Australia is currently approaching its 10th year of wage stagnation and underemployment, and Professor Ross Garnaut, the University of Melbourne's Professorial Research Fellow in Economics, believes the situation is worse than we think.
Professor Garnaut was quoted by the ABC as saying the increasing incomes of Australia's largest earners have been disguising falling wage growth for everyday Australians.
EY.com reported there are approximately 44 million hours each week of spare capacity in Australia's labour market. That equates to $649 million a week not reaching household pockets.
In his new book, Reset: Restoring Australia after the Pandemic Recession, Professor Garnaut has described the Australian economy between 2013 and 2019 as the "dog days", and said the government's actions keep Australian's underemployed.
He commented:
Economic growth continued from 2013, but with much slower growth in total output, stagnant output per person, and decline in the typical household's real wages and income per person.
In the seven years from 2013 to 2019, the whole developed world experienced slow and grumpy times, [but] Australia drifted to the back of a slow-moving pack.
Underemployment has grown and grown. Average household disposable income ended the seven lean years where it began.
What's to blame for Australia's wage stagnation?
According to Professor Garnaut, wage stagnation is a result of changes to Australia's immigration policy and the drive towards a budget surplus.
The Howard Government's immigration policy, continued by successive governments, has resulted in the nation's population growing 35% over 20 years. Further, a shift away from permanent migration and towards temporary migration integrated the Australian labour market with the global one.
"It contributed to persistent unemployment, rising underemployment and stagnant real wages during the expansion of total economic activity during the Dog Days", said Garnaut.
Professor Garnaut also commented that the increase in migrants allowed breaches of labour laws to become common, as workers had less knowledge of their rights. An example of such is the infamous 7-Eleven wage fraud scandal.
He also blamed successive federal treasurers' obsessions with a budget surplus for stagnating wage growth, saying that, by taxing more than they invested into the community, governments have short-changed Australians by slowing down the economy and lessening people's spending power.
How can investing help those affected by wage stagnation?
If a person's household income is stagnant, with no signs of gaining momentum again, investing may provide another much needed income source.
Investing is a popular means of generating passive income, although care must be taken while doing so.
At the moment, low interest rates and rising bond prices mean that cash savings accounts and investment grade bonds aren't as prosperous as they have been in the past.
One option for receiving a passive income from investing in 2021 is to invest in dividend-paying shares.
Dividend paying shares entitle shareholders to a share in a company's profits. Most dividend paying companies listed on the ASX pay dividends twice a year, but they can pay more often, or even as a once-off. It's never guaranteed that a company will pay its shareholders a dividend, but not doing so is often detrimental to its share price.
Like all investing, a personal approach must be taken when investing in dividend shares, and your individual situation must be considered before taking action.
3 high-paying dividend shares on the ASX 200
Aurizon Holdings Ltd (ASX: AZJ)
The largest rail freight operator in Australia has a current dividend yield of 7.74%.
Aurizon' share price boasts a relatively stable performance history and the company has a market cap of $6.71 billion. Its share price is currently $3.71 apiece.
Rural Funds Group (ASX: RFF)
Rural Funds Group owns a diverse portfolio of Australian agricultural assets, leased predominantly to corporate operators. It has a target distribution growth of 4% each year, which it aims to achieve by owning and improving farms and leasing them to counter-parties.
Its current dividend yield is 4.73% and its share price has a 24% return on investment over the last 12 months. Right now, Rural Funds Group's share price is $2.32.
Australia and New Zealand Banking Group Ltd (ASX: ANZ)
Australia and New Zealand Banking Group, more commonly known as ANZ, didn't pay out near the dividends this year as it has in the past. But it is predicted to bounce back in the near future.
ANZ has a market capitalisation of approximately $81 billion. Its current share price is $29.48.
