Penalty rates provide crucial safety net for low-paid workers, Labor argues


The Guardian
Monday 21 March 2016


Penalty rates are a fundamental part of the safety net for low-paid workers and should not be scrapped, Labor argues in a submission to the Fair Work Commission.   

The commission is considering penalty rates in hospitality and retail jobs as part of its four-yearly review process.


Labor put in a submission to the review calling for penalty rates to be retained, in line with its previous comments on the matter.

“Australia’s economic outlook is uncertain, and likely to remain so in the near term,” its submission says. “The federal opposition submits that penalty rates continue to be a fundamental part of a strong safety net for Australian workers, enabling low income workers and workers in highly casualised industries to share in the nation’s economic prosperity.”

It says penalty rates are necessary for many workers to maintain their standard of living.

“Wages are also growing at their slowest rate since the 1990s, increasing by just 2.2% in 2015. The household saving ratio now stands at 7.6 – the lowest level since before the global financial crisis. It appears that Australians are feeling the impact of this slow growth and are dipping into their savings or putting less aside to cope with their increased costs of living,” the submission said.

Twice as many workers in the retail and hospitality sectors are employed on a casual basis compared with the wider Australian workforce, making the industries particularly sensitive to changes in penalty rates, Labor’s submission says.

“Hospitality workers are in the bottom 30% of Australian income earners. Along with hospitality and food services, retail has the largest proportion of low-paid workers in Australia,” the opposition leader, Bill Shorten, said. “Women make up a disproportionate share of workers in both the retail and hospitality sectors accounting for 55% of all those employed.

“[Prime minister Malcolm] Turnbull and his government have made it clear they want to scrap the weekend penalty rates thousands of workers and families rely on to make ends meet.   


“Labor understands that for these workers weekend penalty rates are not a luxury, they are what pays the bills and puts food on the table.”

The Queensland Police Union of Employees is worried that changing penalty rates for one sector will lead to a flow-on impact for other workers, including emergency workers.

“Any proposal to reduce penalty rates is nothing more than an unfair and unjust money grab that will disadvantage the employees most deserving of just recompense for the impact shift work has on their health and lifestyle,” the union’s submission to the Fair Work Commission says.

The retail and catering industry association says penalty rates are stopping employers from hiring more workers.

“Many cafe and restaurant businesses close or scale back staffing to counter higher wage bills on Sundays,” the chief executive of the association, Jon Hart, said. “Sunday pay rates of up to 75% extra per hour can make businesses unprofitable, with operators often unable to break-even or run at a loss.”


His submission calls for Sunday rates to be scaled back to match Saturday rates, creating one weekend rate. The idea was supported by a Productivity Commission report into industrial relations, released in December.   

The government pledged to hold consultations into the changes proposed in the productivity commission report.

At least one Liberal MP has made a submission to the Fair Work Commission calling for one single penalty rate across weekends and public holidays.

Employer groups have until 1 April to make a submission on penalty rates to the commission.
Penalty rates provide crucial safety net for low-paid workers, Labor argues

Penalty rate cut will hurt economy without helping business: Labor
March 21, 2016
The Conversation

The federal opposition says that reducing penalty rates in the retail and hospitality sectors would widen the gender pay gap across the economy and hit consumption without bringing the claimed benefits to business and jobs.

In a submission to the review of penalty rates by the Fair Work Commission (FWC), which sets them, Labor says penalty rates continue to be a fundamental part of a strong safety net for workers, enabling those on low incomes and people in highly casualised industries to share in the nation’s prosperity. They help to increase the economy’s competitiveness and to reduce inequality and the gender pay gap across the community, it says.

“There is clear and well-founded evidence that reducing the take-home pay of low paid Australian workers will have a negative impact on domestic consumption. At the same time, it is highly unlikely that the benefits claimed by individual businesses will be seen across the aggregate economy.”   

The Productivity Commission (PC) last year recommended that Sunday penalty rates should be brought in line with those applying to Saturday.

