’s working life to their retirement. This argument is being wielded in a broader campaign to cancel the scheduled increases in the superannuation guarantee. Some have even used this logic to advocate for making superannuation contributions voluntary for some groups of workers. Proponents of this view are exploiting widespread concern over the current historically low pace of wage growth, to argue that workers should forego promised improvements in superannuation to supplement their (disappointing) current incomes.

However, the claim that wages automatically and fully adjust to offset higher superannuation contributions is not supported by concrete empirical evidence. Instead, it is simply asserted that such a trade-off is somehow an obvious and widelyaccepted economic finding. Proponents of this view cite others who have also made similar assertions; but on closer investigation, these citations are circular and selfreinforcing. A group of writers cites other writers who make the same assumption – none of whom provide empirical support for the proposition. This hardly constitutes meaningful evidence or investigation.

In contrast, this report considers more concretely the historical, theoretical and empirical dimensions of the relationship between compulsory superannuation contributions and wage determination in Australia. [Cont

SOURCE: Stanford, Jim. “The Relationship Between Superannuation Contributions and Wages in Australia.” The Centre for Future Work at The Australia Institute, November 2019.

Link to document

ACKNOWLEDGEMENT OF COUNTRY

The Brotherhood of St Laurence acknowledges and recognises the Traditional Owners of the land upon which we live and work, and we pay our respects to their Elders both past and present

Produced by the librarians at the Brotherhood of St Laurence in Melbourne, Australia