PENALTY RATES AND THE NEED FOR JOB SECURITY

An upcoming Productivity Commission report is likely to make recommendations regarding penalty rates under the current Award. Debate whether to cut or preserve penalties, however, misses the real issue: the increasing dependence of Australians on penalty rates to live. Reform in this area must promote job security.

The most economically vulnerable people in Australia will suffer if penalties are cut. Last year the wage price index rose a mere 2.6%, well below the cost of living, and the lowest result since the ABS started collecting data. So where are low-income families getting their bread?

The Prime Minister recently claimed that low-paid workers “love to work late nights, weekends, because it substantially increase[s] income”. However, many workers rely on penalty rates to live. For example, last year 47% of laborers relied on penalty rates to meet the ‘cost of living’, according to the ABS.

More generally, ABS data from 2012 highlighted that penalties accounted for 7.84% of earnings across all industries, and in 2013 the number of people relying on casual work increased to 19.4%.

Young families are in an especially awkward position. Childcare providers are needed during ‘unsocial hours’ (which is prohibitively expensive) and this increases their reliance on penalties. It’s a classic Catch-22 situation, and it keeps families apart.

Penalties are unpopular with businesses, however. Lobbyists, especially in the hospitality and retail sectors, claim penalties inhibit economic growth. Peter Strong claims penalties are “currently so high that they’re getting rid of jobs”, especially on weekends. A previous Productivity Commission report also found that penalties “overcompensate” workers.

However, the debate whether to ‘cut or retain’ penalties is largely beside the point. An effective Productivity Commission report would analyse the merits of penalties within the context of widespread casualization, and promote job security through the transition from casual to flexible part-time agreements. This would benefit everyone.

Socially, workers (especially those with young families) should be in a position to achieve work-life balance around unsocial hours. Flexible agreements are standard practice in local governments: it’s not pie-in-the-sky thinking. This transition would also reduce the dependence of workers on penalties.

Economically, this would increase flexibility in the kinds of agreements employers could reach with their staff. Award legislation, on the other hand, is inflexible and imposes the cost on employers of paying experts on award-compliance. Creating flexible agreements may also create more work, especially on weekends.

A problem with this solution is that it relies on the existence of a robust workplace bargaining process. The point here, however, has not been to provide a comprehensive solution. It has been to point out that the focus of the current debate is misplaced, and that an effective Productivity Commission report will consider penalties within the broader social-economic context of workforce casualisation.

Getting rid of penalties isn’t the answer, but a shift away from casual work would be a step away from our dysfunctional reliance on them.

David Allinson is a second-year JD student.