New research finds cancelling superannuation increase would not boost wages

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The onus must lie on those pushing for a super freeze to prove beyond reasonable doubt that snatching a guaranteed remuneration boost from millions will result in an equivalent wage boost. We could not identify any evidence.

A new report to be launched by the McKell Institute today finds no evidence that increasing the super guarantee, from 9.5 per cent to 12 per cent, would cause take-home wages to drop.

The research was prompted by the Grattan Institute's well-publicised claim that "$20 billion" would come out of Australian take-home wages if the superannuation guarantee was increased as scheduled. Grattan's assumption is that every extra dollar paid by an employer into an employee's super would be a dollar withheld from a potential wage increase.

The new report finds no evidence to support Grattan's claim, which has been cited by several Liberal MPs agitating for the federal government to drop its scheduled super increase.

"Grattan's neat one-for-one tradeoff assumption is at odds with conventional economic theory, so our team wanted to see if historic data provided any evidence for the claim. We found none," said McKell Institute Victoria executive director James Pawluk.

"If Grattan's direct tradeoff theory were correct you'd see some sort of historic correlation over the past 30 years between super guarantee rises and trend-breaking wage dips. No matter what labour market data you use, and how hard you dig, no such correlation exists.

"This is consistent with what you would expect. In real world conditions you would assume extra costs on employers to be passed on and absorbed in a range of ways. What actual boss would respond to a mandated super guarantee increase by very carefully removing that exact same amount from their employees' future wage rise? The actual world just doesn't work that way.

"Frankly, it's irresponsible to use a completely unfounded assumption as a starting point for back-of-a-beer-coaster arithmetic. That $20 billion figure was erroneously derived for a headline and it should be discarded from the public discussion."

Mr Pawluk said the slow economy and stagnant wage growth actually added impetus to raising the super guarantee.

"The only direct lever Josh Frydenberg has that will mandate a hard increase in the remuneration of millions overnight is the super guarantee increase," Mr Pawluk said.

"Given the current economic conditions, anyone arguing for a significant transfer of money from employers to employees to be cancelled is making a monumental call.

"The onus must lie on those pushing for a super freeze to prove beyond reasonable doubt that snatching a guaranteed remuneration boost from millions will result in an equivalent wage boost. We could not identify any evidence."

Read the new report here

 
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