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Issue #1706      October 14, 2015

A devious attack on penalty rates

Prime Minister Turnbull wants everything “on the table” in the lead-up to next year’s federal budget and election. Income tax cuts, the GST, negative gearing, capital gains and superannuation will all be considered. He is also chanting about the “seven-day economy” being imposed on Australians and how “we’ve got to find solutions to create a more flexible, dynamic, 21st century economy out of which everybody wins.” Look out workers!

Low hanging fruit in the federal government’s quest for higher private profits are penalty rates. The government’s Productivity Commission has produced a draft report on Australia’s “workplace relations framework” and flagged penalty rates and the minimum wage for an assault. Some of the ground-breaking work has already been done in the retail sector in South Australia with a treacherous deal between store owners and the right-wing Shop Distributive and Allied Employees Association. This has reduced Sunday penalty rates in the lowly paid sector to the rate paid for Saturdays.

Other “aggregated” wage deals encompassing penalties for weekend, shift work and overtime have taken place around the country. Reaction to the federal government’s latest proposition has been strong. It would not only slash pay for workers in the most precarious sectors of the economy but encourage further abuse of workers’ rights to rest and involvement in the community. Family life and workers’ health would suffer.

The attack comes on top of revelations about extreme low pay of the sort on offer at 7-Eleven convenience stores. It turns out that the sorts of illegal practices exposed by ABC TV’s Four Corners program are very widespread and include hourly pay rates of between $4 and $12. The legal ordinary minimum wage rate is $17.29 an hour.

Not all the voices in opposition to the axing of penalty rates have resonated among the workers in the government’s sights. Opposition leader Bill Shorten said the cuts would make it hard for families to send their children to private school. The later attempt at “damage control” didn’t sound much better. “I was referring to the local Catholic schools, the primary schools in my electorate where a lot of the parents there, both of them working, both of them need the penalty rates,” he said. It sounds like those parents need stronger unions and higher base rates of pay.

The government is floating the idea of an income top-up for the workers who would lose out due to the changes. “You’ve got to be able to ... demonstrate that people are certainly not going to be worse off and, ideally, in net terms, better off,” Turnbull said recently. The Productivity Commission discussed “earned income tax credits” (EITCs) of the sort now common in OECD countries. The scheme allows employers to pay very low wages that are supplemented by the taxpayer. It is a modern take on Milton Friedman-style “reverse taxation”.

The Productivity Commission acknowledges ideological problems with EITCs. “They must also be financed through taxes, which have their own adverse economic effects. In an Australian context, any EITC would also interact with a well-developed tax-transfer system, which is also intended to improve the incomes of the low paid. The interactions between that system and an EITC would need to be carefully assessed.”

The federal government’s tax pie is set to shrink if nothing is done. Capitalism is in crisis. The economy is slowing. There is pressure building for even lower corporate taxes. Low personal income taxes are an article of neo-liberal faith and are good vote bait. States are going to be bludgeoned into endorsing a higher rate and broader coverage for the GST or see their public services fall deeper into decay. The government’s EITC scheme will be sold as a progressive measure for the low paid and a step for addressing Australia’s yawning income divide.

Workers shouldn’t be fooled. One can easily foresee a further deterioration in the economy. The word will go out that the rate of the EITC will need to be trimmed and ultimately removed for the sake of the “economy” (profits). This has happened to other “tax-transfer” measures in the recent past. That would leave in place the low wages always sought by employers. The bosses and their servants in the major parties think long term in pursuit of their interests. Workers must, too.

Next article – AWU seeks clarification

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