Big Super’s credibility gap on wages exposed

Big Super has been found out for denying that lifting the superannuation guarantee will have to be paid for by some combination of reduced take-home pay, jobs or profits.

Imagine the uproar if a big bank was found out for saying one thing in public to influence a policy debate material to its corporate interests while suppressing incriminating evidence that contradicted its position.
Big Super has now been found out for doing just this after trying to deny that the scheduled increase in workers’ compulsory superannuation payments – from 9.5 per cent to 12 per cent of wages over the next five years – will have to be paid for by some combination of reduced take-home pay, jobs or profits.

Industry super has finally conceded that higher contributions mean less take-home pay. Jessica Shapiro

Left-leaning think tanks the McKell Institute and Australia Institute similarly have argued there is “no evidence” that forcing employers to pay more into workers’ superannuation accounts means they will likely pay less than otherwise into their current take-home pay.

But as Michael Roddan reveals today, Industry Super Australia, the lobby group representing 15 union-backed industry superannuation funds, repeatedly had denied requests from The Australian Financial Review for access to in-house research that suggested otherwise.

The research – a presentation given by ISA senior analyst Bruce Bastian at an academic conference late last year – has finally been submitted to a Coalition-controlled backbench committee. Mr Bastian’s analysis of two decades of enterprise agreement data shows, not surprisingly, that the trade-off costs of a higher super contribution are felt through numerous channels: “In addition to lower wages, costs can also be borne by employers through a reduction in profits, by consumers through increases in prices, or via lower equilibrium employment.”

This finally moves the debate on to more solid ground already occupied by the Henry tax review a decade ago, the Reserve Bank of Australia, the Grattan Institute and the Australian Council of Social Service.

The political advocacy of Big Super has been reluctant to cede the point because it might strengthen the push by Liberal MPs to dump the scheduled super contributions increase.

The Financial Review has suggested that the trade-off between super and wages is not, of itself, fatal to the case for increasing the superannuation guarantee. Instead, it turns more to the merits or otherwise of trading higher pay now for higher retirement incomes in the future.

That is a tougher case to make amid the biggest job market collapse since the 1930s Depression. And it would be harder still if the Fair Work Commission accepts the ACTU’s similarly fallacious arguments for lifting award wages by 4 per cent in the middle of such a job market shakeout, even for those earning $100,000 or more.