A new report for the Chifley Research Centre shows the high cost for typical working Australians of cutting penalty rates. People with normal jobs in middle Australia will be significantly worse off every week if penalty rates are cut. Cutting penalty rates: measuring the impact contains modelling which shows case studies for hours worked under the key awards which have protected penalty rates. Some workers are set to lose nearly one sixth of their earnings. Every case study shows workers worse off, either through lost earnings or extra hours of work to maintain their pay. The pay cuts range from four per cent to fourteen per cent of take home pay. (Detailed tables are contained in the report.) A typical part time retail worker is $78 worse off every week – or she will have to work an extra four hours every week to make it up. A typical part time fast food worker is $39 worse off every week – or he will have to work an extra two hours every week. A typical full time hospitality worker is $35 worse off every week – or he will have to work an extra two hours. A typical part time pharmacy worker is $78 worse off every week – or she will have to work an extra four hours every week. The report Cutting penalty rates: measuring the impact shows that many Australians will be much worse off because of penalty rate cuts. Chifley’s research also shows that our economy is being damaged by rising inequality. This is why the conservative combination of plans to cut wages for low paid Australians with plans to cut taxes on the highest-income earners is very worrying. Labour market changes to squeeze working and middle class Australians and tax changes which reward top earners are making this even worse. The report of the Chifley Research Centre’s Inclusive Prosperity Commission (http://www.chifley.org.au/Inequality-the-facts-and-the-future) showed that rising inequality is damaging productivity by restricting skills formation; damaging participation by hurting public health; and hurting demand by squeezing wages.

1. CUTTING
PENALTY RATES
MEASURING THE IMPACT
A CHIFLEY RESEARCH CENTRE REPORT
March 2017

2. Publication details:
A Chifley Research Centre Report
March 2017

3. 3
CONTENTS
Introduction 4
Executive Summary 5
Case Studies 6

4. 4
This Chifley Research Centre paper 'Cutting penalty rates -
measuring the impact' considers the big costs to key groups
of workers. We examine the cases of typical working people
in hospitality, fast food, general retail and pharmacies.
There has been considerable research focusing on the significant impact that
the cuts to penalty rates will have on the living standards of some of Australia’s
lowest paid workers. This report adds to this body of work.
We provide specific examples of cuts to individual wages, and in turn show
just how much additional work would be required simply to maintain the same
standard of living. If workers are required to work more hours to keep the same
wages, this is a real cut to their wages.
_
INTRODUCTION

5. 5
EXECUTIVE SUMMARY
Many hundreds of thousands of people in Australia who work unsociable hours are
paid above the normal hourly rate for this work. This system of ‘penalty rates’ is
designed to compensate people for the special nature of work outside usual hours.
The higher cost to businesses also encourages employers to consider whether
such work at such times is really necessary.
The reduction or even removal of these rates has been the subject of a long
campaign, strongly supported by interested parties in the business community
and conservative politics. The traditional arguments rest on two, debatable
assertions: that labour costs would remain constant and fund more hours worked,
allowing more individuals to move from welfare to work; and that labour costs
would fall, allowing business to lift profitability, competitiveness and investment.
(These stated benefits appear to rely on key incentives operating in contradictory
ways.)
In 2017, a new argument has also been mounted: that the current arrangements,
which allow trade offs at an enterprise level, do not deliver national consistency
between enterprises and in turn disadvantage small employers who do not strike
such an enterprise bargain. (The ideational explanation for business lobbies
and conservative parties to argue that fewer exceptions to national wage setting
should be allowed is obscure.)
The unstated assumption in all these arguments, old and new, is that business
lobbies and conservative politics are not proposing a complex rationalisation
of employment arrangements with the benefits of penalty rates traded off in a
bargain measured against a no-disadvantage test. Whether because the wage cuts
they seek can’t effectively be compensated, or because any compensation would
defeat their stated policy purpose, a trade-off is not on the table.
Remarkably, what is proposed by business and conservatives – and now
supported by the Fair Work Commission – is the simple reduction of these rates.
A simple cut in pay for people who work.
At a time of near-zero wage growth, below-target inflation, weak consumer
demand and deep public anxiety about the economic prospects of households and
the nation, wage cuts for hundreds of thousands of individuals is a bizarre and
self-defeating national policy. A reasonable assessment of Australia’s economic
conditions suggests that penalty rate cuts are bad for the economy.
The more pressing logical challenge for the opponents of penalty rates is
that there is a direct correlation between the benefits they argue will flow to
businesses and the costs that will be felt by workers. Whatever their effect on the
economy as a whole, penalty rate cuts are bad for the people who work penalty
rates. This is not the argument against cutting penalty rates – it is the argument
for cutting penalty rates: penalty rate cuts only work if they hurt.
Cutting penalty rates cannot be both a big benefit for business and a small cost
to workers.
'Cutting penalty rates - measuring the impact' shows just how high the cost will be.
_
Michael Cooney
Executive Director, Chifley Research Centre
Cutting penalty rates cannot be
both a big benefit for business
and a small cost to workers.

