Everyone knows wages growth in Australia has been bumping along at record lows, but there are reasons to believe we may be at a turning point.
Wages for private-sector employees grew a paltry 1.9 per cent over the year ended the March quarter, according to the most commonly cited measure, the wage price index.
That's the lowest pace of growth clocked by the Bureau of Statistics since it started measuring wages this way in 1998. Wage increases were enough to compensate the average employee for inflation in consumer prices of 1.3 per cent, but only just.
Several factors have been keeping a lid on wages. Most obviously, a higher jobless rate has led to more spare capacity in the labour market.
However, wages have been even weaker than you would expect for where the jobless rate has been. This has been part of a global trend of weaker than expected wage growth.
Australia's decline in national income since the end of the mining boom goes some way to explain it, as does a recent fall in inflation expectations (if you don't think inflation is going to be particularly high, you don't demand a pay rise as passionately).
A more flexible labour market has also given employers more power to curb pay rises when demand for their products is weak.
Indeed, the unit cost of labour for employers has hardly grown for the past four years, meaning wage increases have merely compensated employees for increases in their productivity.
Do you think that's unfair? Perhaps. But for business, it's been exactly what was needed during a time of economic weakness to ensure they could keep staff on, rather than fire them.
Australia remains a high-labour-cost country, but this weak growth in labour costs means our international competitiveness on this measure has improved recently.
Of course, eventually, as the economy improves, you'd expect employers to find a bit more room to compensate employees.
Finding this uptick in wages will be key to identifying the next upswing in the economy.
Already, Australia's jobs market has proven stronger than predicted by both Treasury and the Reserve Bank. The jobless rate has fallen faster than expected, and has been remarkably stable in recent months at about 5.7 per cent. This suggests some of the spare capacity in the labour market has been used up.
Now that the jobless rate is falling, we should expect to see wages improving.
The Reserve is watching closely for signs of a pick-up.
It's true that the wage price index remains weak, but it is a narrow measure of wages growth. It purposely strips out a number of things to arrive at a "pure" measure of wages growth. For example, it doesn't include bonuses, promotions or non-monetary benefits.
If you add in bonuses, wages growth in the private sector picked up to 2.6 per cent over the year ended March quarter, up from 2.1 per cent annual growth ended the December quarter.
There is also a glimmer of light in a keenly watched measure of "average compensation per employee" contained in the quarterly national accounts. This measure is referred to as the AENA, or "average earnings from the national accounts".
AENA doesn't strip out compensation effects, like promotions, bonuses and non-monetary benefits, and so has the potential to provide an early guide on increases in compensation through these other channels.
AENA has been particularly weak in recent years, as it historically is during periods of low wages growth, like the last recession.
But it is also the measure that also tends to pick up first when wages are picking up.
And AENA popped up in the March quarter, growing 0.4 per cent, potentially signalling a bottoming in wages growth.
Sure, AENA is a more volatile measure of wages growth, but the uptick should give the merchants of economic doom and gloom reason for caution.
It doesn't guarantee the average worker is about to get a bigger pay rise. But if the prospects for a pay rise were improving, this is exactly what you'd expect to see.
