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The stupidity in cutting penalty rates

The stupidity in cutting penalty rates

Currently the federal government has flagged discussion about cutting penalty rates due to the costs and inflexibility it provides for employers. The government believes this will strengthen the economy. As a third year environmental student I am here to tell you why this does not make sense from an economic perspective and how it will adversely affect university students.

The federal government has discussed the idea of slashing penalty rates across all sectors. This means it could affect healthcare, construction and hospitality, for example. There is a very broad demographic of people who work in these industries. If penalty rates are cut invariably the working class will feel the effect the most. Penalty rates are a key platform for wealth redistribution. Wealth redistribution and social mobility are two of the key things that make Australia great – we have a high level in comparison to other countries. However trends show that social mobility and wealth distribution has significantly declined since the 80s.

Currently in Australia, the top 20% of households own an average of $2.2 million and collectively own 60% of the wealth, while the bottom 20% own $31,000 per household and own 1% of Australia’s total wealth. This is inherently unfair. If penalty rates are cut, which proportion of Australians will benefit the most? Arguments around cutting penalty rates rely on neo liberal economic assumptions about the work force and often ignore the facts. For example there is a key assumption around penalty rates that if an employer doesn’t have to pay them they will have more money to hire more people. But do you think if a business owner can stay open on a Sunday with one employee and suddenly the owner has more money because penalty rates are slashed he will all of a sudden hire another person? No. In the vast majority of circumstances they will keep the money for themselves.

 

Although I do feel for some small business owners whom I acknowledge may find it difficult sometimes to stay open on Sundays or public holidays, massive corporations like the Coles Myer group, developers and Woolworths (who own chains like Big W, Masters Home Improvement and Caltex) would invariably benefit from these proposed reforms the most. The people who do the front line services for these companies are for the most working class, who will bear the brunt of these reforms. Let’s look to America, where industrial relations have shifted to the extreme neo liberal right and where there is little to no penalty rates and a miniscule minimum wage of $7.25. The top 0.1% of families owns roughly the same amount as the bottom 90%. On top of this, if we look at competition in the market place, America, contrary to popular beliefs, actually has one of the lowest rates of market place competition and one of the highest rates of monopolisation. Cutting penalty rates is the first step to an American system, which will first hurt the poorest parts of Australia and further down that path will ultimately hurt small to medium business owners.

Aside from the economic aspect of the penalty rates, Australia is culturally rooted in the principle of a fair go and was founded on the ideals of a worker’s paradise. We were one of the first countries in the world to introduce the 40-hour working week, the minimum wage and importantly the weekend. By slashing penalty rates, working class employees will now be expected to work on weekends for less than what they were previously, diminishing the value of the weekend in Australia. This could potentially have an effect where only skilled white-collar workers will have weekends off, while the weekend becomes but merely a pipe dream of the working class. Australians celebrate the weekends. It is engrained in our culture as a nation and penalty rates were introduced to compensate for this. If you take away that you are inextricably tearing down a key part of Australia’s identity.

From a University student’s perspective, penalty rates are how we survive. It can be easy to stereotype Uni students as arts or environmental students with 12 contact hours, living at home, with all the time in the world to work and may not need penalty rates. But a lot of my friends who are studying more rigorous degrees like medicine, science, engineering and commerce spend upwards of 30 hours a week at uni and don’t have time to work bulk hours. Many students don’t have the luxury to live at home or work during the day and need penalty rates as a means to live. A student who spends the majority of his week at uni may only have the ability to work 10 hours on the weekend. Penalty rates are a means to ensure they don’t slip into total poverty. Some may argue that Centrelink is there to assist these students. However a fortnightly payment of $285, is not anywhere near substantial enough, especially when you factor in food, rent and transport. By removing penalty rates we are therefore making it even harder for uni students to get by, along with other everyday people, which I believe goes against the fabric of Australian society.

 

Gabe Addley

@realslimgabey

Image:James Jardine, Flickr Creative Commons

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