News & Current Affairs
15 April 2015
by John Passant
Let’s start with the big picture. The Abbott government has had an agenda of austerity since it was elected. There was and is the fake Budget emergency to justify Budget attacks on pensioners, the sick, the disabled, the poor, the unemployed, Universities and a whole range of services.
Think as examples of these 2014 Budget proposals: the GP co-payment, cutting the dole off for 6 months, the pension increase changes, the de-regulation of University fees etc etc.
On all of them there has been massive opposition and the government has backtracked to some extent, although it will try to get its way by the back door as, for example, the freeze on the Medicare rebate to $37.10 for the next 3 years shows. That freeze means that even if your doctor bulk bills the financial pressure on them to charge you more than the rebate will be greater and greater as their costs increase over the next few years without a corresponding increase in the rebate. You in all likelihood will be charged $5 or $10 on top of the rebate amount of $37.10 to visit a bulk billing doctor by 2018.
So why all these cuts and attacks?
Let’s be clear. They aren’t cutting to address the fake budget emergency. Australia’s Budget deficit is one of the lowest in the OECD. They are cutting to continue the shift of wealth from labour to capital that started over 30 years ago with the first government of neoliberalism in Australia, the Hawke Labor government.
The shift in the share of national income from labour to capital shows this. In graph 1 (taken from Bill Mitchell’s blog) you can see the decline of labour’s share of national income starting in about 1974 and then after a big increase in the early 1980s begin its ongoing decline from about 1984/85 (when the Accord starts to kick in). This has continued with ups and downs ever since. The key take home message about this is that the share of national income going to capital is at its highest ever since records have been kept and that to labour at its lowest (or near to lowest.) The trend is all downhill for labour.
At the same time if we look at the level of strikes in Australia over that same period as capital has been getting richer and richer the second graph shows a massive collapse in industrial action. Graph 2 from Bernard Keane in Crikey has the details from 1985.
In fact if we go back to the late 60s and early 70s strike levels now are about between one thirtieth and one hundredth of what they were in the best years then. To put that in perspective strike levels today are 10000% lower than they were in their best years like 1969.
This low level of strikes explains the shift in wealth from labour to capital. For example wage increases in the last year or so have been at or below inflation. Our real wages are actually going backwards.
On top of that unemployment in Australia is increasing and the current level of 6.3% – with predictions of 6.5% or 6.75% – means the bosses can smell blood. A weak labour market means workers are more likely to take cuts to wages and conditions to ‘save their jobs’. As the fear of unemployment grows, it becomes a good time for the bosses to begin an attack on penalty rates.
As the 2014 Budget attacks show, as the attacks on real wages show, as the lengthening working week and unpaid overtime of $110 bn according to the Australia Institute show, and as the attacks on penalty rates now show, the bosses want more. This is not just because they are greedy. It is because something more fundamental is happening in the economy. The shift in wealth from labour to capital has been to address falling profit rates globally and, apart from the resources boom, in Australia.
Our Sydney comrade Peter Jones has a wonderful article in the latest edition of Solidarity – brandish a copy – about the collapse of the boom. His graph on Australian profit rates is very enlightening. It shows that those rates are falling now in Australia and that the mining boom is dead. Graph 3 has the details.
What this shows is during the mining boom Australia’s rate of profit from about 2001 stabilised and even went up a bit because we had the right rocks and gases in the ground. However from a high in 2011 (at least for the 21st Century) it has begun to decline and will only get worse.
Now, this isn’t the time or place for a discussion of the tendency of the rate of profit to fall, what Marx called the fundamental law of political economy. Suffice to say in very simple terms that competition forces bosses to invest more in capital relative to labour. Yet labour is the source of their profits etc. So over time and all other things being equal profit rates will have a tendency to fall.
Capital and its state adopt policies (called counter tendencies in Marxist terms) to address this fall in profit rates. One is to lengthen the unpaid working day, something that has been going on in Australia for some time now. As I mentioned before unpaid overtime – the extra 6 hours per week we work for the bosses for nothing is worth $110 bn a year to them – is one way. Cutting real wages is another. That is occurring already as union negotiated EA wage rises are around or below the rate of inflation. It may be soon that serious calls for cuts in nominal wages begin to be heard, if the economy worsens. That is happening already around the minimum wage and the productivity commission investigation into it has opened up employer calls for it to be cut or even abolished. Shifting the wealth we create to capital is another more generalised expression of these specific policies.
