Low job switching holding back wage growth

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Barriers that prevent workers from changing jobs are holding back Australia’s labor market and contributing to weak wage growth.

Employers are struggling to find staff in an ultra-competitive environment, with the unemployment rate hovering around its lowest level in 50 years.

A study by Deloitte Access Economics shows that the mismatch between worker skills and job vacancies is partly responsible for extreme labor shortages.

Additionally, Deloitte partner David Rumbens says job seekers are often not in the same places as vacancies.

In Tasmania in August, for example, there were 184 unemployed for every 100 vacancies, while in ACT there were 62 per 100.

While Mr Rumbens said there are many reasons people choose not to move for work – such as proximity to family and friends – taxes and regulatory settings also create barriers.

Stamp duties, which hit homeowners twice when they move, make moving less financially attractive.

The ultra-competitive rental market is also deterring workers from moving to find jobs, as tenants fear they will not be able to access housing.

Mr Rumbens said Australia had lower labor mobility than other countries, including the United States, and that could mean a poor distribution of labor between cities and a decline in productivity.

It can also keep wages down, as changing jobs helps workers conceptualize their worth and forces employers to ensure they regularly reassess wages.

The report says low labor mobility is partly to blame for stagnating wage growth over the past decade.

While training and skills development boost long-term mobility and skilled migration can help fill short-term gaps, the report’s authors said more needs to be done.

As well as addressing housing affordability, Mr Rumbens highlighted issues such as licensing, with individual states and territories often not recognizing qualifications from elsewhere.

Deloitte’s quarterly report also said a slowdown in the labor market was inevitable after seven consecutive interest rate hikes.

But Mr Rumbens said it would not have a uniform impact, with white-collar workers likely to fare better than blue-collar workers.

Sectors hit by high interest rates, such as construction and finance, are also likely to be hit harder.

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