INDUSTRIAL RELATIONS by Peter WestmoreNews Weekly
Fair Work Commission's disastrous penalty-rates decision
, March 25, 2017
The decision of the Fair Work Commission to cut penalty rates for people in the retail, fast-food and hospitality industries will lead to a repeat of the unions’ WorkChoices campaign which cost John Howard government in 2007.
Government spokewoman Michaelia Cash
has defended the decision.
It is almost unprecedented for an industrial tribunal to reduce award wages. The only previous case I can recall was during the Great Depression in the 1930s, when the basic wage was cut in response to the financial crisis.
The effect then, like now, was felt disproportionately by low-income earners, contributing to their loss of faith in the industrial-relations system at the time, and the rise of the Communist Party.
Under the commission’s decision, Sunday pay rates for full-time and part-time employees in the retail and pharmacy industry will fall from 200 per cent of standard rates down to 150 per cent. For hospitality workers, wages will be cut from 175 per cent of their standard wage to 150 per cent.
For the overwhelmingly young workers in the fast-food industry, Sunday penalty rates will be cut from 150 per cent down to 125 per cent.
In announcing the decision, the president of the Fair Work Commission, Ian Ross, made clear that the justification for the decision came from the Productivity Commission, which had declared that it expected that reducing penalty rates would lead to increasing employment. He repeatedly said that it was based on work by the Productivity Commission.
However, the Productivity Commission has a long track record of proposing the most extreme free-market solutions, in terms of industry policy, national competition policy, deregulation of the financial system, deregulation of the country’s energy market, and deregulation of the labour market.
Its economic analysis is flawed by research bias – a common flaw in the social sciences and climate science – where the outcome is presumed to be true, and the evidence is marshalled to support the preconceived conclusion.
It also suffers from the ideology of what is known as “economism”, which assumes that the only relevant considerations are economic, and the social and political implications of its recommendations can be totally ignored. It was not surprising that it should have supported reducing penalty rates.
It was therefore extremely disappointing that the Fair Work Commission should have endorsed such an agenda.
Normally, when the Commission hands down a decision that erodes working standards, it offers other incentives to balance its effects. In this case, the Commission offered no incentives to those adversely affected, other than to say that it would examine how the decision was implemented.
However attractive the proposal may be to small businesses, particularly those in shopping centres where they are forced to open on Sundays, the main beneficiaries will be the big business retailers, particularly the supermarkets, who have already substantially cut their workforces through centralised and automated check-outs. Retailers entered into rental contracts knowing the conditions under which they would operate – unlike their employees, who now find that their wages are being cut.
Although the Fair Work Commission has stated that its decision does not set a precedent, the same justification for cuts in penalty rates applies to other industries, so there is every reason to believe that this decision will set a precedent.
Certainly, employer organisations will argue that way.
The Federal Government is in a no-win situation. It has always supported the existence of the Fair Work Commission, even when it was unhappy with its decisions. Further, employer organisations have repeatedly criticised the Coalition Government for its failure to implement fundamental “reform” of the labour market, reduce corporate tax rates and extend economic deregulation.
If Mr Turnbull backed away from the Fair Work Commission decision, the Coalition would be further criticised by business and the financial press for abandoning free market principles.
Government spokesmen, including the Prime Minister Malcolm Turnbull and the Minister for Employment, Michaelia Cash, have strongly supported the commission’s decision.
This is a priceless gift to the ALP, which is already well ahead in the polls.
The unions and the ALP are already blaming the Federal Government for the Fair Work Commission’s decision, and will continue their campaign until the next federal election. If elected, they will certainly reverse the decision, making the whole exercise pointless.
The commission’s decision is also a gift to discredited unions such as the CFMEU, which has given itself the role as the enforcer of the trade-union movement, and whose members occupied a key position in protests against the judgement.
The commission has given legitimacy to the tactics of the CFMEU, whose own members are not impacted by the decision.
Unless Malcolm Turnbull can separate his Government from the decision, its electoral standing, already low, will suffer a further, perhaps fatal, decline.