The speed with which Employment Minister Eric Abetz shut down another outbreak of speculation on dumping penalty rates yesterday reflects the extent to which, however much it may deny it, the budget has made the government worry a lot more about perceptions of fairness.

The penalty rates issue periodically erupts into public debate when business decides to make a concerted push, or lazy journalists go looking for a story about why their favourite coffee shop isn’t open on a Sunday, or both. In March, regional Coalition backbenchers tried to revive the issue. On Monday, it was Jamie Briggs, whom business has looked to for leadership on the issue given his role in crafting WorkChoices for the Howard government.

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Briggs continued two of the characteristics of the debate — attempting to cast it about some more ethereal matter than simply cutting wages, and relying on anecdotes rather than facts. “We do not think that workplace relations should be seen through the prism of us versus them,” Briggs said, although the workers whose income he wants to cut could be forgiven for thinking it was very much about “us versus them”. That approach echoed that of rural Liberal Dan Tehan, who in March called for the issue to be taken out of the “trench warfare” of politics. What that precisely means isn’t clear, but one interpretation is that workers, unions and Labor should simply abandon self-interest or their job of defending workers and accept income cuts.

Like the backbenchers, Briggs also took the “data is the plural of anecdotes” approach, saying “[w]e cannot accept that on New Year’s Eve you can’t attend your ­favourite restaurant because it is impossible for that restaurant to pay its staff to open up”. Where this beleaguered restaurant was wasn’t reported.

“The claims that penalty rates in the hospitality sector are hurting employment didn’t stand up in March and don’t stand up much better now.”

Briggs also implored business to make the case for reform — a line that we hear often from the Coalition both in opposition and in government. It was only last week that Treasurer Joe Hockey was lamenting that business had let him down in failing to help sell the budget. At some point the penny might drop within the Coalition that it’s the job of politicians, not of business, to lead public debate and the reform process, and that Australian business never led any debate successfully because it isn’t trusted by the community to do anything other than represent its own interests. Indeed, the thought might occur to the Coalition brains trust that when you have a mentality of wanting others to make the positive case for reform for you, that further atrophies your own skills at selling reform, something that so far the government has been abysmal at.

But we digress.

Alas, the claims that penalty rates in the hospitality sector are hurting employment didn’t stand up in March and don’t stand up much better now. According to Australian Bureau of Statistics data, in the March quarter part-time employment in the relevant sector, food and beverage services, had risen to 409,000, the second-highest on record. Total employment had risen to 672,000, the third-highest on record (in both cases, the highest employment was in the same period in 2013). How well employment holds up into the June quarter, when retailing took a hard hit from the government’s budget, remains to be seen. What we do know is that in 2013, when there was a slowdown in economic growth, there was a small fall in the total number of food and beverage services outlets, even if that didn’t seem to affect employment growth.

More senior figures in the Coalition understand that penalty rates is not some nebulous issue that should be above partisan debate, but go directly to workers’ incomes — specifically, the incomes of some of the country’s lowest-paid workers. Employees in the broader industry sector, accommodation and food services, have the lowest average weekly total cash earnings in the economy, and rely heavily on penalty rates for additional income. Cutting penalty rates would target the poorest-paid workers in the country. For a government that faces not being able to pass the guts of its budget because of well-founded perceptions it is unfair, opening yet another front in the war against low-income earners at this point would have been the worst possible option.

Thus, “Dr” Eric Abetz came down hard yesterday, issuing this terse statement:

“The claim today that the Government has any plans to change the way penalty rates are determined is false.

“There will be no change to the way penalty rates are set.

“The role of determining minimum wages and conditions, including penalty rates, will remain with the Fair Work Commission.”


The Coalition may indeed want to cut penalty rates, but right now is the worst possible time to do it. The political timing isn’t the only problem. Cutting wages in one of the larger subsectors of the economy (7% of all workers are in accommodation and food services), particularly wages of low-income earners, who spend far more of their discretionary income than higher-income earners, will curb demand in the rest of the economy — most immediately in retail, the very sector demanding the cuts — at a point when there are deepening concerns about unemployment. Indeed, rising unemployment and falling wages might snowball into a bigger impact on consumer sentiment even for people securely employed in higher-income sectors.

Abetz presumably remembers St Augustine’s cry of “Lord make me pure, but not yet.” The “yet” might be a long while for those who want to dump penalty rates.

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Peter Fray
Peter Fray
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