Penalty rate cuts fail to ignite jobs boom

Reduced Sunday and holiday penalty rates for retail and hospitality workers failed to ignite the boom in employment as promised by employer groups who supported the change.

A new report Penalty Rates and Employment One Year Later from The Australia Institute’s Centre for Future Wor examined employment and working hours in the retail and hospitality industries in the year since penalty rates were first cut.

The report found, since the initial penalty rate reduction imposed by the Fair Work Commission on 1 July 2017:

  • The retail sector in particular performed very badly relative to the rest of the economy. 
  • Total employment was unchanged in the year ending in May 2018, continuing a long-term trend of employment stagnation. 
  • Full-time employment declined by 50,000 positions. 
  • Average weekly hours of work declined by more than a full hour, and the underemployment ratio (share of workers who want more hours) grew almost 2 percentage points.
  • The hospitality sector (accommodation and food services) experienced similar results, including weak job-creation, a loss of full-time employment, shorter average hours of work, and higher underemployment.

“Far from experiencing a jobs boom, the retail and hospitality sectors have significantly underperformed the rest of the economy in terms of both hiring and working hours,” says Dr. Jim Stanford, Director of the Centre for Future Work.

“Most industries where penalty rates were unchanged did far better at job-creation than the two sectors where penalty rates were cut.

“Employer representatives argued that reducing labour costs for work on Sundays and holidays would spur a big expansion in employment, one group even predicted 40,000 new jobs. Our report found that was simply not the case.

“Based on a number of criteria, the retail and hospitality sectors performed among the worst of any Australian industries in the year since penalty rates were first cut.

“While lower penalty rates are not the cause of the poor performance, our research certainly disproves inflated claims by employers and government that cutting labour costs would unleash a jobs boom.

“If we really want more jobs, we should boost wages, improve job security, and strengthen purchasing power throughout the economy. Cutting penalty rates does the opposite.”

Related research

Media Enquiries

Anna Chang Communications Director

0422 775 161

anna@australiainstitute.org.au