Australia is now in the same league as Lithuania, Estonia and Hungary when it comes to cutting real pay, according to a new OECD report.

These are the only countries where cuts in real pay – pay adjusted for inflation – have been more severe for low-paid workers than those on higher salaries.

The OECD’s latest Employment Outlook 2024 reports that, compared with the period immediately before the pandemic, real wages are lower today in 16 of the 35 countries.

Australia’s real wages are 4.8% lower than pre-pandemic levels while across the OECD real wages over the same period have, on average, risen 1.5%.

Wages are an artefact of both market and institutional forces. As economist Thomas Piketty has noted, “technology and skills set limits within which most wages must be fixed”, while institutions such as unions and government policy determine the wage levels that actually prevail in any particular country at a given time.

In recent decades, the institutions that shape wages have been transformed. Employers today enjoy far more bargaining power than they did in the era of full employment capitalism (that is, the postwar era up to mid-1970s).

This has not been unique to Australia. The OECD reports that several countries with which we normally compare ourselves are also struggling with real wage decline.

These include Canada, New Zealand,........

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