Australia has built one of the world’s strongest labour markets for creating jobs, but one of its weakest for turning those jobs into higher living standards, according to new research that finds record employment has been accompanied by fifteen years of stagnant real wages.
The twelfth report in The Balance Sheet research series examines Australia’s labour market from participation to retirement, analysing who works, where they work, what they earn and why wage growth has stalled despite historically strong employment.
Australia now employs a record 14.8 million people, labour-force participation is near an all-time high at 67 per cent and unemployment, at 4.4 per cent, remains low by historical standards. Yet real wages remain broadly where they were in 2011.
The report argues these are not contradictory outcomes but two sides of the same labour market.
“Australia has built one of the world’s best labour markets at creating jobs and one of its weakest at turning those jobs into higher living standards,” it concludes.
The explanation, it argues, lies in productivity. Labour productivity grew by an average of just 0.3 per cent a year over the decade to 2025, the weakest performance in sixty years, while Australian workers produce about 88 per cent as much output per hour as their American counterparts.
Although wages have continued to rise in nominal terms, they have failed to keep pace with inflation. The report notes that a 3.3 per cent increase in the Wage Price Index over the past year was overtaken by inflation of 4.1 per cent.
“The pay machine is broken because the productivity machine is,” the report says.
The study also challenges several common assumptions about Australia’s workforce.
Contrary to widespread belief, casual employment has become less common rather than more. The proportion of casual employees has fallen from 22.3 per cent to 19.5 per cent over the past decade, while measured gig-platform work declined 11 per cent in the latest year to fewer than 180,000 workers.
About 36 per cent of employed Australians usually work remotely, although the practice remains concentrated among managers and professionals, where 59 per cent work from home compared with 21 per cent of other workers
Working from home has also stabilised rather than continued expanding. About 36 per cent of employed Australians usually work remotely, although the practice remains concentrated among managers and professionals, where 59 per cent work from home compared with 21 per cent of other workers.
The report argues the more meaningful shift has been the growth in multiple job-holding, now at a record 978,000 people, alongside rising self-employment, trends it links to the pressures identified in its earlier small-business research.
The largest employer is no longer manufacturing, construction or mining but health care and social assistance, which now supports 2.56 million jobs, around one million more than retail. Construction employment continues to expand, while manufacturing lost 3.2 per cent of its workforce over the past year.
The report also distinguishes between different measures of income, arguing that public debate often confuses averages with what most Australians actually earn.
Median employee earnings are about $74,100 a year, rising to $90,500 for full-time workers, while average full-time earnings reach $106,700 because higher incomes lift the mean. Entry to the top 1 per cent of taxpayers begins at about $425,000.
From 1 July, the national minimum wage increased by 6 per cent to $26.44 an hour, taking full-time minimum earnings above $1,000 a week for the first time.
One of the report’s signature findings follows where those wages go.
For every $100 earned by a typical worker, about $19.60 is paid in income tax and the Medicare levy, $16.10 goes to housing, $13.10 to food and only about $5 is saved. For renters, housing absorbs closer to $30 of every $100 earned.
“Seen through the wallet, the whole series is one budget: tax at the top, housing in the middle, super at the end, and the discretionary remainder deciding how prosperity actually feels,” the report says.
A hospitality worker earns about $1.9 million over a working life, compared with roughly $15 million for a surgeon, while teachers, electricians and public servants typically earn around $4 million
The study also estimates that career earnings vary dramatically between occupations. A hospitality worker earns about $1.9 million over a working life, compared with roughly $15 million for a surgeon, while teachers, electricians and public servants typically earn around $4 million. It also finds trades can match or outperform many university-qualified careers.
Rather than endorsing a single explanation for weak wage growth, the report presents competing views. One attributes the slowdown to weaker bargaining power, declining union membership and a falling wage share of national income. The other, advanced by the Productivity Commission, argues much of the apparent disconnect reflects mining’s terms-of-trade boom and that weak productivity remains the larger problem.
Despite their differences, both approaches reach the same conclusion: sustained wage growth ultimately depends on stronger productivity.
The report finds labour shortages remain concentrated in key occupations despite easing from recent peaks. Twenty-nine per cent of occupations remain in shortage, apprentices in training have fallen 24 per cent from their peak, and almost one-quarter of skilled migrants work below their qualifications.
Women’s workforce participation has reached a record 63.3 per cent, while participation among Australians aged 55 to 64 has climbed to 74 per cent. Young Australians continue to face the greatest challenges, with unemployment at 10.7 per cent, the highest underemployment of any age group and average student debt of about $27,700.
On artificial intelligence, the report adopts a cautious view. It finds 12 per cent of businesses currently use AI, increasing to 35 per cent among large firms, but says there is still no evidence of economy-wide job losses caused by the technology. Instead, AI is expected to affect clerical and entry-level white-collar work first, while health care and other people-focused occupations remain among the least exposed.
Looking ahead to 2035, the report models three scenarios. A recovery in productivity to 1.2 per cent a year would lift real incomes by about 13 per cent, maintaining current trends would produce gains of around 7 per cent, while stronger AI-driven productivity could increase incomes by about 16 per cent. Employment is projected to grow to about 16.6 million under all three scenarios.
The report concludes that Australia’s labour market has largely solved the challenge of creating jobs but not the challenge of improving living standards.
“The record-employment economy now has one task harder than creating its next million jobs,” it says. “Making the existing fifteen million pay.”
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