6. 6
CASE STUDIES
Susan, 37 single mum, works Fri Sat Sun as a shop assistant
Award: General Industry Retail
Base rate: $19.44
Mon-Fri Sat Sun
Hours 8 8 8
$ current
penalties
$155.54 $194.42 $311.07
$ new penalties $155.54 $194.42 $233.31
Foregone money $0.00 $0.00 -$77.77
Week (hours) Year (days) Decade (days)
Extra time
required to make
same money
4 26 260
Lost money -$78 -$4,044 -$40,440
Lost money % -11.8%

7. 7
Grace, 22 year old university student, works Sat Sun in fast food
Award: Fast Food Industry
Base rate: $19.44
Mon-Fri Sat Sun
Hours 0 8 8
$ current
penalties
$0.00 $194.42 $233.31
$ new penalties $0.00 $194.42 $194.42
Foregone money $0.00 $0.00 -$38.88
Week (hours) Year (days) Decade (days)
Extra time
required to make
same money
2 13 130
Lost money -$39 -$2,022 -$20,220
Lost money % -9.1%

8. 8
Ahmed, 29 year old Dad, works full time in hospitality
Award: Hospitality Industry
Base rate: $17.70
Mon-Fri Sat Sun
Hours 24 8 8
$ current
penalties
$424.80 $177.00 $247.80
$ new penalties $424.80 $177.00 $212.40
Foregone money $0.00 $0.00 -$35.40
Week (hours) Year (days) Decade (days)
Extra time
required to make
same money
2 13 130
Lost money -$35 -$1,841 -$18,408
Lost money % -4.2%

9. 9
Maria, 40 years old, works weekends in a pharmacy
Award: Pharmacy Industry
Base rate: $19.44
Mon-Fri Sat Sun
Hours 0 8 8
$ current
penalties
$0.00 $194.42 $311.07
$ new penalties $0.00 $194.42 $233.31
Foregone money $0.00 $0.00 -$77.77
Week (hours) Year (days) Decade (days)
Extra time
required to make
same money
4 26 260
Lost money -$78 -$4,044 -$40,440
Lost money % -15.4%

10. 10
Helen, 60 years old, works weekends in a gardening store
Award: General Industry Retail
Base rate: $19.44
Mon-Fri Sat Sun
Hours 0 8 8
$ current
penalties
$0.00 $194.42 $311.07
$ new penalties $0.00 $194.42 $233.31
Foregone money $0.00 $0.00 -$77.77
Week (hours) Year (days) Decade (days)
Extra time
required to make
same money
4 26 260
Lost money -$78 -$4,044 -$40,440
Lost money % -15.4%

11. 11
Endnotes
Hospitality Industry (General) Award 2010 - https://www.fwc.gov.au/
documents/documents/modern_awards/award/ma000009/default.
htm
Fast Food Industry Award 2010 - https://www.fwc.gov.au/documents/
documents/modern_awards/award/ma000003/default.htm
General Industry Retail Award 2010 - https://www.fwc.gov.au/
documents/documents/modern_awards/award/ma000004/default.
htm
Pharmacy Industry Award 2010 - https://www.fwc.gov.au/documents/
documents/modern_awards/award/ma000012/default.htm
Fair Work Penalty Rates Decision - https://www.fwc.gov.au/
documents/sites/awardsmodernfouryr/2017fwcfb1001.pdf
A transition to Nowhere: On the Impossibility of Avoiding the Social
Costs of Reduced Penalty Rates, Jim Stanford, Centre for Future Work
2017, http://www.tai.org.au/sites/defualt/files/Transition%20to%20
Nowhere%20-%20CFW.pdf
The Impact of the FWC’s February 23 Sunday Penalty Rates Decision,
Edward Cavanough, McKell Institute February 2017 - https://
mckellinstitute.org.au/app/uploads/McKell-Institute-The-Impact-of-
the-Fair-Work-Commission%E2%80%99s-Penalty-Rates-.pdf
Assumptions
All workers are assumed to be working on the minimum award wage
10 year figures are not adjusted for inflation or minimum wage
increases, this slightly understates the 10 year impact in real terms.
The annual figure assumes that the workers would be paid penalties on
their leave, as this is likely greater than the leave loading
The extra hours would be at base rate of pay

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