The latest report from the Australian Bureau of Statistics (ABS) shows that Australia’s unemployment rate has remained steady at 5.7%. This result has been generally accepted as a positive for the economy, reducing pressure on the Reserve Bank to cut interest rates. But what is really interesting is the underlying trend towards a part-time workforce.
Under-Employment On The Rise
May marked the eleventh consecutive month with part-time employment increases of more than 10,000 people. At the same time, full-time employment has decreased by 5,000 people every month of 2016*. There is a clear trend emerging where businesses are employing more people on fewer hours.
This change in the shape of the Aussie workforce is interesting when considered against the backdrop of the current debate about penalty rates. How many of these new positions have been created as a result of businesses trying to manage the cost of employment? Can businesses afford to employ the number of staff they need? Do workers deserve higher rates of pay? Instead of arguing about whether penalty rates should be the same for Saturdays and Sundays, our policy makers should really be looking at the big economic picture – do we want less people employed but earning more, or more people with a job but earning less?
Penalty Rate Debate
The penalty rate debate is not new. Over the last 20 years, there have been numerous Fair Work Commission reviews into issues such as penalty rates, public holidays and changes to ordinary work hours. Not to mention the Commissions Annual Wage Review, which sets the national minimum wage and whether to make any variation determinations in respect of modern award minimum wage. These reviews have predominantly focused on the calculations used to determine penalty rates; they have not questioned whether the concept of penalty rates is still appropriate for today’s workforce.
The laws that govern penalty rates date back to the early 1900s, and were introduced to serve two purposes: to compensate people who are prepared to work outside ‘ordinary’ hours, and to deter (or penalise) employers from unnecessarily employing people at times when they should otherwise be at leisure.
On face value, this policy seems fair for both employers and employees. But what makes the issue more complicated today is that the old concepts of ‘ordinary’ hours and ‘leisure time’ don’t really reflect current societal trends.
History
Think back to the 50s and 60s – shops closed at 4pm during the week, 12pm on a Saturday, and did not open at all on Sunday. These normal ‘working hours’ allowed people time to spend with their family, play sport or engage in other recreational activities, and to rest on Sunday (and attend church). While school hours today typically reflect these same ‘norms’, and a percentage of church services are still conducted on Sundays, very few other aspects of society adhere to this standard (or ordinary) set of working hours.
Increasing Trading Hours
In sectors like retail, hospitality, restaurants and entertainment, for example, consumer demand has already determined that there is no such thing as 9-5, Monday to Friday working hours. Consumerism has driven this change, above anything else, and storefronts continue to be threatened by the growth in online shopping (available 24/7).
So, rather than asking whether we should retain penalty rates for employees on weekends, perhaps we should be examining and resetting our concept of ‘ordinary’ working hours and not punishing businesses who need to employ more people outside these times.
Job Creation
Most people would agree that the creation of more jobs is a worthy outcome of any policy decision (it’s even the campaign slogan for one of the major parties in the current election). By reducing staffing costs, which are the biggest expense for almost every Australian business, employers can afford to increase their workforce. More jobs means less unemployment, which translates at a basic level to a healthier bottom line for the economy.
Jobs are not only good for the economy, they’re also good for peoples’ mental health. Aside from the obvious impact that job insecurity can have on a person’s outlook, studies show that work is generally good for health. According to the Royal College of Psychiatrists, people who are unemployed for more than 12 weeks are between 4 and 10 times more likely to suffer from depression or anxiety. With the economic burden of mental illness increasing, there is a lot to be said for initiatives that can remove some of this pressure.
Economists and policy makers need to be analysing whether reducing the unemployment rate will have a better long-term economic effect than continuing to pay less workers at a higher rate. Can Australian businesses really remain profitable and competitive (and capable of employing staff) if they are penalised for meeting consumer demand?
A Final Thought
Any move to change penalty rates needs to also take into consideration the impact on the National Minimum Wage. These are the people who are most likely to be reliant on penalty rates to meet the costs of daily living. In 2015, this was estimated to be 1.9 million Australians – not a small number!
If the argument to retain penalty rates is centred on people being able to support their families, then we need to decide whether the minimum wage is truly keeping pace with the cost of living.
At Employment Innovations we have a wide variety of solutions that can help you navigate the complex employment landscape in Australia to ensure you stay compliant but are also growing your bottom line. To explore some innovative workplace solutions contact us today.