Kohler: why unemployment is heading to 6%
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The problem with Europe is that it makes ordinary crises look, well, ordinary. There is an unfolding employment disaster going on in Australia, but compared with Greece and Spain, Portugal and Ireland, we’re doing just great. Yesterday’s labour force figures revealed a big and unexpected drop in employment in December. After holding staff levels steady for 12 months, businesses have started laying people off. As discussed on Wednesday, banks, retailers and manufacturers are all now cutting employment. To that, you can add cafes, restaurants and the Commonwealth public service — thanks to Labor government policies. The so-called “modern award” system under the Fair Work Act is imposing intolerable weekend penalty rates on the hospitality sector. Many restaurateurs are saying that they simply can’t employ as many staff as they used to and are either shutting up shop or doing it themselves. Meanwhile politics, rather than economics, is motivating the government to get its budget back to surplus earlier than either necessary or previously intended; with softer tax revenues because of weaker than expected commodity prices, and this requires public sector staff cutbacks. Normally that would be a matter for celebration, but right now government is just another sector cutting back employment. We tackled the Acting Treasurer and Employment and Workplace Relations Minister, Bill Shorten, on these matters in our KGB interview with him yesterday, and it was clear there will be no change to either fiscal policy or the Fair Work legislation. So there are now five separate reasons the unemployment rate will go above 6% this year:
There will not be a recession in Australia because investment in mining and energy projects in WA and Queensland will keep national output in the black, but for most of the country it will undoubtedly feel like one. The Reserve Bank will keep cutting interest rates but this will have absolutely no impact because first, the banks will dribble out only part of them; second, there are a lot more savings now than there used to be, for which a rate cut is an income cut; and third, because mortgagees will use any reduction they get to increase principal repayments, and leave total repayments where they are. But at least we’ll all be able to watch what’s going on in Europe and still feel like the Lucky Country. *This piece was originally published at Business Spectator |
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56 Comments
Alan, I normally find your pieces exceptional economics commentary, but I need to correct you on a furphy you’ve repeated a couple of times: namely, that “Cafes and restaurants are being forced by Labor Party legislation to pay uneconomic weekend penalty rates”.
Penalty rates are not new. They were not introduced as part of the Modern Award process or the Fair Work Act (which is what I presume you mean by ‘labor party policy’). Penalty rates have been a feature of the hospitality industry (and a number of other industries) for many years. In some cases, penalty rates are actually being adjusted down as part of the MA process. In sum, it’s not ‘labor party legislation’, nor is it the delegated legislation of the modern awards that means some employers have to pay penalties.
In any case, regardless of what Labor’s policy is, it’s the Bench of FWA that made the decision about what penalty rates are - the independent tribunal, not the government.
The sad irony of restaurants and cafes bleating on about this (and they got two goes during the MA process to put their case, in Stage 1 and Stage 3, and I was there for both) is that as an industry they are notoriously non-compliant. Depending on whether you include pubs/club in the survey, somewhere between 60-90% of the industry doesn’t pay the Award - that is, they pay their staff less than the minimum wage prescribed. So it’s two bald men fighting over a comb - the majority don’t pay the minimum anyway. No one knows if they can actually afford it or not because they don’t pay it.
Hospitality is a minimum wage industry, with a number of marginal employees. I’m not sure why people zero in on wages as the soft spot here - if cafes were complaining that rents were too high, would we say that landlords are being too greedy and need to drop their rents because they are ‘uneconomic’, or would we say that if you can’t cover the costs of running a business, don’t run one? Wages are a cost you factor in like rent, insurance and the like.
A logical corollary of the argument you run is that to compete with China’s manufacturing imports, we should drop to Chinese wages and safety standards because that’s more economical.
75% loading for Sundays is outrageously high.
75% loading figure being quoted currently already includes casual loading, so it is disingenuous.
John , do you work on Sundays ????. Thanks Claire , agree with all you said, Alan must be getting free meals somewhere ? He wonders why people don’t take up his Finance deals ,when he produces tripe like this. Just another Labor basher working for Rupert and the Fiberals .
Didn’t hear him whine about bringing back to surplus under Howard govt. and the cuts to health , education and infrastructure etc etc ??????????????
Alan , you need to open both eyes .
