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Issue #1767      March 1, 2017

Editorial

Massive wage cut

The so-called “independent” Fair Work Commission (FWC) has delivered exactly what the government and employers ordered – a massive wage cut to workers in the hospitality, retail and fast food sectors. Consistent with the government’s policies and past actions, the decision attacks the incomes of the lowest paid and most vulnerable.

This decision should spark an angry response at International Women’s Day actions on March 8 as the majority of workers affected are women. They include sole parents, students, casual and part-time workers. Even full-time employees in those sectors are paid starvation wages. That is why many of them make the sacrifices entailed to work on Sundays.

Communist Party of Australia National President Vinnie Molina condemned the attacks on penalty rates and other workers’ rights in the strongest possible terms.

“It is a disgrace that the FWC responded to the interests of powerful business groups at the expense of the lowest paid.”

The Full Bench decision of the FWC, at this stage applies to the hospitality, general retail, fast food and pharmacy awards (see below). Restaurant and Club owners have been given more time to argue their case for cuts.

The decision affects anywhere up to one million workers. They stand to lose $50, $60, $70 or more a week for working eight hours on a Sunday.

As is the usual tactic of the government to strike at the most vulnerable, these low paid workers have been targeted first, seen as being the least able to fight back because of their industrial weakness and precarious existence. Further cuts can be expected in coming award reviews of these sectors and their extension to other industries.

FWC president Justice Iain Ross headed the Full Bench. He is a former assistant secretary of the ACTU and close friend of Labor leader Bill Shorten.

A penalty

Penalty rates have a two-fold purpose. The first is to discourage or deter employers from hiring labour on weekends and public holidays. The second is to compensate workers for the unsocial hours and inconvenience it causes them.

The Commission only considered the “disutilities” purpose of penalty rates – their harmful effects on workers and their families which it claimed had decreased.

Full-time adult employees, working Monday to Friday in hospitality and restaurants, are paid as little as $672.70 a week – $17.70 an hour. In the general retail and fast food sectors receive $738.80 – $19.44 per hour. For anyone trying to raise a family these are below subsistence wages, particularly in the major cities.

This compares with $1,533.10 for adult average weekly ordinary time earnings across all industries. (ABS 6302.0 November 2016)

In addition these industries are notorious for their use of casual and part-time labour, underpayment and ripping off young workers who are on even lower rates. A 16-year-old, for example, in the retail sector is on 50 percent of the adult rate.

Public holiday rates cut

The Fair Work Commission didn’t stop at Sundays. Public holiday penalty rates also came in for the chop. The pay of full-time and part-time staff will be cut from 250 percent of the base wage to 225 percent with the exception of the Clubs award.

The rates of casuals, who receive a loading to compensate for not being paid leave and other benefits that full-timers and part-timers receive, will be reduced from 275 percent to 250 percent.

Hardship

In such low paid industries, penalty rates are often the difference between survival on a cliff’s edge and homelessness and destitution.

The Commission acknowledges the impact its decision will have:

“Many of these employees earn just enough to cover weekly living expenses, saving money is difficult and unexpected expenses produce considerable financial distress. The immediate implementation of all of the variations we propose would inevitably cause some hardship to the employees affected, particularly those who work on Sundays,” the Commission says in its decision.

“We have concluded that appropriate transitional arrangements are necessary to mitigate the hardship caused to employees who work on Sundays.”

Transition

The Commission is still to issue a decision on the timing of the penalty rate cuts, but has suggested it be done in two stages, with the first cut from July 1, 2017. It also proposed that the cuts coincide “with any increases in modern award minimum wages arising from Annual Wage Review decisions”.

This would reduce the net impact at the time of the cut as any wage increase is factored in – a means of lessening the full shock but not compensating workers for cost of living increases.

Despite claims to the contrary by the Commission - employers and government - Sundays are not just like any other day of the week. That is when people take part in social activities, have family time.

“… for many workers Sunday work has a higher level of disutility than Saturday work, though the extent of the disutility is much less than in times past,” the FWC said.

Based on that reasoning, the Commission argued that while cutting Sunday rates, they should still remain higher than Saturday’s. Its reasoning is contradictory, claiming that that deterrent was not a reason for penalty rates at the same time as pointing out that the need for a deterrent was not as strong as it used to be.

Job creation myth

The aim of slashing wages is to increase profits. The big stores stand to make big gains in profits as their wages bills are slashed.

The various employer bodies were popping corks, as they and the media ran with endless claims about job-and-economic growth. The government was just as pleased with the decision but less publicly exuberant fearing voter backlash. Instead Turnbull attempted to distance himself from the decision, pointing to the “independent umpire”.

The furthest the FWC was prepared to go on any jobs outcome was a cautious “reducing penalty rates may have a modest positive effect on employment”.

In fact the Commission rejected employer demands for cuts to penalty rates in restaurants and cafés, pointing out that it had seen no evidence of more people being employed following a reduction from 175 percent to 150 percent in penalty rates for casuals in 2014.

They have been given more time to present a stronger case.

