Priya Nair has handed her aged-care workers a pay rise every year for the past three years, and she chose none of the numbers herself. She runs a 64-bed residential home in outer Melbourne, employing registered nurses, personal-care workers and cleaners who wash, feed, medicate and comfort residents who can no longer do those things for themselves. For years, many of her staff were paid close to the minimum award rate for work that is physically exhausting and emotionally demanding, in a workforce that is overwhelmingly female and historically undervalued by the same industrial system that sets everyone else's pay. In 2023 and again in 2024, the Fair Work Commission ordered a substantial pay rise for aged-care workers across the country, funded not by operators like Priya out of higher fees, but directly by the Commonwealth government, because residential aged care is almost entirely funded by public subsidy and residents cannot simply be charged more to cover the gap. Priya's staff are better paid for it, and she does not begrudge them a cent. But nothing about how her home operates has changed to earn that increase: the same number of staff still care for the same number of residents, filling out the same paperwork, under the same funding formula. The extra money did not come from her home producing more value per hour worked. It came from a decision, made in Canberra and at the Fair Work Commission, that this work had been underpaid for too long — a very different thing from a business becoming more efficient and being able to afford to pay its people more. That distinction, invisible on Priya's pay slips but decisive for the economy, is the whole subject of this article.
Australia's industrial relations settings changed more between 2022 and 2024 than in any period since the 1990s. The Albanese government legislated two major packages — the Secure Jobs, Better Pay Act of 2022 and the Closing Loopholes Acts of 2023 and 2024 — that expanded collective bargaining, tightened the rules around casual work and labour hire, and gave the Fair Work Commission new tools to lift pay in low-paid, female-dominated sectors such as aged care and early childhood education. The government's explicit goal, repeated by the Treasurer and the Prime Minister through the 2022 election campaign and beyond, was to "get wages moving" after a decade in which pay packets had barely grown in real terms even before the 2021–2023 inflation shock cut into them further. By some measures the goal has been met: nominal wage growth, tracked by the Australian Bureau of Statistics' Wage Price Index, climbed from among the lowest annual rates on record to a multi-year high, and by 2024 wages were once again growing faster than prices for the first time since the government took office (approx.) (ABS, Wage Price Index). The harder question, and the one this article sets out to answer, is what that wage growth is actually made of. Some of it reflects the sort of increase economists regard as durable — pay that rises because workers and businesses are producing more value per hour worked. Some of it, as in Priya's case, reflects a direct, deliberate transfer of bargaining power and public money to workers whose pay had been suppressed for reasons that had little to do with economic output. And a growing body of evidence suggests that too much of it has arrived with no matching rise in the productivity that would make the increase self-funding — a gap that has to be paid for somewhere, whether in higher prices, thinner margins, or a bigger bill for taxpayers.
What the government did
The reforms trace back to the Jobs and Skills Summit the government convened in Canberra in September 2022, three months after taking office, which brought unions, employer groups and government together and produced the political mandate for the first tranche of legislation. The Secure Jobs, Better Pay Act, passed in December 2022 and phased in through 2023, made several distinct changes. It simplified the "better off overall test" that had discouraged some employers from bargaining at all. It removed long-standing restrictions on multi-employer bargaining, creating new streams — a "single interest" stream for employers with clearly common interests, a "supported bargaining" stream aimed at low-paid, female-dominated sectors that had struggled to bargain effectively on their own, and a "cooperative" stream for voluntary multi-employer deals — reversing a decades-old policy preference for bargaining at the level of a single employer. It tightened the legal test for when a worker counts as a genuine casual, aiming to reduce what the government called "permanent casuals": workers with regular, predictable shifts denied the leave and security of ongoing employment. And it gave the Fair Work Commission an explicit new object, when setting minimum and award wages, to consider the principle of equal remuneration for work of equal or comparable value — a change squarely aimed at closing pay gaps in undervalued, feminised industries such as aged care, disability support and early learning.
