Omicron wave disrupts wage growth hopes in Australia – leading macroeconomic influencers

Some economists believe that the Omicron wave will be a clear risk to pay rises this year, as increasing case numbers threaten to disrupt Australia’s economic recovery.

Jim Stanford

Jim Stanford, economist and director of the Centre for Future Work, based at the Australia Institute, shared an overview on the chilling impact of the Covid-19 Omicron variant on labour markets and future wage gains. He tweeted that it is ironic that as the pandemic annihilates labour supply, wages seem to be going nowhere.

Economists had been predicting wage rises by more than 2% during 2022, after years of stagnant wage growth. However, these forecasts are expected to be stalled until 2023, as economic activities drop to new lows because of further worker shortages and supply chain bottlenecks caused by the Omicron wave.

Most economists are fearing a return to lockdowns due to the rising number of Covid-19 infections, which is going to further derail recovery and stymie wage rises this year. Employment across several regions have been impacted due to exploding number of cases and close contacts in isolation.

Claudia Sahm

Claudia Sahm, economist and former director of macroeconomic policy at the Washington Center for Equitable Growth, and a section chief at the Board of Governors of the Federal Reserve System, retweeted a research shared by Dr. Cecília Tomori, an anthropologist and public health scholar, on the Centers for Disease Control and Prevention (CDC) having identified the potential for a rapid increase of Omicron infections in the US that has been modelled in a December post.

The agency found a combination of factors responsible for the exponential rise in Omicron cases across the world, namely its high transmissibility and the ability of the variant to escape the immunity provided by past infection or vaccination, typically referred to as immune invasion.

Results from scenario analyses also indicated large surges in cases in the coming weeks and peak daily numbers of new infections that exceeded previous weeks in January this year. This would automatically translate into increased hospital demand in the US, despite reduced severity of cases due to the large in a short period of time.

Catherine Swift

Catherine Swift, an economist and former chair of the board of the Canadian Federation of Independent Business (CFIB), shared an article on Canada’s healthcare system being expensive and unexceptional at best even before the Covid-19 pandemic. She tweeted that the glaring problems that have surfaced due to the virus crisis should convince Canadians that major structural reforms are required and that spending public money alone will not help in fixing the unstable healthcare system.

Experts argue that Canada has been in a state of denial that people spend more on healthcare and receive mediocre outcomes compared to many other advanced nations. However, the recent surge in infections driven by the highly transmissible Omicron variant has exposed the grave problems of the system with increasing hospitalisations and severe nursing and staff shortages.

The crushing increase in infections in recent weeks has not only pushed many frontline workers into quarantine, putting severe strain on health systems, but also caused them to quit early in their careers. Provinces such as Ontario and British Columbia, for instance, have postponed non-urgent surgeries due to lack of staff. Likewise, many clinics and hospitals in remote regions have been forced to temporarily close and transfer patients elsewhere.   

Canadians are expected to be paying 25% more on healthcare compared to the Organisation for Economic Co-operation and Development (OECD) average, with the recent rise in coronavirus cases straining its healthcare system.