Professor Charles Goodhart – professor emeritus at the London School of Economics – told a European Central Bank forum that the aging of the world’s population will reduce the supply of workers, tighten labor markets and lead to a salary increase :
“In many key continental countries, the growth of the working-age population is not going to slow, it will actually decline. So all the factors that led to an increase in the workforce, the accompanying reduction in bargaining power, the decline of unions, etc., all of this will now be reversed. And we are already starting to see… a fairly rapid shortage of labor in many sectors ”…
“This [will make] labor availability, to be out of your ears, to be hard to find, and people will raise wages in order to cope with the labor shortages they will increasingly face, not just temporarily.
“It’s not transitory. It is there for the long term ”.
I have used similar arguments regarding the impact of immigration on wages in Australia.
In a nutshell, the pre-COVID norm of importing 180,000 to 200,000 workers each year has rapidly increased the supply of labor in Australia, keeping unemployment higher than it ever is. would otherwise have eroded workers’ bargaining power and contributed to weak wage growth across Australia.
So, if policymakers are serious about driving higher wage growth in Australia, immigration should not be reduced to pre-COVID extreme levels.
Unfortunately, the federal government has taken the opposite approach and plans to increase net migration abroad to 235,000 people per year ad infinitum, according to the intergenerational report:
The inevitable result will be lower wage growth.