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.


Union’s Penalty Rates Deal A Smoke And Mirrors Trick

THE DEAL ON PENALTY RATES announced yesterday between Business SA and the Shop Distributive and Allied Employees Association may be a rare and welcome shred of labour market flexibility, and it may even constitute a step in the right direction. But robbing Peter to pay Paul is a fraught pursuit, and this smoke and mirrors trick simply cloaks the underlying burden of wage costs to businesses in a veil of “consultation” and “consensus.”

I have been reading about the “historic” template agreement signed yesterday between the Shop Distributive and Allied Employees Association (SDAEA) and Business SA — which is said to “slash” penalty rates — and I have to wonder if I’m the only one who hasn’t been conned by what can only be described as a hoax; The Australian‘s Grace Collier tears strips from it in a complementary argument to mine, although stablemate Judith Sloan takes a gentler view of it.

The whole point to any debate over penalty rates (at least, where the poor bastards in small business lumbered with paying them is concerned) is that these archaic, obsolete relics from a bygone era as “compensation” for “unsociable hours of work” have in fact become a millstone around the figurative necks of many small and medium-sized enterprises, forcing them to restrict the times they trade, the number of staff they can hire, or both.

But this deal is simply a conjuring trick; everyone with a stake in it professes to have had “a win” — even the employers, their industry representatives, and the supposedly pro-business Liberal government — yet the only winner out of this is the union involved, which has hoodwinked the business interests concerned by a breathtaking sleight of hand.

First, the positives as I see them.

One, the abandoning of penalty rates on a Saturday is an absolute no-brainer, and this indefensible impost on businesses ought to be removed across the board: Saturday has become a day just like any other over the past few decades, and there is nothing unsociable about working on it.

Two, and similarly, the reduction of penalty rates from 100% to 50% on Sundays and from 150% to 100% on public holidays is at least a step in the right direction, reducing at face value as it does further imposts on small enterprises that — with a tiny number of exceptions, such as Christmas — simply fail to stack up against the ancient criteria still wheeled out by Labor and the unions to justify them.

The “right” — set to be enshrined as part of the agreement at hand — not to work on Sundays and/or public holidays is one I can find no fault with; after all, if people don’t want to work on given days they shouldn’t be forced to do so, although I reiterate that with a very small number of exceptions they shouldn’t have their hand out for multiples of their ordinary time earnings if they do work at those times.

And anything that helps flatten out and simplify a ridiculously complex regime of penalty allowances, loadings, and other wage components for hourly employees can only be a good thing.

But the positives are instantly neutralised with one very big negative: the 8% increase in base pay rates the agreement enshrines for its workers in return for surrendering a portion (not all, mind, just a portion) of their entitlement to be paid penalty rates at certain times, and the guaranteed 3% annual increases it includes will simply compound this.

On the one hand, this agreement takes some penalty rates away — some — from the hourly employees it will cover.

But on the other, it will mostly give them straight back in the form of a higher hourly rate.

The proof is that the template calls for the workers it covers for it to be no worse off under its terms for the agreement to be binding.

And the employers, desperate for relief from the punitive burden of paying penalty rates, will still pay out the same amount of money in wages — but broken down and accounted for a little differently.

The higher hourly rates will mean the employer effectively pays current penalty rates at any time of the day or night on any day an employee is working in their business.

What an absolute farce.

It’s unsurprising Labor and the unions are gushing over this; the SDAEA has probably uncovered an exciting new mechanism, compliant with the Fair Work Act, with which to continue to shaft small businesses whilst preserving their self-designated status as the “champions” of Australian workers.

It’s unsurprising the union, even a right-wing union like the Shoppies, would strike such a deal (despite any illusion otherwise) because it enables it to diminish a contentious area of industrial policy — penalty rates — by hiding part of it in an area of wage entitlements that it will never be held to account or challenged over; the penalty rate problem becomes smaller, more manageable and easier to fend off, whilst the unmitigated overall pressures on business are maintained.

But it is a surprise, distastefully enough, that various employer and industry bodies are hailing this as some kind of breakthrough when it is nothing of the sort; a red herring like this should have been easy to spot, and apparently it wasn’t.

And it’s just obscene that various figures in the Abbott government have seen fit to crow about this deal as “a constructive approach” and a “vindication” of its thoroughly gutless position that setting penalty rates should be left to the Fair Work Commission — which Labor in government set up as part of its sop to unions for their role in destroying the Howard government over its WorkChoices legislation.

About the only one of the key players quoted in the articles I’ve included today who has it right is Liberal Democrat Senator David Leyonhjelm, who described South Australia as an “economic basket case” and correctly observed that those who want to work on weekends had been priced out of the market by penalty rates.

And crucially, when the dust settles and the businesses affected reconcile their outgoings on labour — and find nothing has changed — this deal will not make it easier for a single new job to be created, despite the loose rhetoric being tossed around to that effect.

In the final analysis, the union has insulated the earnings of its members by permanently entrenching the cost burden of penalty rates on the affected employers under a different guise.

It can hardly be described as a reform. The parties to this silly agreement might as well have not bothered in the first place.

