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Australia's lowest earners hit hard by penalty rate cuts

Kelly Hughes, Charlotte Lemmon, Lexi Denison, Ainslie Couper |  28 May 2017  |  Economics


The Fair Work Commission, with the support of the Turnbull government, has made a hallmark decision to cut penalty and Sunday pay rates.


This decision affects those working across the retail, hospitality, fast food and pharmacy sectors and is expected to hit hundreds of thousands of low earning Australians.


The commission argues the cuts will stimulate services and increase trading hours on public holidays, as well as intensify wage growth.


However, according to the Australian Council of Trade Unions (ACTU) almost half a million of Australia’s lowest paid workers will lose up to $6,000 a year as a result of the ruling.


Opposition Leader Bill Shorten says Australian workers have been “kicked in the guts” over the commission’s decision.



Fair Work Commission decision


Full and part time employees after decision

Before decision

Casual employees after decision

Before decision




no change

no change

Fast Food
















Figure 1 – The Conversation


“I have never seen an argument which would justify wholesale pay cuts for the lowest paid workers in Australia,” he said in a press conference.



Who’s losing out?


Research conducted by the Australian Work and Life Index (AWALI) suggests young people will be hit the hardest, as their age group is most financially dependent on Sunday and public holiday rates.


Young employees make up an inherently casual work force, where job security is low and employment turnover high.  


The increase in casualisation means less paid leave and an increase in stress for workers.


Jessica Loose, a casual retail employee says she will still be expected to work Sundays and public holiday shifts despite the pay cuts.


“I’m not in a position to refuse weekend or public holiday shifts as they are busy working periods and my boss expects me to work. I have no choice.”


“It’s not as easy to say no to a shift as everyone thinks. In casual employment, if you turn down a shift it will just get passed onto the next person,” she said.


The cuts also mean Ms. Loose is at a loss of $50 a week.


“I’ve budgeted my lifestyle around my current weekly earnings, any reductions to my wages will make it incredibly difficult to make ends meet.”


“$50 a week is a huge loss for a casual employee, as I now need to work extra hours to make up for the money that I’m losing,” she said.



Sunday financial loss:

 Figure 2 - The Advertiser


As shown in Figure 2, workers rostered on for eight hour Sunday shifts will feel the full financial effects of the pay cuts, losing on average over $30 a week.


The Shop Distributive and Allied Employees (SDA) Union is an organisation that has been representing Australian workers since 1908.


They believe the commission’s ruling to cut pay is “unfair” and they “want it stopped.”


“It is an outrage that the Turnbull government has sat on its hands as employers groups have fought to cut penalty rates- they can’t sit by and allow penalty rates to disappear.”


“The Turnbull government has failed to stand up for working families at every opportunity. While they continue to turn their backs on Australian workers who are already struggling with record low wages growth; the SDA Union will continue to defend for fair penalty rates,” the SDA Union said.


Employment Minister Michaelia Cash says the Fair Work Commission’s decision is independent from the Turnbull government, and Labor is fully aware of this.


“Any suggestion by Bill Shorten and the Labor Party that they do not accept this decision is highly hypocritical.”


“Bill Shorten needs to explain why he instigated a wide-ranging review of penalty rates if he does not support a change in penalty rates,” Ms. Cash told Fairfax.


Benefits of Fair Work Commission’s decision:


Not all casual employees are opposed to the recent pay cuts, as working hours and job opportunities for some may increase.


Casual retail employee Cheri Searle says she will benefit from the commission’s ruling by gaining extra shifts.


“Despite my pay being reduced after the penalty cuts come into effect, overall the amount of Sunday and public holiday shifts I will get will increase.”


“Employers now have the opportunity to hire more staff over the weekend in busy trading periods.”


“However, I do understand people’s frustration surrounding the argument. It is unfair to cut the pay of people already earning the lowest wage. There should be pay cuts to other sectors,” she said.



What the employers have to say:


Hospitality employer Rob Minncozi says his business will benefit from the commission’s ruling, as it will stimulate job opportunity and growth.


“Currently we are open for half a day on Sunday. However, when the penalty rate cuts are implemented on July 1st we will extend trading hours as we now have the financial resources to provide more shifts for our workers,” he said.


Small business owner Michelle Gates says the decision in slashing Sunday rates will increase employment Australia-wide.


“Instead of being under-staffed and employing one casual on a Sunday, I will now be able to employ a second staff member.”


“Not only will these changes benefit me, but also young Australians seeking work,” Gates said.



In the long run:


The opposition party claims cutting penalty rates will backfire on small businesses and end up harming the economy.


The recent inequality rate is at a 75-year high with wage growth at the slowest it’s been since the 1990’s, Labor says.


According to a study undertaken by the McKell Institute, the proposed reform to penalty rates will approximately cost workers $78 million dollars per year in wage losses.


The public holiday pay rate cut will come into effect on the 1st of July 2017 and cuts to Sunday rates will be introduced by the end of this year.


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