Modest Penalty Rate Reform Is Common Sense

WHILST it will enrage many as too aggressive or too conservative, a proposal by the Productivity Commission to cut Sunday penalty rates to the time-and-a-half Saturday rate is modest, sensible, and balanced. Typically, Labor and unions are readying to spill blood; the government is ducking and procrastinating. Trades Hall and the ALP must grow up; the Coalition should show some spine. Meanwhile, both workers and business are compromised.

First things first: since it was released late yesterday afternoon, the recommendation by the Productivity Commission that Sunday penalty rates be lowered to the Saturday rate to create a standard weekend penalty rate has already sparked the kind of outrage among unions and the ALP that spewed forth at the height of the WorkChoices debacle, sealing the defeat of the Howard government; in typically gutless form, the Turnbull government has gone scurrying for cover at the very first sign of this resistance, invoking the Fair Work Commission as its go-to patsy as a pretext for dodging an issue that really needs to be sorted out.

It’s great to know conservative parties in Australia can grasp and prosecute a case for change.

Readers — depending on preference — can access some coverage from the mainstream press from Fairfax or Murdoch publications, although to my mind, none of what has emerged in the past 18 hours matters one jot: terrified of meaningful reform of any kind, the Turnbull government — mindful of the similarly abject and pathetic precedent created by its predecessor — is deferring consideration of the measure until after an election (if ever), but that won’t prevent the ALP and the unions causing it as much grief as possible, up to and including a vicious (and mostly baseless) scare campaign that will cost an unquantifiable number of votes.

It would be better to legislate the Productivity Commission’s recommendation, for as it stands the coming avalanche of bullshit from Trades Hall won’t even be directed at a change that will even occur: and the loss of votes from swinging voters erroneously scared witless over literally nothing will be just another avoidable and foreseeable political error by the Coalition.

In truth, I don’t see that arguments for or against penalty rate change are any different to what they were the three previous times we explicitly discussed them (see here, here and here): the third of those posts is telling, however, for it relates to an abortive attempt by former Prime Minister Julia Gillard to enshrine penalty rates in legislation — and that sets up a stark counterpoint with the Liberal Party’s newfound position that the Fair Work Commission sets rates of pay whilst the government sits on its hands at arms’ length.

This column — for the record — believes that creating a set “weekend rate” of time-and-a-half based on the ordinary hourly rate for retail and hospitality workers, applicable to Saturday and Sunday earnings, represents a sensible, common sense outcome that is responsible, and hands all sides of the issue a win: it takes some of the burden off small businesses virtually obliged to open and trade on a Sunday but which often lose money in doing so, but leaves the vast bulk of the overall penalty rate regime intact.

Yet the toxic and counterproductive culture that has sprung up around what passes for debate in this country — ever since Kevin ’07 rode his vacuous “Cool Brittania”-inspired slogans into government in 2007 — means that any change that produces so much as a single loser will be screamed down by a hostile political Left hellbent on nothing less than the destruction of a Liberal government, whilst that same government (led by the purported messiah of the green Left, Malcolm Turnbull) will run off and hide in the toilet until the storm passes.

What a sham.

Particular criticism, at this early stage, must be levelled at Employment minister Michaelia Cash, who — having shown great promise as a reformer on her appointment, for which this column wholeheartedly endorsed her — is now claiming the government “does not set penalty rates” and that to do so would be as absurd as the government setting interest rates (which it did, until the mid 1990s).

Apparently, the small matter of a government’s ability to legislate measures is of no consequence, the roadblock of the present Senate notwithstanding.

Yet changing the penalty rate regime as the Productivity Commission recommends stands to benefit both workers and businesses, not that anyone seems to care to draw the distinction; and rather than bog down in the minutiae of who said what yesterday and what specifics might apply to whom, I thought I’d just point a few examples of workers being disadvantaged by the present system out that unions and Labor don’t just ignore, but tacitly sanction.

First, Sunday penalty rates — as anyone who works in a retail or hospitality business with more than half a dozen casuals knows — are not some across-the-board universal “entitlement:” the playing of favourites, the use of hours on days that are subject to penalty rates to make internal political points through selective rostering, and the presence of staff members of different ages (thus magnifying the cost differential to employers to schedule them) all conspire the ensure some staff get them and some don’t. By standardising pay rates across the weekend, the prospect of all affected workers being given some access to penalty loadings is increased simply on account of the reduced scope to exclude some staff.

