Why it's not a good time to ask for a pay rise

Most Australians do not appreciate the looming ripple effect from motor closures plus mining and Qantas style cutbacks. Unless you have special skills don't press for more pay.

I do not believe the vast bulk of Australians understand that 2014-15 is going to be different to anything they have experienced. Wage rises outside award-style agreements and the banking industry will be rare.

My impression is that most Australians see the mass retrenchments planned for motor, Qantas, retail and even the public service cutbacks as something that is happening to someone else. Most say “it won’t affect me”, but the ripple effects will extend a much wider net than is currently appreciated.

Already large numbers of executives in non-banking corporate Australia are being told not to expect salary rises in 2014-15.

Accordingly if you have a key skill required by an organisation then by all means go for better pay but otherwise it may be better to keep your head down.

In the latest interim report season many companies have driven profits higher by being very tough on costs. Being able to skilfully cut costs is one executive skill that is being rewarded.

Overall wage growth in calendar 2013 at 2.7 per cent was the lowest since 2000 but the figure was boosted by the large number of people on awards that prescribe wage increases above the average and areas where there are healthy profits such as banking. (Soft wage growth hints at a hard economic slog February 19.)

When Callam Pickering revealed the wages growth slump he published a graph which I republished below. It tells a dramatic story. 

Graph for Why it's not a good time to ask for a pay rise

In the past five years the drain of top people to the mining projects increased eastern state salary levels. In particular the drain boosted salaries in manufacturing and sometimes retail as enterprises paid higher salaries to keep their skills base. Now in 2014-15 the mining project employees will start returning home and with tens of thousands of people coming on the market with the closure of motor, retail store selling contraction, and Qantas, we will see people at all levels being prepared to take good jobs at salary levels far lower than is currently being paid.

Back in 2000 and in similar tough times the public service was a buffer. Often there was a lift in public service hiring to offset the private sector carnage, which cushioned the economy. But in 2014-15 Treasurer Joe Hockey and Co have come to cut back expenditure and they will do it.

And style of work that pervades large areas of the public service does not translate well into what is required in modern Australia.

The hardest people to employ are people in industries like motor and organisations like Qantas where “SPC style” industrial relations agreements were signed where executives reported to union dominated consultative committees. (See Why Toyota is leaving Australia: The real story, February 12; and SPC's infinite management matrix, February 6.)

These sort of agreements limit flexibility and boost costs. Those management structures were big contributors to the closure of Ford, GMH and Toyota and they are being burned out of other organisations because they prevent the flexibility required to adapt to modern Australia.

Those who have spent large periods of their life working within those outmoded management systems will struggle if they can’t adapt.

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