Defending penalty rates does not require political bravery

7 October 2015

By Tim Lyons

Since the regime change in Canberra, amongst the things that have stayed exactly the same are Coalition ministers supporting calls for cuts to weekend penalty rates, and Sunday rates in particular.

This has been part of a “call and response” game that has been playing out between employer groups and the Coalition over some years now.

The economic case, if you can call it that, for cuts to penalty rates is ridiculously overcooked.

Take a report released by hospitality employers in July as part of the Productivity Commission review of workplace relations, breathlessly headlined, “Penalty rate cut will create 40,000 jobs.”

But when you actually read the text, all it said was that it was possible that cutting Sunday penalty rates would result in 60,000 extra hours being worked. Even if it was new workers, there aren’t too many people who would argue that 1.5 hours work a week is a “new job”.

So even on the employers’ own argument, cutting Sunday rates would mean a lot of people taking a pay cut, and a much smaller number of people working a couple of additional hours work – perhaps to make up their lost wages.

Given multiple chances to produce real evidence that penalty rates hurt employment or opening hours, the employers invariably fail.

In a case currently before the Fair Work Commission involving claims to cut Sunday hospitality penalty rates, the employers were put on notice regarding the flimsy nature of their evidence. Witnesses admitted they had done no calculations as to how many more staff they would employ, and that they already employed the same number of staff across the weekend, despite differences in penalty rates.

Some of the employer witnesses appeared to think that the case was about cutting all penalty rates completely, confirming that the real agenda here is a longer term push for total abolition.

The statistical evidence doesn’t support calls for cuts. Measured by the number of businesses, hours worked and employment, restaurants and cafes have been “booming”.

Meanwhile, the other key target of this campaign is retail. The sector employs about 1.2 million Australians (our second largest industry after health and social assistance). There is no indication of a job or business Armageddon in the data, because of penalty rates or otherwise. Employment in this industry tends to move around based on the overall health of the economy – in other words, it tracks demand and consumer sentiment, exactly as you’d expect.

Then there are the claims that cafe and retail penalty rates are not “internationally competitive” and so must be cut. This argument is as silly as the urban myth that none of us can find an open cafe on a weekend. If you don’t believe me, ask your local cafe owner if she has considered relocating their facility to Guangdong to lower the labour costs associated with Sunday brunch.

The Prime Minister yesterday cited the “24/7 economy” as grounds for cutting penalty rates. Higher Sunday rates were “historical” he said.

Contrary to what the PM said, penalty rates aren’t about some historical curiosity like chimney sweeps or rotary clotheslines. They are about the present reality of who has to work when.

Lots of us consume goods and services at all sorts of weird hours, but not many of us actually work that way. As economist Greg Jericho pointed out in response to the Productivity Commission’s draft report on the workplace, “The level of people working at least one day at the weekend hasn’t shifted at all in the past 15 years.

The consumption most of us do outside the still highly prevalent “Monday-Friday office hours” is made possible only because of those of us working in retail and “hops”. Along this those who transport us around and clean up the mess. And who keep us safe and are there if we get sick.

A relatively small group of workers make this sort of 24/7 economy possible. But it’s their wages on the block.

The campaign for cuts to penalty rates consists of the people who make the profits trying to get the politicians to convince those who do the consuming to acquiesce to pay cuts of the people who do the actual work at nights and weekends.

But it’s about “the economy” and being “modern” and “24 /7”. And it’s mostly young people who don’t really “need” the money anyway.

Which brings us to Bill Shorten’s bewildering use of the example of the need to pay private school fees as a justification for penalty rates. Labor supporters on social media cited low fee Catholic schools as an example, an argument Shorten subsequently adopted.

While almost any example from a household budget would have been better than the one Shorten used, this sort of argument is generally unhelpful and misses a more fundamental point.

In my view “We need to cut your pay to give you a job” and “we need to pay you penalty rates or you’ll be surviving on two minute noodles” are bad arguments just like the one about school fees. It can can dehumanise the people involved and demean our society as a whole.

It’s not some sort of problem that workers might have the ability to engage in a bit of discretionary spending. Pay your bills. Buy yourself something. Or even have a drink. It’s all good. It’s your money.

Attacking things like penalty rates (and minimum wages) amounts to a explicit prescription for more inequality. Penalty rates are an anti-poverty measure and they are a bulwark against inequality. But they are more than that.

Defending weekend rates as if they are some kind of act of charity (as some on the Left tend to do) is wrong.

One of the centre-left’s strongest suits in economics is supporting good earned incomes for working people. Earned incomes can help give an individual or a family autonomy, security and choices.

Defending penalty rates does not require political bravery – poll after poll has shown stratospheric levels of support of penalty rates (in the 70 and 80 percent range). About three quarters of Coalition voters are supportive of penalty rates.

Labor, and anyone else looking to defend incomes and living standards, must be unapologetic about supporting penalty rates. Whatever people choose to spend the money on.