As soon as anyone puts up and argument as to why Gillard, Swan and Labor are the wrecking ball through the ecomony, the left wingers go into attack mode.
Labor won’t change the Fair Work Act, cause the unions will start a campaign and they dont need attacks on all fronts
Claire
Thanx for your several corrections of Kohler’s mistakes.
S.B , that’s because its BULL SHITE. Look at the numbers. You may be looking at W.A Debt problem ? Labor left W.A with about $3.6 Billion debt and the Libs have spent like drunken soldiers to bring up the debt to $20 Billion by 2014 and left tax payers with a Billion dollar interest debt a Year ? Just proves the Fibs are No good with money and this is a state with a Mining Boom ?
The only wreckers are the Rightards , talking down the country and IF we lived in a “Commie State ” they would have been put up against a brick wall by now .
S.B stop reading the Fiberals talking points chart.
Alan Kohler - you’re the man with the graphs etc.
As far as I’m aware, discretionary consumer spending, particularly on cafe/restaurants, has been growing strongly over the last year or so (in contrast to the weakness in the bricks-and-mortar retail businesses like DJs/Myer/Harvey Norman etc).
If this is the case, cafe/restaurants are probably doing quite well at the moment. If the current Fair Work provisions are onerous and resulting in job shedding/premises closure, you would expect that to be obvious in the statistics - so Alan, Mr Graphs himself, where’s the evidence?
Instead of just quoting the (obviously self-interested) conflicted parties “Many restaurateurs are saying that they simply can’t employ as many staff as they used to and are either shutting up shop or doing it themselves”, why don’t you tell us what is actually going on from the unbiased statistics?
Could it be that the restaurant/cafe owners are looking to improve their profit margins by driving down wage costs? Of course they are, and it’s perfectly reasonable that they try to do so. But equally obvious is the fact that it’s not a one-way street - just because the owners wish to control costs doesn’t mean it’s not also reasonable that workers should have minimum wages and protected penalty rates.
The biggest point is that surely, SURELY, if it’s just excessive penalty rates for weekends etc, then pure economics tells us that restaurants and cafes would move to either a) increase prices during these times, or b) reduce their opening hours. Why is either of these things problematic? Why is the concept that we have, culturally, the concept of a weekend, and normal working hours, to allow people time to socialize with friends/family, for sporting events etc, and that to interfere with this comes at a social cost to all of us, and penalty rates are a way to “internalize” what would otherwise be a negative externality?
This whole debate is being driven by certain sections of the business community as they appear to see a political opening/weakness at the moment. However, our commentators, like Mr Kohler here, appear to be doing nothing to expand discussion/debate to really dig into what is going on here. Give us facts, figures, enlighten us, tell us how it matters from ALL perspectives. Why do we have penalty rates? What are the benefits, what are the costs? What does it really mean to abolish them?
All I hear at the moment is vested-interests (owners) looking to make more money than they already do.
Of course, Kohler serves a new master now as he joins the News Corpse stables. May his previous troubles return to him deservedly
@ Lord Bonkers
Again, go and ask Australians in marginal seats who is the best with state or federal finances. I am no expert of WA, but look at NSW and Federally.
Labor blew 500 million on the light rail project and not one inch of track was built.
Look at federal Labor waste with BER, Insulation, plys 4 deaths, green loans, Solar panels (and NSW Labor).
Lord Bonkers with Blinkers, you are entertaining.
SB Even Victoria is going to have a State debt of 26 BILLION dollars by 2015 and these are figures supplied by the idiot Liberal treasurer Kim Wells.
The LNP good money managers - I DONT think so!
Whats the rise in cost for the food sector against other (non-wage) cost inputs? oh my: above CPI.
Whats the rise in costs for power, heating? above CPI? Yew betcha. we’re talking 5x.
Does the chef have a way to pay less to energex? nope. nor santos. they don’t accept less. gas taps turn off. hard.
Does the chef have a way to pay less to his wholesale butcher? nope.
So, short of selling shoe leather beaten to be as soft as veal, What has they got to work with?
Pay.
Doh.
Do food sector workers put extra money into savings? Nope.
Do food sector workers put extra money into health insurance? nope.
They spend it. People who work in this sector have no bankroll, no margins. they spend what they earn.
