The Fair Work Commission's decision to reduce Sunday penalty rates for retail, hospitality and fast food workers is a modest, but important step towards realigning award wages with the reality of our increasingly 24/7 retail and hospitality sectors.
The decision will see full-time and part-time retail workers' Sunday pay loadings reduced from 200 to 150 per cent, hospitality workers from 175 to 150 per cent and fast-food from 150 per cent down to 125 per cent.
Forget the naysayers. Australia's retail assistants, barristas and wait staff will remain among the best remunerated in the developed world.
The politically inconvenient truth is that penalty rates are a hangover from a bygone era that costs tens of thousands of jobs and cripples businesses small and large.
When penalty rates were introduced in 1947, the workforce was largely comprised of full-time workers – mostly men – clocking in for a standard 9-to-5 weekday workweek. In this context, added weekend pay loadings served the dual purpose of deterring businesses from deviating from the standard work week's strict division of work and play while compensating a tiny minority forced to work extra after already putting in a long week.
The quaint predictability of life in the 1940s bears less than passing resemblance to the fluid and wide-ranging work patterns of today's economy. Part-time positions account for well over a third of our workforce while a third of single job holders and 57 per cent of multiple job holders regularly work on weekends.
Retail and hospitality have moved in lockstep with the erosion of the traditional work week and changing consumer preferences. Saturday is hospitality's biggest trading day and Sunday's share of the retail sector's weekly trade has more than tripled since the early 1980s.
Contrary to conventional wisdom, longer opening hours have been a boon for workers. For the 40 per cent of retail workers who are students, weekend trading means being able to earn money at the times most convenient for them.
Everyone wants retail and hospitality workers to be paid fairly – and they are. But in an age where church attendance has bottomed out to barely 15 per cent, fairness does not require paying workers a 200 per cent premium – often more than $36 an hour – simply for coming to work on a Sunday.
As stated by the Productivity Commission, penalty rates "frustrate the ambitions of the unemployed" while handicapping businesses eager to capitalise on changing consumer preferences. According to University of Canberra economist Phil Lewis, Sunday penalty rates are estimated to have reduced demand for labour by between a staggering 75 and 100 per cent. Likewise, a study by Restaurants and Catering Australia has found reducing Sunday loadings to Saturday levels would create as many as 40,000 jobs.
But perhaps the clearest evidence that penalty rates cost jobs are the series of enterprise agreements negotiated between the SDA and supermarkets and fast food chains that cut weekend and overtime rates in favour of a slightly higher base wage. The recently struck down Coles agreement was estimated to save the supermarket giant a whopping $700 million a year. It is wilful ignorance to believe that a return to the award – nearly doubling the Sunday wage bill – would have no impact to employment or hours worked.
I saw this play out as a 15-year-old supermarket deli hand when on Sundays my humble rate of $8.45 grew to $12.67. The other casuals in their 20s receiving the full adult wage – then $17 an hour – would regularly bemoan that the manager refused them lucrative Sunday work on the grounds that he needed to "manage his budgets''. Go figure.
While no doubt well-intentioned, the union movement's claim that Fair Work's decision will take a wrecking ball to the living standards of thousands of beleaguered working families is wrongheaded. With or without penalty rates, Australian retail workers enjoy generous wages and conditions. According to Morgan Stanley, Australian retailers pay 27 per cent more in wages than the United States and 29 per cent above Britain. Similarly, Citigroup analysis has found that Australian wages, as a proportion of gross turnover was markedly higher than the international benchmark.
Perhaps most revealingly, Finland is now the only developed country that mandates businesses pay double time rates for Sundays.
Concerns about the material wellbeing of vulnerable workers relying on penalty rates such as single parents or students are far better addressed specifically through targeted social welfare measures.
The political maelstrom that has erupted in the wake of Fair Work's verdict demonstrates the folly of allowing the wages of hundreds of thousands of workers to be single-handedly decided by an unelected and unaccountable body like the Fair Work Commission.
If the measure of an effective industrial framework is its capacity to maximise employment and economic, penalty rates should be a matter for negotiation between workers – either collectively, or individually – and their employer. In a workforce spanning seven states and territories, 7.6 million square kilometres and almost 12 million workers, our one-size-fits-all approach of a single regulator making national wage decisions, like penalty rates, belongs in the era of the horse and buggy.
John Slater is executive director of the HR Nicholls Society.
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