The Closing Loopholes Acts, passed in two tranches across 2023 and 2024, went further, and are examined in detail in this site's companion analysis of the wider re-regulation of work. The piece most relevant here is the "same job, same pay" provision, which requires labour-hire workers doing the same job as directly employed staff covered by an enterprise agreement to be paid at least the same rate, closing a channel some employers had used to pay a second, lower tier of workers for identical work.
Separately from legislation, the government used its own voice inside the existing wage-setting machinery. Each year, the Fair Work Commission conducts an Annual Wage Review, setting the National Minimum Wage and the pay rates in every modern award, after receiving submissions from government, unions and employer groups; the Commission, not the government, makes the final decision, and that independence has not changed. What did change was the government's own submission. From 2022, the government's Annual Wage Review submissions argued explicitly that the lowest-paid workers should not go backwards in real terms — a more assertive position than governments of either party had typically taken in the review's recent history (approx.) (Fair Work Commission, Annual Wage Review submissions and decisions, 2022–2025). The Commission's decisions that followed were large by historical standards: the National Minimum Wage rose by roughly 5 per cent in the July 2022 decision and by a further roughly 8.6 per cent in the July 2023 decision, with other award wages rising by a slightly smaller roughly 5.75 per cent that year, before the increases moderated to around 3.75 per cent in July 2024 and a smaller rise again in July 2025 as inflation eased (all approx.) (Fair Work Commission, Annual Wage Review decisions, 2022–2025). For a full-time worker on the minimum wage, the cumulative effect of those decisions was worth in the order of $150 to $180 a week more than they were earning in mid-2022 (approx.) — a material sum for a low-income household, even after accounting for the inflation that ate into a large part of it.
The most direct example of the government using public money, rather than the ordinary bargaining process, to lift pay is the aged-care sector Priya operates in. Following a Fair Work Commission work value case, aged-care workers received a pay increase of around 15 per cent (approx.) from mid-2023, funded by the Commonwealth government rather than out of providers' own revenue, with a further stage extending comparable increases to other aged-care classifications from 2024 (Fair Work Commission, Aged Care Work Value Case decisions, 2022–2024; Australian Government Budget Papers, funding measures for aged-care wages — see this site's companion analysis of aged-care funding). A similar model was applied to early childhood education and care from December 2024, when the government began funding a Worker Retention Payment, worth in the order of $3.6 billion over several years (approx.), designed to lift early educators' pay by around 10 per cent (approx.) in exchange for providers agreeing to limit fee increases passed on to families (Australian Government, Worker Retention Payment funding measures, 2024). Both programs target genuinely underpaid, female-dominated workforces, and both are funded directly by government rather than by any productivity gain inside the sector.
The strongest case for the policy
Put the government's defence at its best
Before this government took office, Australian workers had lived through the flattest decade of real wage growth in generations. Reserve Bank and Treasury officials spent years through the late 2010s puzzling publicly over why wages had stopped responding to a tightening labour market the way textbook economics predicted they should, and the share of national income flowing to wages, tracked by the ABS national accounts, had drifted down over decades while the share flowing to profits rose (approx.) (ABS, Australian National Accounts). Whatever the precise causes — weakened bargaining power, declining enterprise agreement coverage, a more casualised workforce, subdued competition for workers — the result was a decade in which company profits and executive pay grew while median full-time earnings barely kept pace with inflation, and then, through 2021 to 2023, fell behind it outright in the sharpest and most sustained bout of real wage cuts in the Wage Price Index's history (approx.) (ABS, Wage Price Index). On that reading, the 2022–2024 reforms are not an artificial distortion of a well-functioning wage-setting system; they are a correction to a system that had stopped delivering the outcome — wages tracking productivity and prices over time — it is supposed to deliver, for reasons that predate this government by at least a decade.
