John Menadue. Cafes and restaurants are booming despite penalty rates.

Apr 8, 2015

Despite the booming café and restaurant industry, the special pleading by employers on penalty rates and minimum wages goes on and on.

Employers seem to have little appreciation that there is a difference between the market and society. The latter is much more important. The right to a decent wage and time off for recreation and relaxation with family and friends is essential. Markets are important, but they are a means to an end.

Speaking of penalty rates, Peter Martin in the SMH  said ‘This Easter give thanks for penalty rates, they keep us human. Easter has become sacred even for the non-religious and the non-Christian.’

Many employers who call for cuts in minimum wages or penalty rates have little appreciation of the difficulties for low income earners. Attacking the low paid is easy pickings.

Workplace researcher Professor Barbara Pocock warns that cutting weekend penalty rates will erode the time Australians spend on informal relationship building with friends, family and neighbours. As soon as we take that wage premium off we make all time the same and we will see a lot more squeezing of that informal social time on Saturdays and Sundays.

One of Australia’s great achievements in nationhood was in 1907, the living wage. But employers keep pleading that minimum wages are too high and they should be reduced to increase employment and presumably profits! But there is no conclusive evidence to support that proposition. Late last year more than 600 US economists, including seven Nobel Prize winners, signed an open letter to Congress calling for an increase in the minimum wage. They said that the weight of evidence showed that increases in the wage had little or no negative affect on the employment of minimum wage workers.

The Chamber of Commerce and Industry in Australia has recently been encouraging businesses that were closed over Easter to put signs in their window saying that it was because of penalty rates that they could not open. The Small Business Minister, Bruce Bilson, repeated this line of special pleading.

These businesses must have decided to enter business knowing what the penalty rates were. Didn’t they factor that in to their business plans?

I suspect that a lot of special pleading on penalty rates is to divert attention from bad business decisions. It is so easy to blame ‘the system’ rather than acknowledge one’s own business mistakes.

In the last five years, spending at restaurant and cafes has climbed 36%. According to the ABS in 2013-14, the net growth in the number of cafes and restaurants was 7%. For all businesses it was 1%. The café and restaurant business is booming, but still the sector keeps complaining about penalty rates.

Employers who keep up their special pleading on minimum wages and penalty rates should really address the way they run their own businesses, and not always want to get the system changed to their advantage. They need to stick to their knitting.

If the last 20 years has taught us anything about industrial relations, it is that continual change is costly for all concerned. In 1993 the Keating Government abandoned our centralised IR system. In 1996 Peter Reith downgraded the role of IR tribunals. In 2005 John Howard gave us Work Choices. Then in 2009 Julia Gillard gave us the Fair Work legislation. Now the present government wants more changes. But what we really need is more stability in our industrial relations framework because in the end good relations at the work level are necessary to improve productivity, effective local management and employee participation.

The vested interests that want to cut penalty rates claim that we have an inflexible labour market that results in high wage costs. But all the evidence is that the annual rate of wage growth has declined substantially and that our labour market is showing considerable flexibility.

Clearly we need to review penalty rates and minimum wages and all industrial relations from time to time but we seem fixated with the need for change and more change, mainly for ideological reasons or perhaps to hide business failure.

Whilst employers and governments continue with their special pleading on penalty rates, the attitude of the public is very clear. According to Essential Research in January this year, 81% of voters think that people who are required to work outside normal hours should receive a higher hourly rate. 68% said that they would oppose cutting weekend and public holiday rates for hospitality and retail workers.

The public seems to have good sense in these matters, which employers and the government would be wise to heed.

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