New research sheds light on the sluggish wage growth in Australia, attributing it to barriers hindering job mobility compounded by regulatory hurdles.

According to the study, barriers such as non-compete clauses, occupational licensing rules, and soaring house prices are impeding workers, firms, and the economy from reaping the benefits of job switching.

“The rate of workers transitioning between jobs has seen a decline in recent years, despite the labor market experiencing unprecedented strength. Job switching rates have only marginally increased from 8.5 per cent in 2019 to 9.5 per cent in 2023,” stated e61 Senior Research Economist, Aaron Wong.

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Wong further emphasised, “The reluctance of individuals to switch jobs even amidst favorable market conditions signals fundamental issues within the Australian labor market.”

Current jobs

The research revealed that individuals who did manage to switch jobs experienced a substantial 9 percentage point increase in wages compared to their counterparts who remained in their current positions.

For the median wage earner, this translates to an annual pay rise of approximately $5,700.

Younger workers, particularly those aged between 21-34, witnessed even higher wage growth, with an average annual pay increase of $7,500.

City vs regions

The study also highlighted regional disparities, showing that workers in capital cities tended to benefit more from job switching, with an average wage increase of $6,300 compared to $4,300 for regional workers.

This divergence primarily stems from the disparity in available employment opportunities between urban and rural areas.

CEO of e61 Institute, Michael Brennan, underscored the role of regulatory barriers in inhibiting job mobility, stating, “Workplace laws, including non-compete clauses and complex occupational licensing requirements, may deter workers from pursuing better job opportunities.”

Policy help

Brennan further added, “Policy interventions aimed at fostering a more dynamic economy and facilitating easier job transitions are essential to unlocking the full potential of wage growth.”

Aaron Wong echoed this sentiment, emphasising the need for policies that promote entrepreneurship and innovation, stating, “Encouraging competition among firms for skilled workers and facilitating smoother job transitions would not only enhance wage growth but also foster a more efficient matching of skills and job opportunities.”