So, Kohler knows as a MACRO economist, that paying them less actually stuffs the economy MORE.
ie, if you want to intervene in the Aussie economy next time, don’t do pink batts or schools: pay these buggers more, and watch the money get spent, and go round-and-round the swimming pool.
I too have failed to see Cafes and Restaurants struggling - and what Alan Kohler and everyone in the press has failed to mention so far has been how much these businesses rely on cash in hand labour. How on earth do they think people survive on Austudy if Mummy and Daddy aren’t loaded? Do they really think all those backpackers serving them poached eggs on a sunday morning are on the legit payroll? There are people who have worked in the business for years cash in hand and you’ll find them serving you in the best restaurants in town.
Matt Cowgill’s article “Time, money and hospitality” lists the costs involved in the industry. see http://www.abc.net.au/unleashed/3769646.html
@ LJG
I guess its horses for courses. My local cafe says business was down 30% in 2011.
reason:
1. people only buying one coffee a day not 2
2. not buying lunch etc
Let me see if I have this correct . People are saving more and some are even paying off more of their mortgage . That I presume means more money coming into the banks and not under the mattress ? More money in banks must also mean less money borrowed from abroad . I,m sure someone will see a flaw in this but they will do it with vague arguments like the cafe wages that the industry is spruiking .
If the tv chef is doing it tough how come he recently opened his fourth or fifth restaurant ? Whats intolerable about time and a half for Saturdays that includes starting at 12 and finishing at midnight or later ? As a poster said earlier adjust hours/time of business or price of meals to accommodate what the business requires . I,m 61 now but when I was an apprentice printer at 16 I got penalty rates . Are these overpaid chefs and commentators telling me we need to go backwards to advance their profits ? Its a bit like the false assumption about workchoices which figures show did nothing to improve productivity or employment . Now there is an example we can look at and have facts that represent the reality yet the rent seekers want it back under a different guise ( deception ) .
Stupid weekend penalty rate. Penalty rate should only apply when you have to work more than five days in a week or having to do extra shift if your roster hours is fixed. People should have the flexibility to choose weekend work if it suits them better without penalising the employer.
One does not subscribe to Crikey to read “journalism” of this calibre. As Claire has accurately pointed out, Kohler’s rant ignores even the most basic facts; i.e., that there has been no change of substance to the award penalty rate regime for the hospitality industry.
It’s great to have a diversity of perspectives, but this is a question of quality, not politics. If you’re going to claim that increased weekend penalty rates for cafe workers is one of the six major factors causing (supposedly) rising unemployment, it’s just not good enough to fail to identify the supposed increase. That’s either negligent, or dishonest. I don’t come to Crikey to read a Business Council/Liberal Party press release thinly disguised as macro-economic analysis. I can do that on the Tele website, for free.
As an aside, and ignoring for a moment the glaring weaknesses of this “analysis” (such as those pointed out by GGM and Jackol), the current campaign against hospitality workers is just deplorable. If business can successfully characterise hospitality workers - highly casualised, relatively female, low paid (waitperson award rate: $16.57 an hour) and award non-compliant - as overpaid, Jah help the rest of us.
@ Suzanne Blake,
Would you like to point out who brought in the free trade agreement with the US in which we seen our tariffs disappear but the US tariffs remained, putting our farmers into destruction.
What kind of idiot would sabotage the farmers who he was suppossed to represent within his own country.
Mark Vaile under the Coalition policies!!!
I think your views are just meaningless rants devoid of any fact & millions of working Australians would disagree with some of the usual ole right wing banter, that serves to diminish their standard of living just out of greed for your right wing facist masters.
Since the introduction of the solar panels WA has had no further blackouts in summer & they havent had to build more power stations or employ staff to run them. Colin Braindead Barnett has but up all utilities over 60% in 3 years while he takes permanent refuge in the back pockets of the corporates.
Yes I agree with you on 1 point, you are no expert on WA.
Yes, because we all know an individual employee has plenty of bargaining power and can strike a reasonable deal between themselves and the employer on an individual basis. Er, I hope your sarcasm detectors were on because I think it’s fairly widely acknowledged that the ‘labour market’ has significant structural imbalances that prevent sensible free market outcomes that are in the public interest.
