Penalty Rate Cut Fails to Stimulate Job, Survey Shows

Cutting penalty rates across the country has failed to create any extra jobs or give workers more hours, new research has found.

In a blow to the Turnbull government’s backing of the Fair Work Commission’s decision to reduce penalty rates, a survey of 1351 workers by the University of Wollongong and Macquarie University found there has been no short-term increase in average weekly hours worked by employees.

Fair Work justified its decision in March by arguing a gradual reduction in penalty rates would result in more trading hours, an expansion in the level of services offered and an increase in overall hours worked.

But University of Wollongong lecturer Martin O’Brien will tell the Western Economic Association International conference in January that some workers actually experienced a drop in the number of penalty-rate hours they worked in the first two months after they were reduced.

Dr O’Brien concluded that up to 15 per cent of all retail workers who were employed on Sundays worked 9 per cent fewer hours between June and July, while hospitality workers experienced no change to their hours.

“The [retail] results confirm a statistically significant decrease in the proportion of our award employees working on Sundays between June and July 2017,” he said.

“This finding is in stark contrast to the hypothesised outcome.”

The report, which is the first piece of research published on the impact of the decision, is likely to be seized on by Labor as it frames penalty rates as one of its key policy differentials ahead of Saturday’s Bennelong byelection where the Turnbull government’s majority is at risk.

Despite the political furore around Fair Work, penalty rate reductions remain in their infancy after undergoing the first round of three annual 5-percentage-point cuts in June.

The Business Council of Australia has long argued the reductions were needed to reflect a 24/7 economy and that Sunday hours were no more unsociable than Saturday, which they will progressively be shifted in line with.

Employers reported they would increase employment if penalty rates were reduced in Australian Industry group surveys relied on as a key body of evidence by Fair Work in reaching its decision.

Dr O’Brien said the unexpected outcome could also have been influenced by an increase in the number of employees choosing not to work on Sundays for lower pay.

“Information collected in our survey does give some indirect evidence to support this, with 19 per cent of retail employees and 14 per cent of hospitality employees intending to leave their respective industry in coming years purely due to their discontent with wages and conditions,” he said.

He found the groups most affected by the decision were females aged under 35 and students working for small and medium businesses in retail, while full-time and part-time hospitality workers impacted by the cuts were more likely to be older employees in regional areas.

In October, the Federal Court dismissed a case brought by United Voice and the Shop, Distributive and Allied Employees Association to have the penalty rate changes overturned after it found the Fair Work Commission had met its legal obligation to workers.

The research is expected to continue until the full rollout of penalty rate reductions is completed in 2020.