IR Review: WorkChoices Does Not Justify Doing Nothing

THE MERE HINT of a review of Australia’s labour market laws — never mind actual reform proposals — is enough to send the ALP into paroxysms of outrage, with the Howard Government’s WorkChoices laws again being dusted off for battle; armed with a rigidly pro-union workplace regime and readying to fight a fourth consecutive election on WorkChoices, Labor has no reason to countenance change and will refuse to permit others to do so.

I intend a short post — even by my loquacious standards — yet I fear this will end up being anything but “short;” it has been an extremely busy and eventful week, as readers will know from the dearth of comment appearing in this column, and to be honest I’m very, very tired. But I wanted to say a few things before I head off for a few hours’ sleep a bit after midnight in Melbourne on a sultry and unpleasantly humid Thursday night.

The long-awaited review by the Productivity Commission into Australia’s workplace relations system is set to commence shortly — extra reading, depending on preference, can be found from the Fairfax and Murdoch stables — and thanks to the reposting by Labor MPs on Twitter of incorrectly published material from the Commission, we already know what it will examine: and that the minimum wage, penalty rates, enterprise bargaining, individual contracts, unfair dismissal and anti-bullying laws comprise the agenda for the review ought to surprise no-one.

No-one, that is, except the conflicted ALP and its vested interests wherever the snouts of its union mates in protected troughs are concerned.

I was listening to Tom Elliott’s Drive programme on 3AW in the car on the way home this afternoon (go to the 62:00 mark of the 22 January podcast of his show); his guest today was ACTU president Ged Kearney, and the scary thing about listening to her latest enunciation of hatred toward the conservative government and Australian business is that people take notice of her for no other reason than all she preaches is fear: the government wants to cut living standards, make people pay for Medicare (irrelevant in the context of a discussion of workplace laws), drive down wages, slash conditions, blah blah blah…it’s enough to make you want to slit your wrists.

Yet people like Kearney can afford to be smug; the legacy of the Gillard government (held squarely by the balls by its masters in Kearney’s own union movement) is a regime of industrial relations laws, underpinned by the so-called Fair Work Act, that enshrines rigid and expensive conditions whilst conferring a raft of benefits around access, organisation and mobilisation on unions.

Aside from using these issues as battering rams against the detested Liberals, the end consequence of the Gillard government is that unions in this country have never had it so good — and that’s a problem.

Whether you like it or not, Australian labour is expensive by world standards; and the minimum wage — also very high by international standards — is, far from being the guarantor of “fair” pay and comfortable subsistence the likes of Kearney bleat about, is actually a disincentive (or outright bar, for some businesses) to hiring anyone at all.

I wonder how many readers understand that as a result of the Fair Work Act, unions can enter any “workplace” they like; I especially wonder how many readers understand its application insofar as enshrining the right to organise and recruit members during working hours: for just as some of the big, heavily unionised workforces in Australia have collapsed over the past couple of years, the unions have to secure their future somewhere — and they aren’t going to be allowed to do it if the ridiculous favours showered upon them on Gillard’s watch are removed.

It is instructive, therefore, to see WorkChoices — the long-defunct Howard era workplace relations laws — now apparently being readied for re-use as a political sledgehammer at a fourth consecutive election by the ALP and its thuggy associates in the union movement.

The Howard reforms were a modest and sensible suite of measures that encouraged direct bargaining between employers and employees, and which — subject to a no-disadvantage test omitted from the initial version of the laws, but hastily restored after a backlash — enabled flexibility and tradeability around hours, allowances, leave provisions and so forth.

Its greatest flaw was that it was never taken to an election, a misjudgement for which the Howard government paid with its electoral life in 2007.

But to see the idiocy of jumping savagely up and down over a purported “resurrection” of WorkChoices, it is not necessary to look even as far backwards as the Howard government, but to a more recent outrage largely of the unions’ own making.

Back in December 2013 I published a commentary entitled “Moving Forward: Marginalising Unions Without WorkChoices;” that article came as GMH was readying to announce the closure of its Australian manufacturing operations, and also contains several links to excellent articles by other journalists and to other resources, and I encourage those who missed it to take the time to review the material included.

Yet the GMH case and the exodus of the car manufacturers more broadly paints the picture of the logical (and actual) end destination of the preferred operating conditions of the union movement, their eventual deleterious effects on employment, and the obscene bounties carted away by its unquestioningly loyal footsoldiers when the whole edifice collapses under the absurdity of its own weight.

Unions point to “base rates of pay” in enterprise bargaining agreements as evidence of just how poorly remunerated their decrepit members are, but fail to mention the plethora of allowances, loadings, bonuses, penalties and other goodies that in some cases can see workers employed under them earn three, four, five times that rate.

Some of the GMH workers made redundant — the poor, maligned bastards — will walk away with redundancy payouts of between quarter and half a million dollars, and when it is considered that the liability for these payments was a consideration in General Motors’ decision to close its Australian operations it’s hardly a stretch to suggest the unions, in striking enterprise deals that enshrined them in the face of the threat to strike, are largely to blame for the “misfortune” of their members’ unemployment.