So too is cutting government spending. The less spending a government does on social welfare and the social wage the more it can cut taxes on capital, freeing up more income for the bosses to go into new machinery, new takeovers, more dividends, or whatever it is capital deems a useful place for the extra money it gains. Of course, if my analysis is correct this will in the long run only exacerbate the problem for capital because they will pump more money into machinery etc at the expense of wealth producing labour.
All of which I hope is a good lead in to penalty rates.
In a nutshell penalty rates are an increased hourly rate paid for dong work outside ‘normal’ hours (think 9 to 5 Monday to Friday as normal.) They can range, depending on time, industry and the level of class struggle in the past, from 25% to 150% in addition to the normal wage. Of course the lengthening of the working day that I talked about before and so called changes in the working week (think of the 24/7 world instead of 8 hours work 8 hours play and 8 hours rest) are used as arguments to cut or abolish penalty rates. Yet many workers still work Monday to Friday and have nights and weekends off.
The origin of penalty rates in Australia can be traced to 1919 when the Commonwealth Conciliation and Arbitration Commission held that penalty rates for work on Sundays were intended as compensation for working unsociable hours. In 1947 the Commonwealth Conciliation and Arbitration Commission found Saturday work should be remunerated at 125% of the base rate, and the rate for Sunday work should be increased to double time, or 200% of the base rate.
Penalty rates exist in most awards. These are Fair Work Australia approved determinations of minimum standards in most industries. However many workers not specifically covered by these awards for example who are in Enterprise Agreements that lock in penalty rates would be affected by the cutting of penalty rates. Cutting penalty rates in a wards would set a precedent the employer would want to follow. The Fair Work Commission is conducting a review of the 122 awards including penalty rates right now. In one it has already reduced penalty rates and the Union, UV, has appealed. That isn’t the end of the story and attempts to cut penalty rates are ongoing.
In 2012 Nick Xenephon moved the Fair Work Amendment (Small Business—Penalty Rates Exemption) Bill 2012 to exempt small business from award penalty rates. It lapsed after the election was called. But as United Voice noted, if it had been passed then it would have affected not just on those 500,000 immediately impacted (i.e. those employed in small business and being paid penalty rates) but also the other 3 or 4 million workers who receive penalty rates.
Any crack in the wall would mean the whole penalty rate building is likely to collapse.
And the Shop, Distributive and Allied Employees Association in South Australia reached a deal with employers over penalty rates. In the words of Rob Graham in Green Left Weekly:
Business SA said the deal was a “landmark” agreement, “which significantly reduces the penalty rates, for retailers in SA, on weekends and public holidays”.
Under the agreement, penalty rates would be abolished entirely for week nights and Saturdays, cut from 100% to 50% for Sundays and from 150% to 100% for public holidays. In exchange, employees would receive higher base pay, a “guaranteed” 3% annual pay rise and the right to refuse to work on Sundays and public holidays. Permanent staff would have the right to two weekends off out of four.
So it gives higher base pay in exchange for abolition or big cuts in penalty rates. The bosses had to give up a few things that they can win back over time to get their real goal – no or reduced penalty rates. Who needs an Abbott government or Fair Work Commission or Productivity Commission to engineer cuts to penalty rates when you have the SDA? Bosses must be wanting unions like the SDA everywhere.
Bosses say the world has changed and we shouldn’t pay penalty rates. It is a 24/7 today, not an 8 hours work, 8 hours play and 8 hours rest one. Of course if you have school kids, then working at night or weekends means you miss out on being with them. That hasn’t changed. And the vast majority of workers till work 9 to five Monday to Friday. A significant number of those who work nights and weekends do so to because getting sick, being injured, catching fire, doesn’t happen just on weekdays. These people – nurses, paramedics, aged care workers, firies, – help save lives, look after the sick and elderly, put out fires etc. Mining, given the level of capital invested and the need to have it working day and night, is a 24 hour a day occupation. Electricity, Gas etc workers also work 24 hours a day.
The stereotype is that penalty rates are mainly benefiting young people such as students in hospitality. Survey by Tony Daley from Uni SA about penalty rates and unsocial hours in Oct 2014:
In summary, it is women, workers with lower household incomes, and employees in rural or regional locations who may be at greater financial risk if policy changes are made to the payment of penalty rates for working unsocial hours.
