Relationship Research Australia 2022

Chapter: 1 Relationship between wages and industry performance in
Australia
Executive summary
As per the economic theories the wages paid to the employees should be based on their marginal
productivity. There has been many researches in the field of employee wages and the
profitability of the firms. However, only few of them have focused on relationship between
wages and industry performance. The current research is aimed to examine the relationship
between the two variable, wages and the industry performance.
Secondary data was collected from the database of the Austrian Bureau of Statistics for the time
period 2007-2017. The data analysis was conducted using the various quantitative methods. This
includes descriptive statistics, correlation analysis and the linear regression. All the analysis was
conducted using SPSS software
Findings from the descriptive statistics shows that there is significant growth in the income of the
industry however due to increase in the total expenses, the growth of the profit is low. The
correlation analysis suggested positive and significant relationship between the wages and the
industry performance. However the results from the regression shows negative and significant
impact of wages on the industry profits. On the basis of the results, it has been recommended that
the firms should introduce the productivity wage system. However the provision of the minimum
wage should be taken into consideration.

Relationship between wages and industry performance in Australia
Contents
Chapter: 1 Relationship between wages and industry performance in Australia............................1
1.1 Introduction.................................................................................................................................3
1.2 Research Method and Data collection..........................................................................................5
1.3 Results and Discussion................................................................................................................5
1.3.1 Descriptive Statistics............................................................................................................5
1.3.2 Correlation Analysis............................................................................................................9
1.3.3 Regression analysis............................................................................................................10
1.3.4 Discussion..........................................................................................................................14
1.4 Conclusion and Recommendation..............................................................................................15
1.4.1 Limitations.........................................................................................................................15
1.4.2 Recommendations.............................................................................................................15
References.............................................................................................................................................16
2

Relationship between wages and industry performance in Australia
1.1 Introduction
The relationship between the wages and the performance of the firm is a widely researched area
around the world(Atkinson, Piketty, & Saez, 2011; Bell & Reenen, 2012; Reenen, Draca, &
Machin, 2011). The wage rate and the industry performance are usually negatively related, as the
wages are the cost for the company and increase in the cost leads to decline in the profit.
However, the relationship is not unilateral(Bell & Reenen, 2012; Calvin, 2017). The increase in
the wages may lead to increase in the productivity of the workers which leads to increase in the
financial performance of the firm. Since, the relationship is different in different scenario, the
current research is aimed to examine the relationship between the wages and the industry
performance in Australia.
Aims and the objectives of the research:
 To examine the relationship between the wages and the industry performance
 To examine the trend of wage growth in Australia
 To examine the trend of industry profit in Australia
Research Questions:
Research question 1: What is the relationship between the wages and the industry performance in
Australia?
Research question 2: What is the growth trend of wages and the profits in Australian Industry?
3

Relationship between wages and industry performance in Australia
Literature Review
In the section the previous literature on the wages and the industry have been discussed. The
review of literature will not only provide the overview of the past studies on the similar area, but
also allows the researcher to identify the gaps in the literature.
There has been many researches in the field of employee wages and the profitability of the firms.
As per the economic theories the wages paid to the employees should be based on their marginal
productivity. However, this is true only theoretically. In most of the countries the government
has fixed the minimum wage rate for the workers. The minimum wage rate should be paid to the
employees irrespective of the marginal productivity. Government and the international
organizations have fixed the minimum wage so that the employees can maintain a minimum
standard of living(Bell & Machin, 2015; Cengiz, Dube, Lindner, & Zipperer, 2018).
There has been various research on fixing the wage rate for the employees. According to a
research by (Miller, 2014), that with the advancement in the technology and the efficient
management systems, the industries are in the favor of the productivity based pay rather than the
minimum wage rate to the employees. However (Vaughan-Whitehead, 2014) argued that
companies are still hiring employees based on the traditional system of compensation.
The previous literature in the similar area has also focused on examining the relationship
between the minimum wage and the performance of the firm. One study by (Reenen et al., 2011)
argued that most of the research in the field of wages are focused on the labor market and there is
lack of research on the relationship between the firm’s performance and wages. Authors
examined the relationship between wages and performance of the firms and concluded that there
is negative relationship between the variables and increase in wages significantly reduce the
firm’s profit. However another research by (Garin & Silverio, 2017) argued that there is still lack
of evidence that change in the firms’ financial performance have direct and significant impact on
the labor market and the wages.
Another study by (Atkinson et al., 2011; David Card, Cardoso, & Kline, 2016) suggested that
there is long run correlation between the change in the wage rate and the firm’s performance.
Authors also concluded that the relationship between the wages and productivity is much
stronger as compared to firms’ performance. Similar results were proposed by many other
scholars (Bell & Reenen, 2012; Buhai, Cottini, & WestergÂrd-Nielsen, 2008; Calvin, 2017).
The impact of rising wages on the inequalities among the firms is another important area where
the most of the recent research is focused. According to (D Card, Devicienti, & Maida, 2011;
David Card et al., 2016; Furman & Orszag, 2015) differences in the wage in the firms leads to
increase in wage dispersion in the labor market, which ultimately affect the financial
performance of the firms. Apart from these there are other researchers who supported that the
wages and the financial performance of the firms are negatively related (Bell & Reenen, 2012;
Calvin, 2017; Draca, Machin, & Reenen, 2011; Huselid, 2017; Lollo & O’Rourke, 2018). On the
4