But if that is too difficult for some to accept, I cite the example at the polar opposite end of the industrial spectrum of restaurants operated in Melbourne by high-profile chef George Calombaris — and scores more like them — that do not open on Sundays for the rather obvious reason that paying kitchen staff and waiters up to $60 per hour to serve customers, cook food and wash dishes is, on any objective criteria, ridiculous.

Yet the unions have an answer for that too: of course businesses can afford to pay! Their attempts to avoid doing so merely show how greedy they are and how much they hate their staff by depriving them of high-paying hours. It’s just another conspiracy, you see, between the nasty bastards in the Liberal Party who want to wreck the standards of living of millions of Australians, and the business community that gets fat off the profits and gratefully bankrolls the Liberals in return.

That’s a simplistic — but accurately distilled — version of the basic premise of union resistance to workplace reform, and it’s absolute bullshit.

WorkChoices had nothing to do with the demise of car manufacturing in Australia, but the Fair Work Act has a great deal to do with pricing workers at the lower end of the market out of jobs (or at least, reducing the amount of available work to be obtained — which the analogy of the Melbourne restaurants neatly illustrates).

Now, a review by the Productivity Commission — to develop recommendations for the Abbott government to consider, with a view to taking a package of them to the electorate next year — is about to commence, and the unions and an irresponsible ALP are set to raise merry hell over it.

Of course all aspects of workplace laws should be reviewed if there is to be a review; that’s the whole point. Of course things like penalty rates and the laws surrounding terminations and disciplinary action should be included, even if doing so enrages the vested interests who stand to profit most from them being left untouched. But then again, Labor is the party that held a taxation review and prevented it from considering the GST, so it is unsurprising it should object to the framework of the Productivity Commission’s investigations now.

This morning’s article is really meant only as a curtain raiser to what I am sure will occupy a great deal of our time in the medium term, and some thoughts — again, from an addled mind devoid of the six hours’ sleep it needs to function — as a starting point. We will be revisiting this subject rather frequently this year, methinks.

But at the end of the day, a review that encompasses all the things that provoke fury in the ALP/ACTU axis for even daring to mention is not incompatible with a regulatory regime that prevents, for example, the less scrupulous shysters and cowboys in business from firing their staff and rehiring others at half their salaries — a point nobody seems to be making much noise about thus far.

And this is relevant because a sensible and balanced debate over workplace relations reform (which did not accompany the introduction of WorkChoices, was dispensed with when the Rudd-Gillard governments introduced the Fair Work Act, and which Labor and the unions now seek to shut down before it even begins) would talk about the labour market from the perspective of liberalising it and the benefits of doing so: again, an exercise given short shrift in Australia over the past ten years or so, although Coalition figures like Andrew Robb tried to fashion the case with the 2007 election bearing down on the Howard government, but by then it was too late.

After all, there is nothing as effective in politics as fear; these days, of course, Labor peddles little else.

Very simply, when there is plenty of work around and not many people in the market to take it on, employers should have the freedom to pay those who fit their requirements more for their services and, by contrast, when jobs are scarce and many people are competing for them, the impetus to pay them more is, quite clearly, nowhere near as compelling.

The corollary of this is that when businesses cannot afford to hire as many people as they like, forcing them to pay more for the people they do hire is just as likely to drive them out of business — destroying jobs anyway — whereas refusing to remunerate candidates from a smaller pool well to fill an abundance of jobs will damage the business too: no workers, no work, and no work, no profits.

And with observable minimum standards and a system of regulatory safeguards for those already in employment, the horror scenarios being cooked up and bandied around need only remain the stuff of nightmares — not reality.

As we head into this review and the debate that should accompany it, both the ALP and the union movement should stop trying to scare the hell out of people, abandon the story of the nasty, greedy nexus between the Liberals and business, and recognise that business stands to win (and lose) as much from intelligent reforms as their workers do, and that simply ripping people off is in nobody’s interests.

But to do so would require them to concede that their own agendas and their own handiwork, protected by legislation specifically designed in the unions’ favour, actually destroy jobs, and hundreds of thousands of them at that: and in the certain knowledge that Labor and its union cronies will never concede such a thing, the loud and vicious campaign to shut the entire debate down (or to at least render it politically impossible to proceed with anything arising from it) will now begin in earnest.

If you vote and you live in Australia, you’re about to hear an awful lot more about WorkChoices. Again. The 2016 election will be the fourth consecutive election Labor and the unions have fought on WorkChoices.

And rather than being frightened witless by the awful scenarios their rhetoric conjures up for workers and their families, perhaps — after a decade of this tactic — a better question might in fact be what the ALP and the unions are actually afraid of, and why they are so determined to fight tooth and nail to resist any change that compromises the cosy little sinecures they enjoy as the “masters” of Australia’s workforce.

After all, if you don’t belong to a union, neither the ALP or any union in the country could care less about you — however mistreated or exploited you are. If you don’t belong to a union, you may as well — to them — be dog shit.

And if simple, decent folk think about that, they might realise that the fight over workplace laws and employment conditions has less to do with actual workers than they ever believed, or thought was possible.