Macquarie Uni research shows penalty rate cuts fail


Words || Mariah Hanna

In a survey that has surprised literally no one, it’s been found that penalty rate cuts have so far failed to increase jobs across Australia.

Following a decision by the Fair Work Commission last year to gradually introduce reductions to penalty rates for casual and part-time retail and hospitality workers, research conducted by Macquarie University and the University of Wollongong has found that rather than stimulate employment rates as the Commission had hoped, there has been no immediate job growth.

Dr Ray Markey of Macquarie University worked alongside Dr Martin O’Brien and Dr Eduardo Pol of the University of Wollongong to conduct the study. After surveying 1351 workers, researchers found that not only did employment fail to increase, but existing employees’ hours remained the same as they had before the cuts.

The decision to cut penalty rates was met with criticism from the Labor Party last year, who saw the cuts as detrimental to low-income earners. There has also been concern that a disproportionate amount of young people are negatively impacted by the cuts as they are more likely to work casual and part time hours.

It was found that lower-level employees in fast food took the biggest hit when the cuts were introduced. Most negatively affected employees are those aged between 14 and 20.

However, Dr Markey told Grapeshot, “this impact has been partially cushioned by two factors. First, a recent significant increase in the minimum wage will temporarily offset penalty rate reductions for some, although only in the short term before further reductions come into effect. Second, penalty rates cuts for casuals were not as significant as for other workers.”

Dr Markey also points out that this is the first time empirical evidence has shown the impact of penalty rates on employment before or after the cuts. “It is important to follow this initial study with a longer term one, because when our survey was undertaken the full impact of cuts being introduced in stages over time had not been felt. This may have affected the results.”

The next round of reductions is due to come in June of this year, with a further 5% reduction for Sundays and public holidays, at which point consequences may vary from this initial study. However, Dr Markey does not seem optimistic about the prospect of positive results.

“The biggest contributor is consumer demand, which has been weakened by record low wages growth. The penalty rates decision only contributes to this weakening of employment growth.”