Wednesday, 15 March 2017
At a recent Sunday trip to Coolangatta, it struck me how many of the retailers in the main shopping centre were closed. The large retailers and restaurant chains were pretty much the only options. Considering this is a major tourist area and how busy the beaches were, there was clearly no shortage of potential customers. And therein lies the foundation for understanding the recent decision by the Fair Work Commission (FWC was set up by Julia Gillard as an independent body free of political interference, and tasked by Bill Shorten to review award conditions at four yearly intervals).
The Heart of Employment
Obviously, it is sad to hear of any reduction of income for any part of our economy as we don’t want a reduction in living conditions in our country. The buzz word of the year is “fake news”, so I thought I’d put the impact of penalty rates on employment into perspective:
- There are 11,984,300 people employed in Australia. 17.6% of these (or 2,110,800 people) work in the Retail, Accommodation and Food services industries. Despite Construction and public sector unions protesting in the streets, no other sectors are affected by this decision.
- Breaking the above figure down further, only 600,000 in these sectors are affected, because the remaining portion are employed by companies that negotiated EBA’s with the Unions. The EBA’s pay LESS than the award rate on Sunday’s, as an example McDonalds pay $26 per hour compared to a competing independent snack food bar that would have to pay $34. The question needs to be asked how large employers and Unions could negotiate agreements for 2/3’s of this sector that didn’t pass the Better Off Overall Test (BOOT) they needed to obtain FWC approval.
- Worker preferences are not considered when the headline figures are discussed. For example, most fast food workers are full time students aged between 15 and 19 years. 2/3’s work less than 25 hours per week (hence why employers asked FWC to consider overtime only be paid after certain minimum hours). About 60% work Saturday’s, and 60% work Sunday’s. Further, the fast food industry awards didn’t have weekend penalty rates until 2010.
- Penalty rates are not being abolished. They are being reduced on Sunday’s only to the same as on Saturdays: from 150% to 125% for permanents (175 to 150% for casuals). For an average worker in this industry, the impact is the same as what they earn from 1 hour of employment per week.
- There are 122 different industry awards, with many small business owners forced to use 3-4 different awards for the different roles in their business. There are 960 sections in the Fair Work Act, consisting of 250,000 pages. How is a small business expected to stay on top of that? The Small Business Ombudsman (Kate Carnell) is working to fix this by aiming to have a 2 page document apply to the small business sector, but needs industry support.
- There is no difference in the productivity of a person in these industries between different days of the week to justify pay differences. Australia’s minimum wage is already more than double that in the USA, impacting on our competitiveness in for instance attracting tourists.
- One of the main reasons for the FWC decision was that Union negotiated EBA agreements have traded away weekend penalty rates over the past few decades, setting the scene to treat all days of the week the same. The decision was about starting to level out pay discrepancies between large and small employers.
- There are nearly 2.2 Million businesses in Australia, over 90% of which are Small to Medium sized. Let’s assume only 10% of them now decide to open on Sunday’s for 8 hours, and only put on ONE person. That’s the equivalent of 1,584,000 extra hours of employment PER WEEK, or the same as employing about 60,000 people in full time equivalent roles that currently have no jobs and don’t earn an income at all.
From the above, there will be a small portion of the overall workforce (about 6%) who will be very minimally worse off (about 5% less take home pay, unless they work the extra hour). By comparison, the extra jobs this will create has the potential to reduce our unemployment by up to 10% from its current level. That means our welfare bill (which accounts for 1/3 of all Government expenditure) can also reduce, and the money hopefully invested into productive causes such as much needed infrastructure upgrades.
This is a first step for small businesses to start getting a more level playing field.
After all, I think we all like to support Australian Owned businesses that employ Australians, pay their taxes, and re-invest in Australia. Much like RD Williams!
As always, onwards and upwards!