An open letter signed by more than 120 labour market experts has urged policy action to boost wages growth in Australia, amid perceptions that stagnant wages are threatening the economy and increasing inequality.

Key points: The co-signers of the open letter include legal experts, economists and policy analysts

The co-signers of the open letter include legal experts, economists and policy analysts According to the ABS, wages rose just 0.5 per cent in the December quarter and 2.3 per cent over 2018

According to the ABS, wages rose just 0.5 per cent in the December quarter and 2.3 per cent over 2018 The letter says suggestions higher wage growth would threaten economic stability are "puzzling and unconvincing"

The letter, endorsed by 124 economists, lawyers and specialist labour market researchers, has called for the adoption of measures to raise minimum wages, strengthen collective bargaining, relax wage caps on public sector workers, tackle pay inequity and constrain the outsourcing of "normal employment responsibilities".

"If those proposals are implemented, in whole or in part, we expect they would support a moderate but meaningful improvement in wage growth in future years, lifting wage increases back above consumer price inflation and towards traditional benchmarks (of 3.5 per cent to 4 per cent per year)," the letter said.

"The consequences of this unusually slow wage growth are many and varied, and include weaker consumer spending, greater household indebtedness and financial stress, slower growth in government revenues, and widening inequality.

"These structural and institutional factors include wage suppression by governments (affecting not just the public sector, but businesses or non-profit organisations reliant on public funding or procurement), the erosion of collective bargaining, a persistent gender pay gap, the expansion of precarious forms of employment and fragmented work arrangements (including independent contracting, temporary work, franchising, labour hire and gig work), and so-called 'wage theft'."

The Reserve Bank (RBA) and the Treasury have been advocating for faster wages growth to help boost the economy, with RBA chairman Phillip Lowe warning that recent record low and near-record low wages growth is posing a serious threat to the economy.

With wages shaping up as a key election contest, the Coalition and Labor are at loggerheads about how to deal with the issue.

Employer associations and the Federal Government have baulked at the measures advocated in the letter, arguing they could come at the cost of jobs — the Prime Minister recently said calls by the ACTU to significantly boost minimum wages to a "living wage", backed to an extent by the ALP, was a policy that "people should be sacked".

Business groups including the Australian Chamber of Commerce and Industry and the Australian Industry Group have argued against changing the law to boost workers' wages and bargaining power, saying wages growth will flow from increases in productivity and that intervention to lift wages would harm the economy.

The letter described such arguments as "puzzling and unconvincing".

"There is a growing consensus among labour market analysts and practitioners that wages today in Australia are too low, not too high. Hence Australia's economic prospects would be enhanced by policies to boost wage growth."

"This is not a problem that is going to fix itself," said Adelaide Law School employment law professor Andrew Stewart, one of the initiators of the letter, which has been published today in the Australian Financial Review and on social media outlets.

"We need to see a policy response from governments at all levels and an acceptance that lifting wage growth can help the economy, not harm it."

The letter was initiated by the co-authors of a recent book on the wages crisis in Australia — Professor Stewart, the Centre for Future Work's Dr Jim Stanford and Dr Tess Hardy from the University of Melbourne — and endorsed by some of the nation's most eminent labour market policy researchers and scholars.