Finance Work The PM must step in to prevent a low-wages shock
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The PM must step in to prevent a low-wages shock

Malcolm Turnbull
Malcolm Turnbull says his cabinet is well balanced. Photo: AAP
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What makes Thursday’s decision to cut penalty rates so shocking, is that the body that made the ruling, the Fair Work Commission, exists to ensure wage rises reflect “relative living standards and the needs of the low paid” – no more, no less.

That’s the first objective spelled out in section 134 of the 2009 Fair Work Act. Like the original Arbitration Commission or the later Industrial Relations Commission, the FWC is not there to deliver pay cuts.

That’s what makes the ruling so unusual and so infuriating to low-paid Australians and their families – particularly those relying heavily on Sunday penalty rates.

The biggest of the cuts is for full-time or part-time retail workers, who’ll see their Sunday hourly rate drop from 200 to 150 per cent of weekday wages.

Rates vs take-home pay

The unions have muddied the waters on this issue somewhat by railing against any change to penalty rates per se, rather than focusing on what really matters – the hourly rate that will give employees a dignified, healthy life.

While at first these sound like the same thing, they are not. So let’s separate out the two questions.

Firstly, should Sunday penalty rates be reduced to reflect the fact that Sundays are less special to Australian families than they once were?

In my view, they should. The Commission thinks so too, saying that “for many workers Sunday work has a higher level of disutility than Saturday work, though the extent of the disutility is much less than in times past”.

penalty rate cuts retail
Retail workers face the biggest cuts to their Sunday pay rates.

However, there is a second important question: how should the two sets of rates be brought closer together without putting workers in horrible financial stress?

The shock of a cut

Low-paid workers, like other Australians, make financial commitments based on a level of confidence about their future earnings.

If you hate your job and are thinking of quitting, you’ll think twice about rushing to sign a finance agreement on a second-hand car.

However, if you’ve been in your job for years, the last thing you’ll expect is a pay cut.

The point is, the financial commitments of the low-paid can’t easily be unwound, but unless something drastic is done, their ability to honour them will be.

In more normal times, the least painful way to adjust Sunday rates closer to Saturday rates would be to let inflation do the work.

Thus a ‘200 per cent’ hourly pay rate could be fixed for some years until the old ‘150 per cent’ rate caught up. Not nice, but gradual at least.

Focus on ‘take-home’

The second way to soften the blow is already written into the Fair Work Act. It makes provision for the Commission to issue ‘take-home pay orders’ when a worker’s wages are adversely affected by an award ruling.

Australian Council of Trade Unions president Ged Kearney tells me the union is “seeking legal advice” as to whether aggrieved workers can preserve their levels of pay in that way. (They can apply for such an order here.)

Ged Kearney ACTU
ACTU president Ged Kearney is fired up to campaign against the cuts.

Again, the Commission makes mention of this in its ruling – but perversely says it’s not sure how available the orders will be. The Commission’s Full Bench “did not favour any general ‘red circling’ term which would preserve the current Sunday penalty rates for all existing employees”.

Stranger still is the fact that, after announcing big cuts to low-paid workers’ incomes, the Commission only now wants to take submissions on what kind of ‘transition’ plan should be put in place to prevent an income shock.

Mr Shorten says Prime Minister Malcolm Turnbull should “send along the Commonwealth’s lawyers” with a submission to ensure that the low-paid don’t “have a cut in their take-home pay”.

Little chance of that. But if Mr Turnbull doesn’t do something, he is surely giving Labor huge political momentum in the lead-up to the next election.

In a time of growing under-employment, that would seem a very misguided course indeed.

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