What does it mean if people can just ‘define away’ weekends? What does it mean for society in terms of social clubs, sports, social interaction? Don’t you think there is a broader point here where we value the fact that people can get together to do non-economic stuff on the weekend with friends and family? Individuals bargaining this away leaves us with a work-all-the-time blancmange where social interaction is discounted.
There IS a social cost to weekend work, and there should be a visible economic cost put on that - ie penalty rates. Argue about the size of the penalty, but I think there’s a pretty solid case for maintaining some economic penalty for weekend/night work.
@Jackol
Not everyone goes to church on Sunday or have problem with working in weekends. Students for example want weekend work because it suits them better. Why should someone who wants to work in the weekend by their own choice who perform the same task get higher paid. It does not only drives up the cost to employers it will drive up the cost for consumers as well. Then it will also decrease the economic activity in the weekend, jobs and productivity output which is un-necessary especially in this economic climate.
I wanted to be put on weekend instead of weekdays when I was working for a hotel because I have other work during the weekdays. Moreover the relationship between the staff there and the owner there are like friends and have collective sense of flexibility and responsibility to be there for the good of the business and do not care about penalty rates. There are enough availability of people who want the flexibility to work in weekend for employers to choose without forcing anyone to do it. Not all employers want their place open on weekend because of demand and efficiency so it’s not like the whole workforce are demanded for weekend work.
And … you’re missing my point entirely.
Penalty rates don’t stop people working weekends, they simply add an economic cost to reflect a social cost.
As a society (yes, yes, Margaret Thatcher didn’t think society existed) we need more than just economic things. We need dynamic social networks, and one of the things that assists in the formation of these is being able to do non-economic things with friends and family on weekends. We already have a problem with declining membership of clubs/societies of all sorts, declining volunteerism etc. Putting more pressure on the shared time set aside to do some of this stuff is not in the broader public interest.
It’s not about individual freedom, as you are arguing, and it’s certainly not about going to church on Sunday.
The wrecking balls coming through the economy are dutch disease and grotesque private indebtedness thanks to the real estate bubble, both of which were set in motion by Howard and Costello.
1.Bank funding, isn’t our dollar AAA rated and the world investing in the $A.
We got all the funding we need via people plugging their money in our currency.
2.Online retailing isn’t the end of retail. People do make money out of online purchases in Australia. Just because it isn’t Jeans west or Myers Dosen’t mean there is no profit at all. (Also remember Australia post, couriers, packaging companies ISP’s, website designers, IT specialists etc) One sector is getting smaller while others are enlarging.
3.The Aussie dollar.
Oh poor retailers with online selling..hang on things are CHEAPER now with our dollar being so high? exports get more expensive while IMPORTS are cheaper.
Note to Australian buisness people SWITCH TO IMPORTS!
4.Cafes & Restaurants
So its ok for someone who walks around a mine site in Queensland to make $50 dollars an hour plus weekend penalty rates but someone who works washing dishes and serving tables has to settle for $17-20
If you want to own a restaurant you got to pay your workers properly, theres plenty of cash out there and plenty of mouths to feed..stop being pricks and just pay your workers penalty rates. To think that some people really think penalty rates are ruining that industry… what a joke!
Oh and the flip side to that is..less money paid to workers, less money spent and less people willing to work in that industry.
Right, I see the right wing nuts are setting up a meme that people shouldn’t be paid for working.
Again.
As in, this is not new, it been going on for yonks, employers always reckon workers get paid too much regardless of what they are paid, employers would be happy if workers paid to have a job.
This article by Kohler is standard stuff.
Ignore.
@S/b
“I guess its horses for courses. My local cafe says business was down 30% in 2011.
reason:
1. people only buying one coffee a day not 2
2. not buying lunch etc”
So, absolutely nothing to do with penalty rates, Fair Work or the ALP then.
I started to read the article and for a moment I thought I must have gone to a News Limited site, no it’s crikey.com. I’m sick of all this right wing media we get these days. Hey, the left didn’t crash the worlds ecomony it was the right wing policies of greed, self interest and corporate power (vested interest). Goodbye crikey
@ Damotron
Good Bye. There is Communist Party Daily News. I think its just printed in China, Cuba and North Korea these days.
