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Penalty Rate Cuts Cost Workers Billions And Not One New Job Created

Penalty rate cuts cost workers billions and not one new job created

Penalty rate cuts have cost workers billions, and not one new job has been created as a result.

Business and industry groups lobbied for the cuts arguing they will boost jobs and the economy, however, this hasn’t happened.

McKell Institute research found workers will be $2.87 billion worse off by the time the full cuts come into effect.

Penalty rate cuts cost workers billions

The Fair Work Commission introduced the penalty rate cuts two years ago to be phased in over a number of years.

Workers in hospitality, retail, fast food and also pharmacy are affected.

As a result of previous cuts, many are already earning 15 percent less for Sunday and public holiday shifts.

According to McKell, by the time the cuts come into full effect in a few years:

  • hospitality workers will be $837 million worse off;
  • retail workers will be $1.64 billion worse off; and
  • pharmacy workers will be $85 million out of pocket.

Penalty rate cuts have not created one single job

The Commission, in addition to business groups, argued the cuts will lead to economic growth and an increase in jobs and work hours.

However, this week the Council of Small Business Australia admitted none of that has happened.

Chief executive Peter Strong said the reduction in workers’ pay has been a “waste of time” and had not created one single job.

“There’s no extra jobs on a Sunday.

“There’s been no extra hours. Certainly, I don’t know anyone (who gave workers extra hours). 

“It’s been just a waste of time.”

Strong argued the net impact of the cuts has been minimal because they coincided with increases to the minimum wage.

Peter Strong – Council of Small Business, says penalty rate cuts have not created a single job.

No evidence penalty rate cuts create jobs or economic growth

Industrial advocate Miles Heffernan said there is no evidence that cutting wages creates increases in jobs or economic growth.

“It’s one of the greatest myths and biggest con jobs the business lobby and conservative governments wants us to believe,” he said.

“They claim reducing the cost of labour will prompt a business to employ more staff.

“It’s utter nonsense and discredited trickle-down voodoo economics.

“The only time a business employs more people is if it needs more staff.

“Businesses that don’t need more staff don’t employ more staff.

“Instead, they simply pocket the savings in penalty rates as extra profit for themselves and also for their shareholders.

“The argument about economic growth is without credible evidence.

“Since the penalty rate cuts have come into effect, we’ve seen growth stagnate in Australia.” 

Mr Heffernan says paying workers higher wages makes the economy grow.

“If you pay workers more money, they will subsequently spend that money on more groceries, or new tyres for the car, or going to the movies, or buying a takeaway pizza,” he said.  

“It’s basic economics.”

No evidence lowering penalty rates affects employment

McKell Institute Victoria executive director James Pawluk supports Mr Heffernan’s position.

“There is no compelling evidence to suggest that lowering penalty rates has affected employment in the affected sector,” he said.

Furthermore, Pawluk says the main effect of lowering penalty rates is the transfer of billions of dollars from retail, pharmacy and hospitality workers to business owners and shareholders.

“There does not seem to be an economic or ethical justification for such a transfer at this time,” Mr Pawluk added.

The Labor Party has pledged to reverse the penalty rate cuts in its first 100 days in office if it wins the May 18 election.

Please call our specialist team at Fair Work Claims today on

1300 324 748

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Fair Work Claims is a private consultancy and advocacy firm with no affiliation to any government agency, commission or tribunal.

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