Friday, 24 February 2017

Will cuts to Sunday penalty rates become a textbook example of unintended consequences?

ABC News, 23 February 2017:

Let's start by calling a spade a spade. Sunday penalty rates have been cut by the Fair Work Commission. Not "equalised" or "brought in line" with Saturday rates. Cut.

Business, big and small, has been seeking this cut for years, saying Sunday penalties are a legacy of a bygone era where families went to church — one that's costing them a tidy sum.

They also argue it's a legacy that's been costing jobs, with many employers choosing not to open on Sundays, or to maintain just a skeleton staff (although ask yourself, just how many retailers, restaurants, cafes and bars are actually shut on Sunday?).

But the cuts to Sunday penalty rates could become a textbook example of unintended consequences, where a move supposed to increase employment instead hurts the economy and increases business failures and job losses.

Why? Because the hundreds of thousands of retail and hospitality workers affected by this decision are also customers.

What do you think happens when you cut someone's pay packet by as much as 25 per cent for their Sunday shifts?

(For a typical permanent retail worker on the award who always works Sunday shifts this will cut their annual pay by about $3,500).

They either have to work more, or they have to cut their spending to match their new, lower wage.

Given that unemployment is stubbornly high at 5.7 per cent, and underemployment is near record levels, it seems unlikely they'll actually be able to get more work to make up the lost pay — and, remember, these staff already work Sundays, so it's not like they'll benefit from any increase in jobs on that day.

According to the Australia Bureau of Statistics (ABS) an est. 850,300 people were employed in the accommodation and food industry sector in November 2016 as their main job and another est. 1.25 million people have their main job in the retail sector [ABS 6291.0.55.003 - Labour Force, Australia, Detailed, Quarterly, Nov 2016].

An est. 54.7 percent of female employees in the accommodation/food industry work part-time and an est. 45.3 per cent males do likewise. While in retail an est. 54.6 per cent of females and 45.3 per cent of males work part-time.

In accommodation/food businesses part time employees work for an average of 16.1 hours while in the retail trade part-time employees work for an average of 16.7 hours.

Underemployment appears to be highest in the food and hospitality sector, third highest in the retail sector and females highest in both sectors. [Workplace Gender Equality Agency, Gender composition of the workforce: by industry, April 2016]

Females with only one job were more likely to work on weekends - 73% compared to 68% for males.

These statistics tend to confirm that “hundreds of thousands” of single person and family households will be hit by cuts to Sunday penalty rates as set out in the Fair Work Commission’s 4 yearly review of modern awards – Penalty Rates Decision covering Hospitality, Fast Food, Retail and Pharmacy Awards and, I have no doubt that their loss of income will affect local economies to a significant degree.

Award Sunday Penalty Rate

Hospitality Award full-time and part-time employees: (no change for casuals) 175 per cent -> 150 per cent

Fast Food Award (Level 1 employees only)
Full-time and part-time employees: 150 per cent ->125 per cent
Casual employees: 175 per cent ->150 per cent

Retail Award Full-time and part-time employees: 200 per cent ->150 per cent
Casual employees: 200 per cent ->175 per cent

Pharmacy Award
(7.00 am – 9.00 pm only)
Full-time and part-time employees: 200 per cent ->150 per cent
Casual employees: 200 per cent ->175 per cent

Local and regional economies on the NSW North Coast - where often low levels of employment opportunity combined with the fact that few hospitality/food outlets in tourism-orientated towns and none of the big retail stores currently close on a Sunday anyway - suggest that this wages cut will be nothing more than a straight forward cost saving for local businesses, with no or very little additional full-time, part-time or casual employment eventuating.

That a backlash to the Fair Work Commission decision appears inevitable is indicated by this online poll active on the day the decision was published:

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