A Tale of Two Perspectives

26th February 2017

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity”

The Fair Work Commission decision reducing Sunday penalty rates has been characterised in some quarters as an act of gross barbarity against the oppressed and starving masses. The hysteria has been turned up to eleven. I almost expect the sounding of the conch shell throughout the city commune urging the mob to rise up, storm the Commission with pike and pitch fork, murder the President and free the workers from the oppression of the ancient regime.

Give me a break. This decision will neither herald a boom in employment or send people to the Poor House. It is both overdue and inevitable in the face of the overwhelming evidence of an outdated, illogical and unworkable system of wage regulation. The Fair Work Commission President was mugged by reality and despite taking almost three years to accept the inevitable, his decision hasn’t gone far enough. Let me provide a second perspective.

There has never ever been uniform national rates of double time paid to employees working on Sundays in Australian retail fast food and hospitality businesses. That is, not until the modern awards were phased in 2014. Until then every State had its own system of minimum wages and penalties and there were already national enterprise agreements in place covering 40 per cent of the Australian retail workforce with penalties half the size of the modern award rate. Club land in NSW and QLD never had rates higher than 75 per cent, whilst cafes and restaurants existed for decades paying only time and a half.

In the land that time forgot, South Australia, Sunday trading has always been restricted and full-time or part-time employees that volunteered to work on Sunday were paid a loading of 60 per cent. The modern awards added costs to business that were previously not incurred.

There will not be 1.5 million employees losing money from this decision. At last count by the ABS there were approximately 2 million persons working in retail and hospitality. This group includes managers, full-time, part-time, casual employees and self employed. 40 percent of the Australian retail workforce (600,000 people) is employed under enterprise agreements with time and half wages for work on Sunday. Most of the agreements do not include penalties on Saturday.

Managers in retail and hospitality are normally employed on over award salaries that do not include penalty rates and most are not required to work every weekend. Full-time award covered employees usually work Monday through Friday. It is predominately part-time and casuals that are employed on Sundays and a substantial number are earning some money on their way through university in which they will eventually earn greater salaries in professional and technical careers. Work in retail and hospitality is just a passing phase of their middle class lives. Entire casual workforces turnover every two to three years.

Thirdly, there is the black economy where the award rates are ignored. There are thousands of small cafes, restaurants, convenience stores and fast food outlets that never pay staff the double time required under the applicable awards. They employ recent migrants, family members, students on visas, tourists and other young naive Australians on ordinary hourly rates on a ‘take it or leave it’ basis. The experience with 7-Eleven is the tip of the iceberg.

The system established under the Fair Work law is incapable of enforcement. If the law were to be properly enforced (as it should) it would send thousands of businesses broke or otherwise require prices to rise on weekends to cover the additional cost. Retail, fast food and hospitality businesses operate on profit margins of less than 5 per cent and post-GFC experienced average growth of less than 2 per cent. Which government is going to see mass closures of businesses and the real life loss of employment?

Fourthly, there is absolutely no science in the determination of (to use President Ross’s expression) the disutility from working on Sunday. Should it be 10, 20, 30, 50, 75, or 100 percent? These ‘penalties’ were decided in a bygone era and simply adopted by the Fair Work Commission in 2010 as if set in stone and passed down from the gods above. All I know is the Australia when I starting work in the 1970’s is nothing like the Australia in which we now live. The churches are empty but the cafe’s, restaurants and shops are full.

So, having said all this, will anyone actually lose money from this decision? Undoubtedly yes, but I would argue this is likely to be very minor. The decision to reduce the penalty rate retains the link to the base ordinary wage. Therefore, as the base ordinary award rates rise then the Sunday penalty will also rise.

A much better solution would be to de-link (is that a word?) the penalty from the base ordinary rate of pay and treat it like an allowance i.e. set a monetary value for work on Sunday, say $10 per hour for all jobs in these industries. Why should Sunday work be worth more or less to the baker, butcher, candlestick maker than the restaurant manager or CEO of Coles and Woolworths. It’s all about time lost with family, isn’t it? Once set at a particular value it should remain at that value unless and until market forces indicate the need to adjust it.

Maybe that is too radical, too difficult or too simple for our man President Ross. However, I fear for his future. The angry mob is calling for his head. However, he could do it. Just imagine the final words of a really beautiful and noble decision before Prime Minister Bill Shorten sends him to the guillotine, “It is a far, far better thing that I do, than I have ever done.”