Finance Work Lower wages ahoy, Australia!

Lower wages ahoy, Australia!

penalty rates regatta
A sailing regatta isn't the best place to discuss penalty rate cuts.
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The next time Australia’s corporate leaders want to speak out on cutting penalty rates, how about doing it from a sleeping bag at the annual Vinnies CEO Sleepout?

They might get some sympathy there.

Instead, social media has exploded with pictures of top Australian CEOs discussing the issue at their preferred location – a sailing regatta at Melbourne’s bayside retreat of Sorrento.

It’s a shame really, as the Twitter storm will only inflame the already emotive and partisan nature of this debate.

That doesn’t make things any easier for the Fair Work Commission, the body set up by the Rudd government in 2009 when it repealed the Howard-era WorkChoices legislation, which is expected to rule within weeks on whether Saturday and Sunday penalty rates should be equal on both days.

If it makes the rates equal, fast-food workers would see their Sunday rate fall from 150 per cent to 125 per cent of normal wages, and retail workers would see their Sunday rate fall from 200 per cent to 150 per cent.

Labor and the unions have vowed to keep fighting any such move, while the CEOs seen sailing back and forth on Wednesday with WorkChoices Treasurer Peter Costello think it’s essential.

A bad look

Mr Costello’s presence at the regatta was doubly unfortunate in a week when Fairfax Media revealed that 4000 young workers were still stuck on WorkChoices-era workplace agreements paying as little as $8 per hour.

Oh, and in the same week in which the Howard government’s excessively generous pension rules were further reined in.

But I digress. The issue at hand should not have become as polarised as it has. It really does have two sides.

retail penalty rate cut
Retail Sunday rates could fall from 200 to 150 per cent. Photo: Getty

As former AWU secretary Paul Howes tried to point out in a speech in 2014, the end of the mining boom was going to require a “grand compact” between business and labour to avoid a blow-out in unemployment.

Not much chance of that, it would seem. The trench warfare of Australian politics has only worsened since Mr Howes gave that speech – which, incidentally, pretty much ended his career in the union movement.

Three years on, there are 40,000 more 15- to 24-year-olds unable to find work (see chart below).

The life-stage problem

When Labor vows to fight penalty rate cuts, it tends to highlight the problems this would cause workers with, as Zorba the Greek famously put it, “children, a house, everything. The full catastrophe”.

And yes, for such workers a reduction in Sunday rates could be a catastrophe – especially those who took on high levels of household debt during the low-interest rate period, which is already ending.

On the other hand, the real bulge in the unemployment stats is among younger workers, who are over-represented in the retail and fast-food sectors under consideration.

Importantly, that bulge includes the highest level of long-term youth unemployment for a decade.

Priced out?

What does all this mean at street level? For one thing, youngsters ‘priced out’ of the workforce are more likely to find ‘informal’ work far below award rates, as University of Melbourne researcher Shirley Jackson showed last year.

Research on the informal economy is sketchy, but the Australia Institute estimated in 2012 that, across all age groups, informal work resulted in something like $3.3 billion in lost revenue per year.

The Fair Work Commission has ruled in favour of Southern Cross Care in a fight over pay rates.
‘We still don’t know what the Fair Work Commission will decide.’

So if the aim of keeping award rates high on a Sunday is to help youngsters get ahead, the results look pretty awful: high unemployment, lots of informal work with none of the benefits of award wages, and a big hole in the tax base.

We still don’t know what the Fair Work Commission will decide, though reports in December suggested that FWC’s full bench is evenly split on the issue.

What we do know is that youngsters wanting above board working arrangements, and businesses wishing to employment them, need encouragement in a time of economic transition.

If the FWC swings too hard towards the Labor position, therefore, it’s doubtful it will have found the best economic outcome.

On the other hand, the public backlash against CEOs calling for pay cuts from yachts might be the final puff of wind to blow them in that direction.

To read more columns by Rob Burgess click here.

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