@ Dan Gulberry
“So, absolutely nothing to do with penalty rates, Fair Work or the ALP then.”
Just the economy the ALP trashed. Consumer and Business confidence lost by inept Givernment, new taxes, waste….
So this article with the tripe about restaurants doing it tough because of penalty rates comes out a week or so after Alan Kohler tweeted that about the great food he’d had at George Calombaris’ restaurants.
Sus.
you know, i always wondered who put calombaris up to speaking out the way he did. incidentally, the irony of a multimillionaire tv chef complaining about not having enough money i snot lost on me
*is not
lol
@S/b
“I guess its horses for courses. My local cafe says business was down 30% in 2011.
reason:
1. people only buying one coffee a day not 2
2. not buying lunch etc”
Down 30%? Because people simply stopped buying an extra coffee? Either this guy doesn’t trade very well anyway, or he charges extortionate amounts for his coffees.
I love the way so many business owners abdicate all responsibility to the rest of society! I’ve had a number of these conversations, with so-called “businessmen” ranting and bleating about how hard it is to run a business, how unfair it is that they have to pay so much in wages, and that employees have rights. I asked one of these guys once, “what’s wrong with employees having rights? What’s wrong with a decent pay? They have houses to pay off, families to raise.” His response: “Nobody asked them to work.”
I think the message- the same message Kohler is sending out- is that business should not be expected to contribute to society beyond the product/service it provides, and which it will make a profit from anyway. Subsidies to business growth and development are encouraged, at the taxpayer’s expense, and yet these same people are niggardly about providing decent wages. Bottom line- if a business owner can’t factor in wages and make a decent living, maybe he/she should give it up.
It’s amazing how someone can look at the rest of the world fall apart, the Australian economy (mostly) proceed as normal [0], and come to the conclusion that the government at the time “trashed” it.
The mind boggles at what the standards for success must be.
[0] Which is not to say our normal is good, but it didn’t get much worse, unlike pretty much everywhere else.
I suspect that many people believe that the economy is bad unless they are well on the way to making their next million.
Heres what Wayne Swan said back on May:
www .perthnow.com.au/business/business-old/treasurer-wayne-swan-tips-500000-new-jobs-for-may-budget/story-e6frg2qu-1226047856579
So far he has managed to lose 30,000 jobs in December alone
@ Geewizz
Incompetent Swan and Ly ing Gillard will get slaughtered at the next election.
Wilkie has first hit today.
Ly ing does not pay, and gillard is having her nose rubbed in it.
Suzanne,
The Labor hacks have been saying you can’t believe anything Tony Abbott says unless it’s written down after his radio gaff about not everything he says is policy.
Well it appears you can’t believe anything Dillard says EVEN IF it’s written down, because Wilkie and Dillard had a written agreement… that he would support her if she passed legislation on pokie precommitment by May 2012.
Seems Dillard can’t be trusted whether it’s written down on stone. Wilkie has just been Kevin-Rudded by the devious liar.
GEEWIZZ
Posted Saturday, 21 January 2012 at 4:56 pm |
SUZANNE BLAKE
Posted Saturday, 21 January 2012 at 4:59 pm |
Sort of like a ventriloquist act isn,t it ? Trouble is working out which one is the actual poster . No trouble working out the dummy though because there is only one with two names . Geewizz aka gerry gee or SB as a muppet , take your pick because either pick is still the same as the other except for monicker .
EMC - Meal-Gate ?
SB - You forgot No. 3 - They all lost their money at the RSL on the pokies .
@ Geomac
You rusted on left wingers live in denial. You believe in conspriacy theories. The media, the other posters, law enforcement baiting and catching Labor crooks (or the media in Campell’s case).
SS Gillard has more holes in it that at any stage.
Lets hope we get an announcement on the HSU fraud investigation soon. That will definately stop the music with musical chairs.
@ GeeWizz
Wilkie is an honourable and honest man (two traits ly ing Gillard does not have).
I cannot wait until he rubs her nose in it in Parliament. This was his big issue and Gillard knifed him. It will be entertaining.
Either way Gillard is history with voters, no credibility, no honesty, no intregity, no professionalism, no hope.
@ Subterranean Homesick Alien
Any private business is susceptible to consumer and business confidence.