The question needs to be asked, if more retail and hospitality outlets remain open on Sundays and public holidays and new ones open, where will the extra custom come from? From their competitors? Will hundreds of thousands more people will be flocking to retail stores or fast food outlets.

In economic terms, hundreds of thousands of workers will, to use the Commission’s own words, be experiencing “hardship” with up to $6,000 or more a year less in their pockets to spend.

These are the lowest income recipients who spend every cent they earn, who resort to mounting credit card debt to daily expenses and emergencies. At best existing workers will be forced to work longer hours or find a second job just to tread water.

Contractionary

Even if in the short term some additional jobs are created, as the cuts take their toll on consumption they will have a contractionary effect on the economy. The economy is already flat and showing all the classic signs of heading into another recession.

The profit gains will prove to be short-lived.

Capital investment is stagnating, investor confidence is low, as is consumer confidence. Families are loaded with massive debts and the cost of housing, education and health is rising.

Employer bodies have been demanding the abolition of penalty rates for years – some seeking a gradual phasing out, others pushing to strike them out in one deadly blow. The Commission has taken the gradual approach.

What lies ahead

The Commission has floated the idea of replacing penalty rates with a “flat” or what it calls “loaded” wage rate.

The FWC noted that some businesses in the hospitality and retail sectors already provide “flat” (or loaded) rates of pay, ostensibly to simplify their payroll process. It said that many of them “underestimate the additional premium (or loading) required in order to compensate employees for the loss of penalty rates, resulting in non-compliance.”

Loaded rates are in fact a backdoor path to abolishing penalty rates. In time these rates will be whittled away.

The FWC suggests that “The insertion of ‘loaded rates’ schedules in these modern awards may have a positive effect on award compliance.”

The logic behind this claim is not clear. Penalty rates become invisible, swallowed up in the hourly rate and provide employers with an excellent cover for robbing workers of their entitlements. It would also make it easier for the former penalty rates to be eroded with subsequent wage decisions.

But the Commission goes on to suggest they be inserted in awards as if this would protect workers.

Labor leader Bill Shorten also appears to be headed in this direction. Prior to the last elections Labor and the Coalition indicated they would abide by the FWC’s decision if it decided to cut penalty rates.

Since then Shorten has indicated it would legislate but only if the FWC cut penalty rates “without sufficient compensation”. What does Shorten mean by this? Is it a reference to loadings?

The Australian Greens are the only parliamentary party to strongly support the retention of penalty rates at their present level in their present form.

The FWC also raises the idea of a change in terminology from “penalty rates” to “additional remuneration”. That would also cover up the reasons behind the payment and make it easier to whittle away.

“… the way minimum wages get set in this country is through evidence, it’s through the submissions of workers, their representatives and employers,” Shorten said, when indicating he would accept the decision of the FWC before the elections.

This position reflects the ideological shift that has taken place in the leadership of some trade unions – the replacement of class struggle with economic arguments in a court.

Workers do not and cannot hold onto their rights and their wages without struggle. Under capitalism employers never let up in their drive for increasing profits. One of the principal means of increasing profits is by cutting wages which is what the FWC has done. Another is by lengthening the working day.

Up until the mid-1980s, wage and other claims were won through industrial action. Past gains were defended through industrial action. There is only one way to defeat the FWC’s decision and that is through struggle.

It is no coincidence that the most vulnerable, insecure workers have been targeted first in the process of abolishing penalty rates.

The decision is the thin edge of the wedge, with other workers in line for cuts and if the employers get away with those cuts then overtime, night work and other rates will also be in for the chop. It really will be the 24/7 working week the Prime Minister Malcolm Turnbull keeps referring to.

Penalty rates, thanks to Shorten when he was Workplace Relations Minister, are now an integral part of the FWC’s four-yearly review of modern awards.

Fight back

The ACTU has come out opposing the cuts and demanding the Turnbull government legislate to protect them and unions are organising protest actions for March 1.

The Australian Unions Team has launched a petition opposing the cuts.

On Friday the Greens responded with a bill to lock in penalty rates at their 2017 levels. Labor says it will introduce a bill this week to prevent penalty rate cuts that reduce take-home pay. That is not the same as opposing penalty rate cuts. It seems to suggest some form of compensation. Neither bill is likely to be passed.

The only way the cuts can be halted and reversed is through struggle, united struggle with workers and the community coming together. This is a battle for living standards, for a living wage and workers’ rights.

Molina called on all CPA members and supporters to rally alongside workers and their unions in defence of workers’ entitlements.

Sunday penalty rate cuts

Hospitality award

  • Full- & part-time workers 175% −> 150%
  • Casuals: remains unchanged at 175%

Retail award

  • Full- & part-time workers 200% −> 150%
  • Casuals 200% −> 175%

Fast food award

  • Full- & part-time workers 150% −> 125%
  • Casuals 175% −> 150%

Pharmacy award

  • Full- & part-time workers 200% −> 150%
  • Casuals 200% −> 175%

Next article – Closing the Gap report – Six gap targets aren’t on track

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