Despite Australia continuing its nearly three-decade record of uninterrupted economic growth, albeit weakly, wages stubbornly refuse to grow.
It’s the same story in many developed economies, such as the US and the UK, as pay rises become few and far between, and growth slows in part as a result with no respite in sight.
While politicians and economists continue to wring their hands over the fact, the catalyst for wage growth might come from an unexpected source.
AOC and economic activists
Highlighting the potential movement is an unlikely American politician.
While Donald Trump’s Twitter spats are almost the stuff of legend, it’s been another US politician, Alexandria Ocasio-Cortez, that has been making waves on social media since taking office in 2018.
29-year-old Ocasio-Cortez, or AOC as she is known on Twiter and beyond, has enjoyed an almost unprecedented shot to fame, going from Brooklyn bartender to the youngest woman ever elected to Congress in a short period of time.
Once private equity took over, they fired 38,000 workers w/ no pay. We can fight back. pic.twitter.com/7RcdJHP91C
— Alexandria Ocasio-Cortez (@AOC) November 23, 2018
In the process, she’s garnered almost 3.5 million Twitter followers and hijacked headlines around the world.
“She’s the first woman on the American Left to really get social media and to realise that there’s a way of playing the same game as Trump but from the Left,” economic historian and former Harvard professor Niall Ferguson told Your Money’s Ticky Fullerton on the sidelines of the Australian Financial Review Business Summit.
“She’s pioneering it,” he explained.
“If you want to get a lot of traction on social media you have to say things that are outrageous, that get people on the other side indignant and that’s the Twitter storm that you actually want.”
Championing ideas like taxing every dollar of income over $10 million at a rate of 70 per cent and transitioning to 100 per cent renewable energy within a decade for example, unsurprisingly created a stir in some American political spheres.
Busting big business
Significantly, behind the rise of political figures like AOC and presidential hopeful Bernie Sanders has been a groundswell of support for tackling climate change and economic inequality.
“Much that happens in the world today began on campuses. The notion that there should be a kind of ethical investment strategy really dates back to campus activists pressuring university foundations to divest from anything they didn’t like,” Ferguson explained.
You only need to look as far as mining giant Glencore’s decision last month to cap future coal activity to see that activism is alive and well.
The decision was spurred by increasing pressure from Climate Action 100+, a $44 trillion investor group made up of some of Australia’s largest super funds.
“The more focus there is on meaningful change in policy to mitigate the effects of CO2 emissions, the more external pressure there will be on companies to change their ways,” Ferguson explained.
“Let’s face it there’s a lot of sitting ducks here in Australia which is a major exporter of coal to China which is the economy which is doing the most damage to the planet right now.”
So where’s my pay rise?
But while lobbying for environmental divestment has a long history, it’s the potential for investment groups to target raising wages that would be revelatory.
“We usually see pay rises as something pursued by trade unions but in the rest of the world the unions are so weak that that is scarcely is happening. Maybe it’s going to come from this new direction, pressure on boards from left-wing activists, that leads them, names them and shames them into raising wages,” Ferguson said.
It’s that issue of measly minimum wages that AOC has spearheaded since coming to Congress.
In fact, wages are so low today compared to actual worker productivity that they are no longer the reflections of worker value as they used to be.
— Alexandria Ocasio-Cortez (@AOC) February 26, 2019
Economic discontent is evidently a powerful force.
It is, after all, what saw Sanders, a relatively unknown senator from Vermont, seriously challenge political heavyweight Hillary Clinton to become the Democratic Party’s 2016 presidential nominee.
“Whether it translates into a wider set of, let’s call them left-wing objectives, like raising pay I think that will be interesting to see.”
Politics and profit
While that discontent is not as pronounced in Australia, the success and size of groups like Climate Action 100+ have perhaps paved the way to pressure big businesses to proactively increase salaries.
It is, in some part, what the Federal Opposition will campaign on leading up to the May election, with shadow treasurer Chris Bowen on Wednesday declaring that “what we see is that profits continue to grow but wages simply do not.”
It’s a platform that leader Bill Shorten doubled down on this week.
“We are witness to the end of the old economic orthodoxy, the notion that supply and demand in the labour market is enough to boost wages,” he said, speaking at the AFR Business Summit.
“The minimum wage is nowhere near a living wage.”
However, politicians that go too far may pay the price though, Ferguson warns, particularly in a divided America.
“I think that’s moving the debate on the Democratic Left, within the Democratic Party and its debate about what candidate they should field in 2020 in a way that could ultimately be problematic for the Democrats,” Ferguson said.
“These ideas may seem cool now but they will not seem so cool but they won’t seem so cool when there is just Democratic candidate up against Donald Trump and middle America is watching.”
Watch the full interview above.