The government can also fairly say it targeted the correction rather than applying it indiscriminately. The multi-employer "supported bargaining" stream was built specifically for sectors — aged care, disability support, early learning, community services — where the workforce is overwhelmingly low-paid and female, individual employers are often too small or too financially constrained by government funding rules to bargain meaningfully on their own, and normal market wage competition barely operates because most of the money in the system comes from a government price or subsidy in the first place. In those sectors, waiting for a productivity gain to fund a pay rise was never a realistic mechanism, because the Fair Work Commission's own work value findings concluded the existing rates were not an efficient market price at all, but the residue of decades of undervaluing caring labour. And the government did not seize control of wage-setting to do this: the Fair Work Commission, an independent statutory tribunal, made every decision discussed in this article, following its own evidence-based process. Finally, secure work has a value that a pure output-per-hour lens does not capture. Reduced roster insecurity and genuine, rather than nominal, casual status can lower staff turnover and the ongoing cost of recruiting and retraining — a real economic benefit to employers, even if it does not show up cleanly in the productivity statistics used elsewhere in this article.
The evidence: what actually moved, and against what
Two numbers have to be read together to understand this topic, and almost no public debate about it does that consistently. The first is the Wage Price Index, the ABS measure of how fast the price of labour — wages and salaries for a fixed basket of jobs — is rising, independent of any change in the mix of jobs in the economy. The second is labour productivity, the value of output produced for every hour worked, examined in detail in this site's companion analysis of the productivity collapse. Wages can rise faster than productivity for a while without causing trouble, funded out of temporarily fat profit margins or a run of good luck in commodity prices. They cannot do it indefinitely. Over any sustained period, if wages rise faster than the economy's capacity to produce more value per hour worked, the gap has to be paid for by someone — through higher prices, through thinner business margins, or, as in aged care, through a bigger transfer from taxpayers. This section sets out what actually happened to both numbers, and to the gap between them.
Real wages: the fall, and the fragile recovery
The Wage Price Index recorded some of its lowest annual growth on record through 2020 and 2021, as the pandemic labour market slackened and public-sector and many private pay rises were held down, with annual growth falling to around 1.4 per cent at its low point (approx.) (ABS, Wage Price Index). It then accelerated steadily as the labour market tightened, migration paused and then reopened, and the minimum wage and enterprise bargaining decisions described above flowed through the system, climbing past 3 per cent through 2022 and peaking at around 4.2 per cent in late 2023 or early 2024 — the fastest annual pace in roughly fifteen years (approx.) (ABS, Wage Price Index). But inflation, driven by global energy prices, supply-chain disruption and domestic demand pressures, rose even faster over the same stretch, peaking at 7.8 per cent in the year to December 2022 on the Consumer Price Index (ABS, Consumer Price Index, Dec-2022). The result, once wages are adjusted for the prices workers actually pay — what economists call the "real wage" — was a run of consecutive quarterly falls in real wages, widely reported at the time as the longest and steepest such run in the Wage Price Index's history, stretching across roughly seven quarters from 2021 into 2023 (approx.) (ABS, Wage Price Index; ABS, Consumer Price Index). By the trough, a full-time worker on average earnings had lost purchasing power equivalent to several thousand dollars a year relative to where their pay would have sat had it simply kept pace with prices (approx.).
The recovery, when it came, was genuine but gradual. As inflation eased from its late-2022 peak and nominal wage growth kept climbing through the minimum wage decisions, the enterprise bargaining pipeline and the aged-care and early-learning pay rises, the Wage Price Index overtook the Consumer Price Index on an annual basis at some point around the second half of 2023 or into 2024, delivering the government's promised return to real wage growth for the first time since it took office (approx.) (ABS, Wage Price Index; ABS, Consumer Price Index). By 2025, real wages had recovered only part of what had been lost in the 2021–2023 fall; the recovery had not, by the time of writing, been fast enough to return the average worker's real pay packet to where it stood before the fall began (approx.) (ABS, Wage Price Index series, deflated by CPI).
