Why lower penalty rates wont work

The significant argument about lower penalty rates revolve around two issues, longer opening hours and better consumer services, and secondly, the economic impact.

The argument over opening hours for business is problematic. In retail, and some parts of hospitality, this is a regulated environment so reducing wage inputs is a meaningless argument. The lower penalty rates regime doesn’t affect cafes and restaurants on Sundays, so no 4pm smashed avo’s for you (unless they already do offer them). In hotels, even forgoing the previously mentioned regulatory environment, it is unlikely that pubs are going to open till midnight on a Sunday, when Monday is a ‘school-day’.

More importantly, lower penalty rates advocated by FWA (Fair Work Australia)  has a minor effect on cost-structures, a conservative 3.5% for Sunday’s  and an overall 0.5% on weekly expenditure. It will unlikely be profitably (thereby likely) to open for longer periods, opening/closing times provide marginal income, but a useful way to generate income when staff are either preparing for service, or cleaning down after service. No business is going to have staff stand around waiting to serve customers.

The economic impact will be negligible. FWA in their decision, recognised that there is wide-spread underpayment in the hospitality industry. Even despite that, most full-time permanent staff are paid salary. Those salary payments are not tied to award payments (despite award requirements). Chef-de-Patrie’s are typically paid $15 000 under award. Australian-trained  Commis Chef salary level usually are about $3000-5000 less than a cook paid under a 457 visa. This also does not take into account the numerous EBA’s in the industry.

What this decision does allow, is the opportunity to measure economic impact of wages on the hospitality industry. FWA, despite protestations to the contrary, gave the Union movement every opportunity to provide an economic argument to justify retaining penalty rates. United Voice declined to meet this challenge, as they did when penalty rates were lowered in the Restaurant Award in 2014. In the latest review, employer groups presented over twenty witnesses from a broad-range of the sector, who provided comprehensive and multiple arguments for their case. United Voice presented 7, some who FWA dismissed since they were not Award employees but employed under EBA’s, this is gross incompetence and displays a continuing lack of concern by the Union dating back to the  review under the previous Labor government that led to lowering of penalty rates under the Restaurant Award .

Employer groups attacked the Unions at their strength, the social costs and impacts. The union movements argument was a weak, qualitative economic rebuttal, that ignored the legal framework FWA was based on. FWA recognised that employer groups made dubious economic claims based on flawed modelling, it gave the union movement every opportunity to dispute those arguments as part of the arbitration functions it operates under. Failure by the Unions to present a meaningful argument left FWA with no other choice, the unions involved allowed this decision to be enacted by acts of omission.

Employer groups challenged the unions on social grounds ( a perceived union strength) and won. Ironically, it is the economic argument that favours the union case. To prosecute, requires an alternative vision of the workplace, one that our conservative leadership does not have the vision or skills in order to adequately develop.


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