Why penalty rates should not be scrapped

August 17, 2015

18 August 2015

by David Hetherington

Recently I hailed a cab after a work function in the Sydney CBD. “How’s it going?” I asked the driver.

“Dead as a doornail” he tells me. “Bank holiday.”

“Bankers all got the day off so the city’s a ghost town,” he deadpans. “Wish we had a cabbie’s holiday.

This got me thinking. I’d always known about the bank holiday in August, but not given it much thought. Lots of mates in finance had seemed to take the day off over the years (skiing was popular). Good luck to them, I’d thought.

But why do we have it anyway?

Turns out it’s to compensate bank staff for the extra work involved in completing end-of-financial-year reporting. What other industry gets its own legislated holidays? None that I can think of.

The next day, the Productivity Commission released its draft report on the workplace relations system. The big recommendation was a cut to Sunday penalty rates for workers in the retail, hospitality, tourism and entertainment sectors.

Some low-paid workers cannot afford to take a pay cut.

My mind returned to the bank holiday.

If penalty rates for baristas and bellboys are such a drain on the economy, whatâ’s the impact of a freebie holiday for bankers? What’s the productivity effect? Who pays for it?

That last one’s easy – you do. Check your statement. You don’t get a discount on monthly account fees because the banks weren’t offering services that day.

What do some rough numbers tell us?

At the end of March, Macquarie Group, a big bank, employed 14,085 people and its annual remuneration costs were $4.143 billion. That’s roughly $294,000 a year for every employee.

If they work 232 days a year after annual leave and public holidays, that’s $1267 per day. So, by this proxy, the “cost” to the economy of this little perk on the first Monday in August is $1267 per banker.

For hospitality workers, the minimum wage before penalty rates is $17.29 an hour, and the proposed cut to Sunday penalty rates equates to 25 per cent of this, or $4.32 an hour. So a waiter would have to work 37 weeks of eight-hour Sunday shifts under the proposed new regime to generate enough savings to offset the cost of one banker’s holiday.

This isn’t a call to abandon the bank holiday … for one thing, we don’t track our account fees that closely. But the comparison does illustrate the folly of attacking the incomes of the lowest-paid workers in our society.

A waiter would have to work 37 weeks to earn enough savings to offset the cost of one banker’s holiday.

Wage growth is stagnant, so living standards for this group are already under pressure. Unemployment is still low, suggesting that higher wages under the existing penalty rate regime are not keeping people out of jobs.

And just like our account fees, we don’t keep track of our coffee prices that closely. A price cut of 10 cents a cup, made possible by lower penalty rates, is barely noticeable for most of us.

And those for whom it does matter are the ones most likely to have their incomes cut even further by reduced penalty rates anyway!

All of this ignores the most important factors in the penalty rates argument, the non-economic ones. As historian and speechwriter Dennis Glover argues in his new book, An Economy is Not a Society. Or as the PC report put it more tentatively, “there may be non-economic considerations”. Who’d have thought?

This is code for saying these workers are people too, with families, friends, social engagements, second (and third) jobs, study commitments, and all the other life details we juggle.

Their Sundays are as important to them as they are to the rest of us, and they give up more on a day’s work than those of us in a full-time Monday-to-Friday job. They miss weddings and barbecues and grand finals and kids’ concerts. And they sure don’t have dedicated paid sector-wide holidays to compensate them for it.

So let’s give them a break and lay off their weekend rates.