smh.com.au
Superannuation Increase: Workers Bear the Cost
From July 1st, 2024, employers will contribute 12 percent of an employee's wage to their superannuation, a 0.5 percent increase that, according to economic studies, will largely be offset by lower pay rises for the workers.
- How does the cost of the increased employer superannuation contributions get distributed among businesses, consumers, and employees?
- This adjustment to employer superannuation contributions, while presented as a benefit to workers, effectively reduces their current disposable income. Studies, such as one by the Grattan Institute, indicate that employees absorb a significant portion of the increased employer contribution through lower wage growth, impacting their current living standards. This cost-shifting mechanism is not widely discussed in the media, which is surprising given its impact on all workers.
- What are the immediate consequences of the 0.5 percentage point increase in compulsory employer superannuation contributions, and how does it impact workers' current financial situation?
- Starting July 1st, employers will increase their superannuation contributions for employees by 0.5 percent, reaching 12 percent of the employee's wage. This increase follows a 12-year government plan to gradually raise contributions. While seemingly beneficial, research suggests that 80 percent of this cost is indirectly borne by employees through reduced pay increases.
- Considering the trade-off between lower current income and increased retirement savings, what are the long-term financial implications for workers of different demographics and life circumstances?
- The long-term implications suggest a trade-off for employees: lower wages during working years in exchange for a larger retirement fund. Whether this trade-off is favorable will depend on individual circumstances, including homeownership status and spending habits in retirement. For those who are renters, the added financial security from a larger superannuation balance may not fully compensate for reduced current income.
Cognitive Concepts
Framing Bias
The article frames the increased superannuation contribution as a hidden cost to workers, emphasizing the reduction in current wages rather than the long-term benefits of increased retirement savings. The headline and opening paragraphs highlight the lack of media attention, suggesting a deliberate attempt to draw attention to an overlooked issue and frame it negatively. The author's tone is skeptical, questioning whether this is 'good news'.
Language Bias
The article uses loaded language such as "hell to pay," "bitching," and "killing the economy" to describe the potential reactions to changes in tax policy. These terms are emotionally charged and contribute to a negative framing. More neutral alternatives could include "significant debate," "concerns," and "potential economic impact.
Bias by Omission
The article focuses heavily on the impact of increased superannuation contributions on workers' wages, neglecting to explore the perspectives of employers and the potential economic consequences of this policy. It omits discussion of potential employer responses beyond reduced wages for employees, such as decreased profits or increased prices for consumers. This omission limits a comprehensive understanding of the policy's multifaceted effects.
False Dichotomy
The article presents a false dichotomy by suggesting that the cost of increased superannuation contributions is either borne by employers or employees, overlooking the possibility of a combination of these, or the impact on consumer prices. The narrative simplifies a complex economic issue.
Sustainable Development Goals
The increase in employer superannuation contributions, while indirectly impacting employee wages, aims to reduce inequality in retirement outcomes. Over time, this measure could lead to a more equitable distribution of wealth among retirees, lessening the reliance on age pensions and potentially improving the overall financial well-being of a larger segment of the population. The article highlights that the cost is largely passed back to employees through lower pay rises, but this is presented as a necessary trade-off to ensure sufficient retirement savings.