An Analysis of the Effect of the Superannuation Guarantee Levy on Wage Growth in Australia

Australia introduced the Superannuation Guarantee Levy (SGL) in 1992 as a major component of the retirement system. The SGL system requires employers to make contributions to an approved superannuation fund on behalf of employees as a percentage of wages with the contribution rate being gradually increased over the period 1992~2014. Using multi-factor regression and a methodology founded in Power Resources theory, we find there is evidence that the low real wage growth in Australia has been correlated with the increases in the SGL. The paper has important implications for the Australian Government given the intention to raise SGL contributions further in 2025 and the impact that such a change will have on wages, on SGL accumulations (Stanford 2017) and on the net costs of the superannuation system taxes and transfers (Evans and Razeed 2018)