Union influence: institutional leverage rising as membership keeps falling
The word "union" in this topic's title deserves its own scrutiny, because the membership numbers move in the opposite direction to the influence numbers. Trade union membership among Australian employees has fallen for four decades, from around half the workforce in the early 1980s to roughly one in eight employees by the early 2020s, according to the ABS Characteristics of Employment survey — a decline shared, to varying degrees, by unions across most advanced economies (approx.) (ABS, Characteristics of Employment, Australia). On membership numbers alone, organised labour has never been weaker. Yet the 2022–2024 reforms increased the institutional tools available to the unions that remain, largely independent of how many members they have: multi-employer bargaining lets a union bargain across an entire industry from a single foothold rather than employer by employer; the new equal-remuneration object gave unions in feminised sectors a stronger legislative hook for the work value cases that delivered the aged-care and early-learning pay rises; and the tightened casual and labour-hire rules increased the number of workers covered by, and therefore the practical reach of, existing enterprise agreements. The apparent contradiction resolves once membership and influence are recognised as different things: a smaller, more institutionally leveraged union movement can still shift outcomes for a much larger group of workers than its membership numbers alone would suggest, because Australian awards and agreements, once struck, generally apply to everyone in the covered classification, member or not.
Enterprise bargaining: a bigger increase, a cautious take-up of the new tools
Most private-sector pay in Australia is not set award-by-award; it is set through enterprise agreements negotiated between employers and their employees, often through a union, and registered with the Fair Work Commission. The Commission's own bargaining data shows the average annualised wage increase locked into current federal enterprise agreements climbing from around 2.5 to 3 per cent in the years before the reforms to somewhere in the vicinity of 4 per cent by 2023 and 2024 (approx.) (Fair Work Commission, Trends in Federal Enterprise Bargaining Report, various quarters). Some of that increase reflects the general inflationary environment every wage-setting mechanism was operating in over the same period, not the bargaining reforms specifically; separating the two cleanly is not possible from the published data.
The take-up of the genuinely new tool — multi-employer bargaining — has been more modest than either its advocates hoped or its critics feared. The supported bargaining stream, aimed at aged care, early learning, disability and community services, produced a wave of applications concentrated almost entirely in those sectors, consistent with its design. The single-interest stream, which employer groups had warned could drag reluctant businesses into pattern bargaining across an entire industry, has to date been used in a comparatively small number of cases, most requiring the consent or at least the acquiescence of the employers involved (approx.) (Fair Work Commission, annual reports and bargaining data, 2023–2025). Whether that caution reflects a genuinely narrow scope for the mechanism, or simply the early years of a tool most employers have not yet tested, is not answerable from three years of data alone.
The productivity gap: what wages are now outrunning
The number that ties this whole picture together is the gap between wage growth and productivity growth, sometimes summarised in a single figure economists call unit labour costs — the labour cost of producing one unit of output, which rises when wages grow faster than productivity and falls, or stays flat, when the two move together. This site's companion analysis of the productivity collapse sets out the case in detail: Australia's labour productivity gave back the better part of a decade of gains between 2022 and 2024, falling back to around where it stood in 2016, and has grown at close to zero per cent a year since (approx.) (ABS, Australian National Accounts). Over the same stretch, the Wage Price Index rose by close to 4 per cent a year at its peak. The arithmetic is not complicated: if wages rise by 4 per cent and the value each hour of work produces rises by close to zero, unit labour costs rise by close to 4 per cent, and that increase has to be absorbed somewhere. The Reserve Bank made exactly this point repeatedly in its Statements on Monetary Policy through 2023 and 2024, flagging weak productivity growth alongside solid wage growth as a live risk to getting inflation back to its 2–3 per cent target band, because a persistent rise in unit labour costs tends to show up, sooner or later, in the prices businesses charge (RBA, Statement on Monetary Policy, 2023–2024).
A pay rise funded by a growing economy and a pay rise funded by a government cheque both arrive in the same pay slip. Only one of them can be repeated indefinitely without someone, somewhere, footing a growing bill.
