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Monday, December 21, 2015

Sunday rates aside, the Productivity Commission finds we set wages pretty well

The most important finding of the Productivity Commission's new report isn't that some workers should receive lower penalty rates on Sundays.

It's that almost everything conservative commentators say about the industrial relations system is wrong. It works well, it isn't creating wages explosions, and it isn't pricing people out of work.

"Economy-wide wage breakouts and associated stagnation – the horror of the 1970s – seem as dated as floppy disks," the commission says, in what may be a gentle dig at one of the ministers who commissioned the report, former workplace relations minister Eric Abetz.

Two years ago, as wage rises began to slide, Abetz warned of "something akin to the wages explosions of the pre-Accord era, when unsustainable wage growth simply pushed thousands of Australians out of work".

During the mining boom, wages in industries that needed workers grew extraordinarily fast, as would be expected, but other wages didn't. During the global financial crisis, wage growth slowed and, as a result, unemployment remained below 6 per cent. As unemployment climbed following the end of the boom, wage growth dived to historic lows, and unemployment fell.

Whatever else you want to say about Australia's wage determination system, its hard to argue that it isn't flexible.

The head of the International Monetary Fund's Australia division, James Daniel, was asked on a recent visit whether our industrial relations system was holding us back. He almost laughed. He replied that he had just come from leading the running in charge of Spain...

Work Choices, the Coalition's mid-1990s attempt to sweep away the old system, had little detectable effect on productivity, the Productivity Commission finds. It certainly thinks there's room for improvement. Fair Work Commission judges act like judges in courtrooms; they weigh up evidence presented to them. But for decisions about the minimum wage and other minimum standards, the Productivity Commission thinks a separate, non-judicial division should go further – it should undertake its own inquiries and pay for independent analysis.

The Fair Work Commission should remain. "Absent specific workplace legislation and oversight, employees would particularly suffer from unequal bargaining power," the Productivity Commission says. "Most stakeholders recognised this."

Far from threatening employment, minimum wages are likely to have a zero "or even positive" effect on jobs, if they are not set too high. The contention that increases in minimum wages lock people out of jobs – while obviously true if minimum wages were lifted to very high levels – hasn't stood up to the onslaught of real-world investigation, much of it recent.

The commission quotes with approval the work of Keith Hancock, who chaired the 1985 review of Australia's industrial relations system. When equal pay for women was introduced in the early 1970s, "so far as could be told from the employment statistics, there had been no adverse effect on the relative employment prospects of women", the review said. Women are today far more likely to be employed than before their pay lifted.

Australia's youth wages are unusually low by international standards, typically 44 per cent of the adult minimum wage, compared to 60 per cent in the United States. Yet youth unemployment is climbing. The commission finds it's been climbing more as a result of the increase in the general unemployment rate (because what happens to the general rate happens more to youth) than because young workers are paid too much.

The commission finds "compelling grounds" for penalty rates for overtime, night and shift work. Night work and rotating shift work has "proven adverse health effects". Public holidays are meant to encourage shared community activities. "As such, there are strong grounds for deterrence against their use for working, but with some flexibility to provide some services on these days," it says.

Weekend workers are also deserving of extra rewards. The commission says many employers would pay them extra on weekends, even if penalty rates didn't exist, to fill rosters.

But weekends are changing. Traditionally a time for socialising, there's now less of it and it is highly likely to be done while shopping. In one survey, 39 per cent of Australians nominated their shopping centre as their most important meeting place. Only 16 per cent nominated a park, and 19 per cent nominated a pub. For some stores, Sunday has become their most important trading day, accounting for 25 per cent of all sales.

Sunday rates are often 150 to 200 per cent of weekday rates, yet the commission finds those working on Sundays often have a work-life balance that isn't any less satisfactory than those who work on Saturdays, where the rates are nearer to 125 per cent.

They are certainly better off than workers on night shift, who receive penalties as low as 15 per cent. It recommends substituting Saturday rates for Sunday rates in the evolving leisure industries of hospitality, entertainment, retailing, and dining.

It would mean less Sunday pay for these workers, but more weekend-style services on the days we want them, and an easier life for cafe and store owners who often feel compelled to work themselves because they can't afford to pay many staff.

The government has shoved the proposal off to the Fair Work Commission, which will most likely implement it. It'll upset some people, but it's not what the report is about.

In The Age and Sydney Morning Herald