Secondly, the insidious practice of making some casual staff full-time employees — often with minor titles such as “shift supervisor” as a sop to their vanity — and placing them on salaries at or fractionally above the minimum wage means that employers can then work them on whatever day they like, as hard as they like, and avoid paying penalty rates altogether (I know — it was done to me a little over 20 years ago). By the letter of the law, the practice is legal; against the spirit of the law, it’s just an old-fashioned cost cutting exercise. Standardising penalty rates over a weekend at least reduces the incentive for employers to do this.

Thirdly, increasing numbers of smaller operators — particularly in the restaurant industry — are choosing to simply remain closed on Sundays and avoid the expense altogether; these business owners are between a rock and a hard place: open on a Sunday and lose money, or stay close and lose what unprofitable trade might have been generated to rival operators, damaging the reputation of the business in the process. I spent some time consulting to hospitality businesses in exactly this situation a few years ago, and there’s no easy answer, although staying shut, and preventing the red ink flowing on Sundays, was almost invariably the lesser of the two evils.

And finally, the point has to be made that the existing penalty rate regime — fashioned in the 1920s and 1930s, when Sunday was almost universally a day to spend with family at church — is an anachronism; the contention that Saturdays and Sundays are virtually identical today where work is concerned is sound, and the only groups who are trenchantly and implacably opposed to acknowledging it are the ALP and the unions.

In today’s modern, open, 24-hour society, it beggars belief that whole cities like Sydney and Melbourne would effectively close every Sunday, as they did until about 20 years or so ago.

Big businesses like supermarket chains have the weight of market power behind them not to feel the effects of having to pay existing Sunday penalty rates (although if you buy takeaway alcohol from a certain large national liquor retailer, pay attention to who serves you between Monday and Saturday, and who serves you on a Sunday: I’ll bet you don’t see many of the uni students on casual wages on a Sunday that you see at other times).

But smaller operators — often mum-and-dad enterprises — simply can’t afford it. Every time the headline hourly rates for their employees increases, those increases are magnified disproportionately when it comes to penalty rates. In the early 1990s, the wait staff at the restaurant chain I worked at were paid $10 per hour to serve tables; double-time-and-a-half was $25. Today, the same staff member earning $20 per hour costs $50 at the higher rate. Australia has had more than 20 years of low inflation growth and, whilst it has slowed now, wage growth that has consistently outpaced inflation. To compound this, retail prices have not been the primary drivers of what inflation has occurred over this period; housing, rents, energy and fuel costs have done that job. In some cases, small businesses are selling goods and services at prices that (in real terms) are the same or less than they were 20 years ago. But the wage bill has, by comparison, exploded.

There is little point trying to make these arguments to people in the union movement or the ALP, whose only real experience of small business has been to either extort it into bolstering union claims of delivering the best wage rises for workers in Australia, or to drive it to the wall: and similarly, I am yet to find an employee who encountered a pay rise they didn’t like, although the end destination of this particular ship is far fewer jobs and far fewer people to benefit from them.

So the Turnbull government, after obfuscating and procrastinating and blaming someone else, will “take the recommendations to an election” after which they will be quietly abandoned; the unions and Labor, as usual, will do all they have to in order to shut this latest eruption of sanity down, safe in the knowledge that irrespective of who it hurts out in the real world, their own cosy sinecures, paid for at public expense, mean they will never be disadvantaged either way.

Maybe, as I suggested not so long ago, the simplest solution would be to abolish Sunday trading altogether, although when the ALP and its thuggy cohorts at Trades Hall jump all over that as “anti-jobs” and “anti-worker,” perhaps everyone else might give some thought to the fact that small businesspeople are not obliged to continue trading if it isn’t profitable to do so, and that unless something is done to restore a bit of balance to an equation that has been overwhelmingly dictated by unions for the best part of a decade, an awful lot of jobs will end up being lost anyway.

And that’s one hell of a price to pay for gutlessness from the Liberal Party and the flat-Earth, scorched-Earth approach to getting what they want from the unions and the ALP.

 

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