The critique: bargaining power without a matching rise in output
Every one of the pay rises described above was, on its own facts, defensible — underpaid care workers, a minimum wage that had fallen behind inflation, a bargaining system that had drifted toward the employer's side of the ledger for years. The critique in this article is not that any single decision was wrong. It is that, taken together, they have widened a gap between how fast pay is rising and how fast the economy is producing more value to fund that pay — and a gap of that kind does not disappear quietly. It has to be paid for, and there are only three places the bill can land.
The first is higher prices. When a business's wage bill rises faster than its output per worker, and it can pass the difference on to customers, it usually does, and the increase becomes part of the same inflation the government has spent three years trying to bring down. The Reserve Bank's repeated flagging of unit labour costs as an inflation risk through 2023 and 2024 was precisely this concern, expressed in the Bank's own technical language (RBA, Statement on Monetary Policy, 2023–2024). Wage-funded inflation is not a hypothetical: it is one of the standard channels by which a tight labour market feeds into a wage-price spiral, the very dynamic central banks raise interest rates to head off — meaning that industrial relations policy and monetary policy can end up working against each other if the wage side runs too far ahead of the productivity side, with households paying the cost twice: once in higher prices and again in higher mortgage repayments.
The second is thinner business margins, particularly for smaller employers who cannot pass costs on because they compete against larger rivals or operate in markets, like much of retail and hospitality, with little pricing power. Priya's aged-care home is one version of this story, but it is not confined to any one sector: a business whose wage bill rises 4 per cent a year while its output per worker stands still either raises prices, cuts into its margin, or looks for ways to employ fewer people to do the same work — and the last of those options is precisely the outcome an agenda aimed at protecting jobs and conditions should not want to encourage. Business groups, including the Australian Chamber of Commerce and Industry and the Council of Small Business Organisations Australia, have argued publicly that the multi-employer bargaining changes risk locking smaller employers into pay rates negotiated with reference to larger competitors' capacity to pay rather than their own — a concern that, while argued from a position with an obvious interest in the outcome, points at a real structural feature of single-interest bargaining that the Fair Work Commission's own processes have only partly tested to date (ACCI and COSBOA, public submissions and commentary on multi-employer bargaining, 2022–2024). The government would say the number of single-interest agreements to date has been small, and it would be right; the fair rejoinder is that a mechanism can be a genuine structural risk even while its early take-up looks modest, if the option remains available to be used more widely as confidence in it grows.
The third place the bill can land is the one Priya's story makes hardest to avoid: the taxpayer. The aged-care and early-learning pay rises were not funded by those sectors becoming more efficient; they were funded directly out of the Commonwealth Budget — a genuinely honest and transparent way to fix an underpayment problem, but one that adds a recurring, indexed cost to the budget rather than a one-off. That matters because both sectors already sit among the fastest-growing lines in Commonwealth spending on demographic grounds alone — this site's companion analyses of the NDIS and the aged-care funding model examine the underlying growth pressures in detail, against a Budget already carrying a structural deficit — and a wage bill that rises without a matching efficiency gain compounds a spending trajectory that was already under strain before the pay rises were funded. None of this is an argument against paying aged-care and early-learning workers fairly; it is an argument that the fairness came with a bill, that the bill is real and recurring, and that naming it honestly is different from pretending it does not exist.
Finally, the industrial relations changes do not sit in isolation from the rest of the government's re-regulation of work. The Closing Loopholes Acts' casual-conversion and labour-hire rules, examined in detail in this site's analysis of the re-regulation of work, raise compliance costs and reduce the scheduling flexibility some employers had used to manage labour costs against demand — a second, compounding pressure on the same margin businesses are already absorbing the wage side of this story through. Whether that flexibility loss is a fair price for more secure work, discussed in the case for the reforms above, is a genuinely contested question; what is not contested is that it adds a second cost alongside the wage cost this article has focused on, at the same time, to many of the same employers.
