Penalty rates won’t reduce prices for consumers: employers

Don’t expect a cheaper meal on a Sunday.

Employers admitted the reduction in Sunday penalty rates would not offer consumers lower prices, a crucial clause in the Fair Work Commission’s ruling has revealed.

In paragraph 632 of the FWC’s full decision, it states that the notion of lower wage costs leading to lower prices, increased demand and increased labour was “not supported” by “any” of the employers who presented submissions.

This clause runs contrary to the commission’s argument that the real winners of the decision are the consumers, claiming they would “benefit from more convenient access to services and in some cases lower prices”.

The commission ruled yesterday to reduce Sunday penalty rates for hospitality workers from 175 per cent to 150 per cent, while fast-food workers’ rates will drop from 150 per cent to 125 per cent.

Retail workers face a cut from 200 per cent to 150 per cent for Sunday work.

Workers from the hospitality, retail, fast food and pharmaceutical industries responded with outrage, as for many Sunday staffers the decision meant a pay cut.

No cheaper Sunday breakfast

Consumers can expect to pay no less for their Sunday brunch or afternoon tea, as employers indicated to the commission that a cut to penalty rates would have no impact on their prices offered on Sundays.

Griffith University professor of employment relations David Peetz told The New Daily that when he visited New Zealand a few months ago, a country with no penalty rates, he observed that the younger and less experienced were attracted to Sunday work.

“Arguably, more senior staff won’t be as attracted to Sunday work with a reduced penalty rate, so I think we will see a higher proportion of younger and lower-skilled workers on Sundays,” Professor Peetz said.

There is no evidence to support the claim that some small businesses would cut Sunday prices, but rather there’s evidence against that.

“They’re saying the decision will increase opening hours on a Sunday, but an increase in hours overall would rely on spending overall. I’m not convinced. Nor am I convinced businesses will offer a larger range of services to customers.”

Professor Peetz believed businesses would compensate for any additional hours open on a Sunday, by reducing their opening hours on weekdays such as Mondays.

“Likewise, if people spend more on a Sunday, we might see a reduction in spending on other days of the week,” he said.

But other experts maintain the impact of the penalty rates decision is largely positive.

University of Canberra’s Phil Lewis, director of the Centre for Labour Market Research, said the reduction would enable smaller businesses to take on more employees.

“Some smaller businesses pluck staff right down to the bare minimum on a Sunday or don’t open at all. This will give consumers more choice,” he said.

“Even with the reduction, Sunday rates are still substantially higher than the normal rate. The award rate is well above what should attract people to work on Sundays.”

Wider economic impact

University of Newcastle’s Bill Mitchell, director of the Centre of Full Employment and Equity, told The New Daily the reduced penalty rates could spiral into a rise in individual insolvencies.

The leading economics researcher said the ruling was a “self-defeating strategy” that would lead to less consumer demand and a rise in unemployment.

“I don’t believe for a second that penalty rate cuts will cause prices to drop,” Professor Mitchell said.

“The bottom line is that when you start hacking into people’s wages, they stop spending.

“Most of us have contractual commitments, like mortgage and credit card expenses, and I think what we’ll see is a rise in insolvencies among low-income earners who rely on additional casual shifts to stay afloat.

“They will lose their houses, and the lot.”

Employers keeping the peace

Meanwhile, following the widespread backlash from workers who will suffer a pay cut, some businesses such as Lush have reassured their Sunday employees that they would continue to offer the current award.

Originally published at The New Daily.

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About Alana Mitchelson

Alana Mitchelson is a journalist based in Melbourne, Australia. Follow her on Twitter at @AlanaMitchelson.

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