Figures released today by the Australian Bureau of Statistics (ABS) show that over the year to December, wages grew by 3.4%. For households, however, the number that really matters is what happened to wages after inflation.
Over the same period, the consumer price index (CPI) rose by 3.8%. This means real wages (wages after accounting for inflation) actually went backwards.
That’s just today’s story. The deeper story, which has now been playing out for several years, is the erosion of Australians’ sense of what a “good” wage is and how we think about wage inequality.
Many people are feeling the pinch of inflation when paying their rent, groceries, insurance, child care and other costs. That’s why even a decent pay rise can be underwhelming. Because inflation doesn’t just squeeze budgets. It quietly moves the goalposts.
Shifting benchmarks
Earning “six figures” – A$100,000 a year or more – is far from what it used to be.
For many people, cracking six figures once signalled you could live very comfortably.
Australians face a huge variety of circumstances, so it’s impossible to say a particular wage level is objectively “good”. But our estimates suggest that only around one in ten full-time workers in Australia earned $100,000 or more in 2010. By 2025, this had risen to almost one in two, at 45%.
Despite this, many households on that level of income don’t feel overly comfortable, especially in big cities where housing costs have risen sharply in recent years.
While wages have risen on average in recent years, they have not kept pace with inflation. To illustrate, if we adjust for CPI inflation, $100,000 today only has the purchasing power of about $67,000 in 2010.
So, when anyone today says “people earning six figures should be very comfortable”, they may be using an outdated benchmark given the new cost-of-living reality. That’s why many people may feel like they’re running to stand still, even on incomes that used to signal comfort.
What Australians think about wage inequality
A lot of the cost-of-living debate often mixes two different issues.
The first is whether typical living standards are rising (which is about real-wage growth).
The second is the issue of how wages are distributed across society (which is ultimately about inequality).
In my recent research with co-authors, we studied how people perceive wage inequality.
We asked a nationally representative sample of 1,500 Australians to estimate what share of full-time workers are actually on low, middle and high wages. Then, we asked what they think a fair distribution would be.
A clear pattern emerged: Australians systematically underestimate wage inequality.
The gap is bigger than we realise
Most respondents underestimated how “top-heavy” the distribution of wages is – that is, how a small group of workers at the top are earning so much more than everyone else.
This matters, because public perceptions shape policies.
If people think the wage distribution is more equal than it really is, they may be less likely to support policies aimed at narrowing gaps.
That’s not because they don’t care, but because they don’t realise the true size of the problem.
Australians want fewer workers earning lower wages
Almost all respondents in our research expressed a strong preference for fewer full-time workers to earn low wages. This desire exists across political lines and income levels.
Our results show when people are provided with accurate information about wage inequality, even far-right respondents become much more supportive of redistribution.
That’s a useful reality check, because public debate is often framed as “envy versus aspiration” or “us versus them”. Our research suggests many everyday Australians are more focused on ensuring workers are paid enough to live comfortably.
What today’s wage release doesn’t capture
Today’s numbers tell us whether real wages are rising right now.
If you want a clearer read on living standards than a single wage headline, here are three questions worth asking:
-
Are wages consistently beating inflation? Even three months of wage growth can’t undo years of lost ground when inflation rose sharply after the pandemic.
-
Where are the gains concentrated? Industry and sector and gender differences shape inequality.
-
Have we updated our mental benchmarks for how much money it takes to live comfortably?
The cost-of-living story isn’t just about today’s number; it’s about the benchmarks inflation has quietly rewritten.
Comments are closed.