The amount of revenue earned by Australian corporations which gets sent to shareholders is rising – while the amount received by workers in the form of wages is going down. According to figures, the proportion of gross domestic product (or GDP) at factor income which ended up as of dividends received by shareholders went up by a third over the course of the last financial year. But the amount by which wages rose was much smaller, at just 2.3%.
Overall, the percentage of GDP at factor income which constitutes corporate profits is now almost at 30%. This has risen significantly over the last few years: as recently as 2015, this was closer to 24%.
Wages, meanwhile constitute just under 24%. This has fallen in recent years: in fact, the figures show that in 2015 the proportion of GDP which went on wages was higher than that which went on profits just three years or so ago.
The figures were released by CommSec, known in full as Commonwealth Securities, which is an internet stockbroker firm.
The figures also revealed some specific numerical amounts, too. They showed that between the months of February and June this year there was likely to be approximately $30bn Australian dollars paid out to shareholders in the form of dividends. Compared to last year’s February onwards earning period, this is a rise of around $8bn. In that period, the figure was recorded at just $22bn.
Reaction from academics and politicians has been mixed.
Speaking to ABC, John Buchanan – who is a professor at the Business School based at Sydney University – said that the power to redress the balance laid with large firms. ‘It’s usually the sector that sets the standard, so wage movements in the big companies actually are reported and that can set the reference point for a community wage norm,” he said. And he also warned that there could be long-term effects if the accumulation of profit in the here and now was emphasized. “I don’t think we have the right balance….I do think that there is too much focus on short-term profitability,” he argued.
But Warren Hogan, from the University of Technology Sydney business school, was more direct. ‘The data, and the reality today, show that there is a much greater return to capital than there is to labor, and the wage/profit share is at quite an extreme level,’ he said.
The figures also reveal changes over longer periods of time. They show that back in 2010, the wage proportion was just under 24% – while corporate profits were almost at 30%.
The debate between wages and profitability focuses in large part on productivity. It is often claimed that if an economy – or individual units within it, such as workers or firms – are more productive, then profits and hence wages should rise.
Philip Lowe, who is the Governor of the Reserve Bank of Australia, revealed this focus in a speech to the Australian Industry group last year. “We also need to keep focused on the critical task of raising national productivity.”
But according to some, that’s not the only approach. ‘If we took that approach, hairdressers and barbers would be living on pauper wages,’ Professor Buchanan told ABC. ‘We should be looking at the distribution of productivity across society, not just in the enterprise, and if we take that broader look on the determinants of productivity we usually get a better outcome.”