The business owner takes a rick with his / her capital, does a business plan and executes as best as possible.
If the Government destroys confidence, the business owner needs to preserve cash, offload staff, work longer hours, maybe drop prices etc etc.
Its costs around 35c to make a coffee, they sell it for $3. You lose a few hundred coffees a day and thats $530 a day lost.
@ Claire - thanks for the facts on hospitality pay rates, i look forward to Mr Kohler’s response/correction.
@ geomac - yes ‘Geewizz aka gerry gee or SB’ do seem entirely of one remarkably predictable mind. But tho Muppet has its attractions, i think Sockpuppet is the correct term, a.k.a persona management software.
I’ve been around for about 60 years. In this time I have always looked on the Australian flag as a beacon of fair play and common sense.
I don’t think any of you can grasp the obscenity of Suzanne Blake using our honourable flag as a gravatar. Should any of you visit Gallipoli, Changi, the Kokoda, Long Tan and others places where our men and women have shed blood please understand that they died not for people like Suzanne Blake but in spite of her.
Their legacy?…….courage and pride and a memory of honour
Her legacy……..twisted, malicious and bitter words. Bile in its most venal form.
@ Ian
Take a hike. My Family have fought for Australia since WW1, in WW2 and Korea, Malaya. One was MIA and is still MIA over Darwin in 1942.
About the online thing, the question economists haven’t been asking is why are we so uncompetitive in that space. Take the bicycle parts supplier Wiggle — there’s no reason for Portsmouth UK to be the centre of competition for parts predominately made in Asia. Rather their success is due to their access to business infrastructure: quality management, venture capital, postage, land. You couldn’t imagine a similar business being successful in regional NSW.
That then doesn’t give you the right to cheapen their memories, or their courage, by using the flag they fought and died under to promote your vicious hatred. The MIA in Darwin, presumably lost in mangrove swamps or destroyed in the bombing, would be ok with the hatred and vitriol of his descendants? Do you think his last day on earth was spent in the knowledge that no matter what the sacrifice, no matter what the pain, he was going to die protecting the right of the vicious and the twisted to manipulate the democracy he lived in?
Have the decency to honour his and all the others sacrifices.
Change your gravatar
@Ian … now you can add using others service records to the list of obscenities. Says a lot about a person who doesn’t understand that, really.
Realistically unemployment is far, far higher than 6% due to the ridiculous or should I say convenient statistical measuring by the ABS. All one has to do is work for ONE HOUR in a week and they are classified as employed! So easy to fudge the figures when you skew the data collection. Kohler and all the other believers in this so called ‘free market’ economy know this. It’s funny, the closer you look at our ‘democratic’ and ‘free market’ system the more you realise that it is neither…
Whats the long term unemployment rate in Australia? It has to be close to 6% doesn’t it?
Economics 101 says that is what we will return too doesn’t it?. Believe it or not, a 6% unemployment rate might mean a healthier employment market.
Employers might get staff at reasonable rates for example to actually expand.
You would only begin to worry if unemployment rose by much more than 6%, say 7% or higher….that would be higher than the long term average.(and actually what you would expect if were genuinely hit by a recession/financial crisis)
@ Ian
Hear Hear!
Two words will answer the Toyota decision in Victoria : CARBON TAX!
@ Johnfromplanetearth
Perhaps the Japanese at Toyota don’t want to offend the Labor Government, so they say $A instead of carbon tax?
Storm in a tea cup.
This is what would(probably) happen if you removed penalty rates:
1. If you remove penalty rates, you remove the incentive to work on weekends/late night etc.(ie its just the same as sociable hours).
The unions could argue for a proviso that no staff member be forced to take on what was regarded as a penalty shift previously, but in reality, whilst there are still plenty of “position vacant” signs around, people can just move on to another company if they dont get the shifts they want.
2. Noone wants too work these hours, so staff shortages for weekend work appear(or more broadly what was penalty shift work).
3. Employers forced to offer above award wages to attract staff to take on these shifts.
In effect, the market decides “penalty rates”.
This is what unions should be pushing for: An increase in the base award rate in return for a scrapping of penalty rates and a push for increased contributions into super.(and freedom of super fund…thats another rort they are on at the moment not making the press).