Where unions are strong and take action they have locked in good penalty rates in EAs and awards, although the latter are coming under review and attack as I mentioned. Where there are not, penalty rates are under attack.
The Abbott government wants to attack penalty rates. However the backlash against its 2014 Budget has put it on the back foot. So it is relying on the award modernisation program (first introduced by Julia Gillard in 2009 when she was employment Minister to do that). That is what they thought would happen. Don’t blame me – FWC did it. However the Productivity Commission came along and in January announced a review into a whole range of matters including penalty rates and the minimum wage. The PC putting these issues upfront and knowing full well it will recommend drastic changes, the Abbott government has been in retreat ever since. Employment Minister Senator Abetz has told the AFR that he was surprised the Productivity Commission decided to look at penalty rates and the minimum wage – arguably the two most contentious political issues in the review – and that “we have a system that has worked relatively well over many years now, and I don’t want to put the Parliament in the space of the Fair Work Commission”.
In other words let the Fair Work Commission do the dirty work and Abbott and co can say – nothing to do with us. Just part of the FWC process. And that means it may not happen or may happen too slowly for the bosses.
Will getting rid of penalty rates improve the number of people employed? No. The employer will pocket the savings. There is no guarantee they will hire more people. In fact the survey I mentioned above showed it is more likely that without penalty rates people will stop working unsociable hours. So employment in the particular industry and business profits as a consequence may actually fall.
The hospitality industry has been most vociferous about penalty rates and campaigned over Easter with crap ads saying we aren’t open because of penalty rates. They put these in their windows. One of the pubs featured was actually open the whole of Easter. And workers on social media began organising boycotts against businesses that put the signs up. Matt Cowgill from the ACTU has a wonderful analysis of employment in the hospitality sector. It has increased by 28% over the last 5 years while employment across all industries has increased only 18% over the same time. It seems that despite all those supposed crippling wage cuts the hospitality industry has steamed ahead to employ many more workers than most other industries.
Where to from here? The Abbott government wants to attack penalty rates, even if the politics means it has to do this softly softly and through the FWC. Business groups and the bosses certainly do.
As an employer friendly legal firm put it some time ago:
The game is not over by a long shot. Penalty rates are being reviewed in at least three separate ways:
• the Restaurant Industry Award decision (under which the FWC cut some penalty rates) is now being appealed by United Voice (the hospitality sector union);
• the Productivity Commission inquiry into workplace laws will consider the role of penalty rates; and
• the Fair Work Commission is currently undertaking a further review of the award system. This latest review is more comprehensive than the 2012 review – it is designed to be a root and branch review to ensure that all awards reflect a ‘fair minimum safety net’ and continue to be relevant to the needs and expectations of the community. As part of that review, the Commission is likely to consider whether the penalty rates specified in awards are appropriate to that particular industry – indeed, the Federal Government has submitted that it would be appropriate to schedule a review of penalty rates after 30 June 2014.
Whatever the timing of future changes, it will be important for employers who are interested in influencing the outcome to participate in these processes as far as possible – and experience suggests that a coordinated, comprehensive approach by groups of employers in a particular industry increases the prospects of ‘kicking a goal’.
Their side is organising against penalty rates and ramping up the pressure. So our side needs to do the same. But that doesn’t just mean fighting it out with words before the Fair Work Commission. It doesn’t mean organising for a Labor win. It means organising among workers and others like students who are dependent on penalty rates. It means those workers and students organising too. It means rejecting the cuts to penalty rates the SDA template has or will allow. It means workers as workers joining the fight against any Abbott government attack. Ultimately that means striking against all the attacks so our side can defend wages, jobs, living standards, the social wage etc and of course protect penalty rates.
What about for us in Solidarity? Well, we can’t do those things. We are too small. What we can do is make the arguments for action in our unions and workplaces, and on campus and involve ourselves in all the campaigns that crop up against the government attacks and other issues like refugees and equal love, against Reclaim Australia, the great demos against closures of Aboriginal communities in WA. There is another demo being organised on 1 May. I hope it will be big. Every opportunity we need to be involved in the fights of the day as best we can, and make the arguments for fighting back, for strikes and demos and protests and for ordinary workers and others to organise them.