Cutting penalty rates is economic madness
Further cuts to penalty rates make no sense when leading economists say Australia needs a pay rise.
A second tranche of penalty rate cuts for low paid workers came into effect on 1 July despite a new call from the Reserve Bank governor, Philip Lowe, for an increase in wages for Australian workers.
Day one of the new financial year saw the implementation of a further 10 per cent cut in Sunday penalty rates for fast food and hospitality workers. Retail and pharmacy workers copped a 15 per cent cut.
Last year, workers in all four sectors saw their Sunday rates slashed by five per cent.
This attack on the wages of the low paid is not over.
Another 10 per cent cut is scheduled for fast food and hospitality workers next year and further 15 per cent annual cuts in retail and pharmacy workers’ penalty rates for the next two years.
Sydney Morning Herald columnist Jenna Price warned that these cuts were merely the beginning.
“I always think about those first cuts as being a taste of things to come – penalty rates cuts for the industries we don’t think are important; hospitality, retail.
Workers need more bargaining power
The latest round of penalty rate cuts came weeks after Reserve Bank boss, Philip Lowe, said a lack of wages growth is chipping away at Australia’s “sense of shared prosperity”.
On 13 June, Lowe, in a speech to the Australian Industry Group, told some of Australian’s most prominent business leaders he would like to see pay rises of at least three per cent for working people.
“In my judgement, the return over time to a world where wage increases started with a three rather than a two is both possible and desirable,” he said.
It was the second time the Reserve Bank governor had publicly called for an increase in wages in order to stimulate the Australian economy.
Lowe attributes the lack of wages growth to a decline in the bargaining power of workers, an increase in the global supply of workers and businesses that have focused on controlling labour costs instead of investing in technology.
“This cost-control mentality does not make for an environment where firms are willing to pay larger wage increases,” he said.
Guardian economics com-mentator Greg Jericho says that the lack of bargaining power and the use of imported workers are connected.
“Temporary workers brought in (to Australia) are being done so by companies seeking to ensure lower levels of unionised labour and higher levels of non-permanent staffing, which combined, reduces the capacity for workers to argue for higher wages,” he wrote.
Government policy decreases wages
Prior to Lowe’s speech, bus-iness groups and the Turnbull government had opposed an increase in the minimum wage.
The Turnbull government warned the Fair Work Commission that an increase in the minimum wage would pose “employment risks”.
That position was comprehensively debunked by Reserve Bank research that showed minimum wage rises don’t cause job losses (see The Lamp June 2018).
Malcolm Turnbull has also publicly supported the decision to cut penalty rates arguing it would lead to an increase in jobs.
This claim too has been demolished by research produced by the University of Wollongong and Macquarie University. Their study found there was a zero increase in jobs after the first round of penalty rate cuts.
“This finding is in stark contrast to the hypothesised outcome,” said Dr Martin O’Brien, the lead researcher.
The penalty rate cuts that keep on coming
June 2017, the Fair Work Commission (FWC) ruled cuts to penalty rates that would be phased in over the following years.
Workers in fast food or hospitality had their Sunday penalty rates reduced by five per cent in 2017, with a further 10 per cent cut from 1 July 2018 and another 10 per cent cut to come in 2019.
Retail or pharmacy sector workers had their take-home Sunday pay cut by five per cent in 2017, with a further 15 per cent every year until 2020.
Malcolm Turnbull publicly supported the FWC decision.
What if it happened to nurses?
If nurses and midwives’ Sunday penalty rates were cut to Saturday levels:
A registered nurse in a NSW public hospital would lose $1,767 per year or 1.9 per cent of gross pay.
An enrolled nurse in a NSW public hospital working “average hours” would lose $1,573 per year or 2.59 per cent of gross pay.
The loss for an assistant in nursing in an aged care facility working a full-time equivalent of 38 hours per week, would total $1,399 per year or 2.59 per cent of gross wages.