April Holiday Cluster Highlights Income Losses From Reduced Penalty Rates

by Jim Stanford

Many Australians are eagerly anticipating a unique concentration of public holidays in coming days. There is a ten-day period (stretching from Good Friday through Sunday, 28 April) during which many employees only have to work three days. Many Australians are now arranging to take those three days off: creating an extended 10-day holiday for the “price” of just three days leave.

Of course, many other Australians will be required to work during this period, and so for them the appeal of this coming period is diminished. Adding insult to injury, however, is the fact that their compensation for working during this period is being significantly reduced as a result on ongoing reductions in penalty rates for Sunday and public holiday work in the retail, accommodation, and food and beverage industries. A new report from the Centre for Future Work puts a number on the total loss of wages that will be experienced by workers in the broad retail and hospitality sectors through the coming holiday period: $80 million this year, rising to $107 million for a similar period once the rate cuts are fully implemented.

The reduction in penalties for public holidays (by an amount equal to 25% of base wages for most workers in these sectors) was fully implemented on 1 July, 2017. The reduction in penalty rates for Sunday work is still being phased in: a third reduction in the rate will occur on 1 July this year. And for workers in industries covered by the General Retail and Pharmacy awards, another reduction will occur on 1 July, 2020.

Over one-half million Australians are at work in these industries on a typical Sunday. The income losses experienced by most of these workers (both directly and indirectly) are substantial: presently amounting to about $16 million in lost wages for each public holiday, and over $8 million (at present) for a Sunday. The unique concentration of public holidays within the 10 days starting on Good Friday (amounting to a total of 6 holidays or Sundays in most states) dramatically highlights the scale of those losses. Over that 10-day period, we estimate that wages will be $80 million lower than if penalty rates had been maintained. And the problem is getting worse, due to the further reductions in Sunday penalties that are coming. After 2020, if the remaining Sunday penalty rate reductions are fully implemented, the loss in wages would equal $107 million for a corresponding 10-day cluster of holidays.

The coming concentration of public holidays dramatises the magnitude of income losses resulting from the penalty rate cuts, but those income losses are experienced throughout the entire year. In the current financial year (from 1 July 2018 through 30 June 2019), we estimate aggregate income losses at around $630 million. That loss will double once the Sunday penalty cuts are fully in place, to some $1.25 billion per year after 1 July 2020. In sum, this policy imposes a substantial income loss on a group of workers who are already vulnerable to low and uncertain earnings.

The report also examines the job-creation record of the sectors in which penalty rates were reduced. Employers promised that lower labour costs would result in more hiring, but that promise has been broken. In fact, hiring in sectors where penalty rates were not reduced has been five times faster since July 2017 than in the retail and hospitality sectors (where penalty rates were cut). The idea that cutting penalty rates will spur more hiring has been disproven by real experience.

Full report