Return to Priya's aged-care home for a moment, because it is the cleanest illustration of all three channels operating together, even if only one applies directly to her. Her wage bill has risen by government direction, funded not by her home's own performance but by a Commonwealth transfer that itself has to be funded — out of general taxation, or out of a growing structural deficit examined elsewhere on this site. If the same underlying dynamic — wages rising ahead of productivity — plays out instead in a private, unsubsidised business, the transfer does not arrive from Canberra. It has to come from a price rise, a thinner margin, or fewer hours rostered. Three different mechanisms, one shared cause: a wage increase not backed by a matching rise in the value each hour of work produces.
What the government got right
A fair audit has to weigh the credit alongside the critique, and there is real credit to give. First, the decade of wage stagnation that preceded this government was not a story this government invented, and the evidence assembled above — including the extended real-wage falls of 2021–2023, the longest such run in the Wage Price Index's history — supports the case that Australia's bargaining system genuinely needed a correction of some kind, whichever government happened to be in office when it arrived. Second, the government kept the independent umpire independent: every pay decision discussed in this article, from the minimum wage to the aged-care work value case, was made by the Fair Work Commission through its own evidence-based process, not legislated directly by the government or dictated to the Commission. That institutional restraint matters, because a government that had instead set wages by fiat would deserve a far harsher verdict than one that used its voice as a participant in an independent process.
Third, by 2024 and into 2025, the headline goal the government set for itself — get wages growing faster than prices again — had genuinely been achieved, after the sharpest real-wage fall on record. That is not a small thing for the millions of Australian households who felt the 2021–2023 squeeze directly in their weekly budget, and it deserves to be recorded plainly rather than buried under the critique of how durable the underlying gain is. Fourth, the aged-care and early-learning pay rises corrected a specific, well-documented form of historical unfairness — work disproportionately done by women, systematically undervalued by an industrial system that had never properly priced its skill and intensity — and the Fair Work Commission's own work value findings, not merely union advocacy, support that conclusion. Fifth, the actual use of the most contested new tool, multi-employer bargaining, has so far been more targeted and more cautious than either the government's boosters or its critics predicted at the time of the 2022 legislation, concentrated in the low-paid, historically hard-to-bargain sectors it was ostensibly designed for rather than spreading rapidly across the broader economy.
The honest caveat sits alongside all of this: none of it resolves the arithmetic set out in the evidence and critique above. A government can correctly diagnose a decade of stagnant, unfairly distributed wages, use a legitimate and independent process to fix it, and still leave the country carrying a wage bill that has grown faster than the economy's capacity to produce the value that funds it. Both things are true at once, and an audit that credited only one of them would not be trustworthy.
The risk to the future
A raise the economy has not yet earned is a bill, not a gift
Nobody voting for secure work or a fair pay rise for an aged-care worker is voting for inflation, yet the two are connected by an arithmetic that does not care about intentions. If Australia's productivity growth remains close to zero while wage growth continues to be lifted by minimum wage decisions, an expanding enterprise bargaining pipeline and Commonwealth-funded sectoral pay rises, the gap this article has documented does not close on its own — it widens, and every one of the three places it can land carries a cost for the country's future. Persistent unit labour cost growth risks keeping inflation, and therefore interest rates, higher for longer than they would otherwise need to be, a cost borne disproportionately by mortgage holders and renters who had no say in any wage decision. Margin pressure on employers without pricing power risks showing up, with a lag, in weaker hiring and investment, particularly among the small and medium businesses that cannot simply raise prices to cover a rising wage bill. And the direct-subsidy model used in aged care and early learning, however well justified on fairness grounds, adds a recurring, demographically growing cost to a Commonwealth Budget that this site's companion analyses already show is under strain from an ageing population, a fast-growing NDIS and rising defence spending. None of this is an argument that workers were paid too much, or that the correction to a decade of wage stagnation was wrong. It is an argument that a wage rise not backed by a matching rise in what the economy produces is not a permanent gain in living standards until productivity catches up to fund it — and on the evidence in this article, that catch-up has not yet happened. The next government, whatever its political colour, inherits both the wage bill and the unfinished task of making the economy productive enough to actually afford it.