It said in its report: “Sunday penalty rates for hospitality, entertainment, retailing, restaurants and cafes are inconsistent across similar work, anachronistic in the context of changing consumer preferences, and frustrate the job aspirations of the unemployed and those who are only available for work on Sunday.”

But the opposition says cutting penalty rates would harm the economy.   

“Penalty rates support demand in an economy in transition and are consistent with helping to deliver better productivity performance and increasing competitiveness of the national economy.”

Labor says inequality is at a 75-year high, real national disposable income per capita has fallen by 3.2% since September 2013, and wages growth is the slowest since the 1990s.

Changes to penalty rates would represent significant changes to the total earnings and income of workers in hospitality and retail, which have a higher prevalence of casualisation, and so have an impact on fairness and the performance of the economy, the submission says.

While the exact number of workers that would be affected by the FWC decision cannot be estimated, Labor says the best estimate provided by the Parliamentary Library is potentially more than 390,500 in retail and more than 342,000 in accommodation and food services alone.

It says that with women representing more than half the workforce in retail and hospitality any measures which reduce the take home pay of workers in these sectors “can only widen the gender pay gap across the Australian community”.   

Disputing the PC’s argument for cutting Sunday rates, the submission says it did not give proper weight to the impact on individual workers of reducing their take home pay, and failed to consider the regional and economy-wide implications of an associated fall in consumption.

“Reducing the take-home wages of low-paid Australians runs completely counter to the objective of supporting demand in an environment where domestic consumption has taken on a more central role in underpinning growth.”

The submission says proponents of cutting penalty rates use flawed assumptions in asserting that more businesses will open on weekends, or for longer hours, if their staff costs are lower, and that this will increase profits and create more jobs.   

There is a lack of evidence that a significant number of businesses in the retail and hospitality sectors are genuinely choosing to remain closed on weekends and public holidays, it says. To the extent there are businesses with capacity to open longer, there is no reason to believe the claimed benefits in terms of aggregate business activity or total employment would flow from reducing penalty rates.

“The amount that consumers have to spend is a function of their incomes. Australians will not find themselves with more money to spend simply because there are more hours available in which to spend it.

“Rather, businesses which do open additional hours will simply attract spending which would otherwise have been made at other times during the week, or from businesses which previously lacked direct competition.

“While individual businesses in some locations may benefit from increased custom on weekends, the associated reduction in custom elsewhere means the aggregate impact on the Australian economy is likely to be minimal.”

Swagman wrote on Mar 21^st, 2016 at 7:43am:


How many times have you been proven wrong with that statement???

crocodile wrote on Mar 21^st, 2016 at 8:25am:


if you have a cafe and require two staff on Sunday. Penalty rates are scrapped, do you
A. Hire another staff member or
B. Pocket extra profit


No one hires staff they don't need, and if they need them they already have them. Any gains that may be made in some industries are offset by losses in others due to the decline in disposable . There are many existing threads on the topic where others have gone into much more detail.

John Smith wrote on Mar 21^st, 2016 at 8:02am:


NIL

John Smith wrote on Mar 21^st, 2016 at 8:02am:


I've lost count.

Penalty rates do not cause unemployment.

greggerypeccary wrote on Mar 21^st, 2016 at 9:19am:


Only in Peckaland....

John Smith wrote on Mar 21^st, 2016 at 9:04am:


Sawagman seems to "think" (a bit of a stretch, I know) that if penalty rates are scrapped, more customers will start going to the cafe and thus they'll need more staff.

Where he gets this nonsense from, I'm not sure.

If, as you say, a cafe hires two staff members on Sundays and penalty rates are removed, this is what will happen:

- cafe opens the same as it always has;
- the same two staff members work;
- the same amount of customers come;
- the same amount of coffee and cake is sold;
- the same amount of work is done as on previous Sundays;
- the customers pay the same as they have on previous Sundays;
- the two staff members get paid less than they have on previous Sundays;
- the cafe owner pockets more profit (which has been taken from his staff);
- the two staff members have less disposable income;
- the unemployment figures remain the same (or go up, due to there being less disposable incoming in the pockets of low paid workers across the country).

A primary school student would be able to understand this.

Why Swagman can't, is a real mystery.