TRANSCRIPT

PENALTY RATES AND FAIR PAY SELECT COMMITTEE

Inquiry into penalty rates and fair pay

Melbourne — 26 April 2017

Members

Ms Gabrielle Williams — Chair Mr Sam Hibbins Mr Robert Clark — Deputy Chair Ms Dee Ryall Ms Lizzie Blandthorn Ms Natalie Suleyman Mr Josh Bull

Witness

Ms Ged Kearney, president, Australian Council of Trade Unions.

26 April 2017 Penalty Rates and Fair Pay Select Committee 1 The CHAIR — I welcome Ged Kearney, president of the ACTU. I will start by making clear that all evidence taken by this committee is protected by parliamentary privilege. Therefore you are protected against any action for what you say here today, but if you go outside and repeat the same things, including on social media, those comments may not be protected by this privilege. All evidence given today is being recorded by Hansard, and you will be provided with a proof version of the transcript for you to check as soon as possible. Verified transcripts, PowerPoint presentations and handouts will be placed on the committee’s website as soon as possible.

For those media representatives among us, we welcome you. We remind you of the following guidelines: that cameras must remain focused only on the person speaking; operators must not pan the public gallery, the committee or witnesses; and filming and recording must cease immediately at completion of the hearing. Broadcasting or recording of this hearing by anyone other than accredited media is not permitted.

We invite you to give a 5 to 10-minute presentation, after which time members of the committee will ask you questions, usually in the form of a substantive question followed by a supplementary question. Just as a reminder, you may be familiar with the terms of reference of the committee, but in a nutshell it is to examine the social and economic impacts of the Fair Work Commission’s decision to cut penalty rates. I am sure you have read the terms of reference; if not, we can provide those to you. I welcome you and ask you to start your presentation.

Ms KEARNEY — Thank you very much. My name is Ged Kearney. I am the president of the Australian Council of Trade Unions, and I thank you very much for inviting me to speak to your inquiry on behalf of our 1.8 million members today.

I would like to give a little overview of our view of the penalty rates decision itself. I would like to go to some legal advice about the implications for the wider workforce of that decision, beyond the ones mentioned in the decision itself, and then perhaps talk a little bit about community expectations with regard to penalty rates, if that is okay.

In the decision the Fair Work Commission determined that Sunday penalty rates will be in general cut by 25 percentage points in those awards that I am sure you are aware of. The cuts apply, except under hospitality, to both permanent and casual employees. Under the fast-food award the cuts apply to level 1 employees, who are by far the predominant class of employees in that industry. Full-time and part-time employees under the retail award and the pharmacy award will see their Sunday penalty rates cut by 50 percentage points. As well as Sunday penalty rates, the commission has determined to cut public holiday rates in those awards, as well as the clubs awards and restaurant award, by 25 percentage points.

These cuts will affect some of the lowest paid workers in the country, and it comes at a time when wage growth is at a record low and inequality in Australia is at a 75-year high. We estimate that there are approximately 700 000 award-covered employees in the retail and hospitality industries, and according to the data referenced in the decision, an average of 52 per cent of workers in the affected industries work weekends — and that data is available.

These workers face a direct cut in weekend and public holiday penalty rates if the decision is implemented. A further approximately 700 000 are covered by enterprise agreements, and many of these workers are also likely to see their penalty rates reduced when the enterprise agreements they are covered by are renegotiated. This is not a distant possibility as many EBAs covering some of the largest chains in the affected industries are already past their nominal expiry dates or due to expire and hence are up for renegotiation, including large agreements like Coles, Myer, Woolworths and Officeworks. Some employers are already moving to take advantage of the cuts before the decision is even implemented. The kikki.K enterprise agreement was in the media recently for its inclusion of a mirroring clause that locks in those cuts already, ensuring that the rates will drop automatically when the decision to cut penalty rates takes effect later.

The impact of the decision on hospitality and retail workers will be harsh. In the decision the commission acknowledged that the planned reduction in Sunday penalty rates will result in a significant loss of pay to retail and hospitality workers who work on Sundays and that it accepts that these workers are indeed low paid. The commission also found that hospitality, retail and food services have in fact, and I quote, ‘the largest proportion of low-paid workers in Australia’. These workers are more likely to be women, award reliant, part time and employed on a casual basis. Many hospitality employees earn just enough to cover their weekly living expenses.

26 April 2017 Penalty Rates and Fair Pay Select Committee 2 Saving money is difficult. Unexpected expenses such as school trips, illness, or repairs, can produce considerable financial stress. That too is a direct quote from the decision.

One witness — for example, Ms Gordon — gave evidence in the proceedings that she earned between $357.90 and $362.50, and the proposed cuts would reduce her income by between $25 and $40 a week, leaving her very ‘little margin for error in her spending’. The commission found that the reduction will have an adverse impact on the earnings of those hospitality industry employees who usually work on a Sunday, and it will have a negative effect on their living standards and on their capacity to meet their everyday needs.

Fast-food employees are more likely to reside in a lower income household and are more likely to experience financial difficulties. Again, that was recognised by the commission. Retail employees and their households face greater difficulties in raising emergency funds and their financial resources are limited. And, as a result of the decision, most of the hospitality and retail employees who work on Sundays will receive a wages cut. Some will have to work more hours to make up the lost pay, whilst others will be unable to and others will be offered less hours than they received previously.

The ACTU has calculated, for example, that full-time fast-food level 1 workers employed on the award working Sundays would lose $38.88 every Sunday, an effective reduction of around 16.6 per cent in their Sunday hourly rate of pay and equates to around $2022 per year. Full-time pharmacy assistants would lose $77.77 per Sunday, an effective reduction of 25 per cent of their Sunday rate of pay and around $4043 per year.

We have had some legal advice because we are concerned that the decision has the potential to undermine penalty rates in other industries as well. We sought advice from Maurice Blackburn as to what extent the decision could open the door to penalty rates being cut in other industries. The advice which we received confirmed that even though the commission indicated that the hospitality and retail industries are distinguishable from other industries and there is not necessarily a case for reduction in other industries, many of the commission’s findings are applicable to those awards. For example, the following findings are fact and law, and Maurice Blackburn said are all applicable to other awards:

(a) entry-level jobs for relatively unskilled or young people justifying a reduction in Sunday penalty rates

(b) consumer expectations of weekend and public holiday service justifying a reduction in penalty rates. I am listing these as things that can apply to other awards that was the decision for cutting the rates in this instance. The potential increase in employment opportunities justifies a reduction in penalty rates, this utility for employees not preventing the reduction in penalty rates. Even if women were disproportionately affected, the principles of equal or comparable value would not be enlivened, therefore not preventing a reduction in penalty rates, and employees earning just enough to cover weekly living expenses did not prevent a reduction in penalty rates. All these findings are potentially applicable to other awards.

The commission also stated that each review application will be assessed on its merits. However, this decision has relied on principles which are likely to be relied on in future decisions, hence it opens the door to reducing penalty rates and loadings in other awards in the future. The advice says that each review application will be assessed on its merits, signifying that they will hear other applications for reductions of penalty rates. It goes on to say that a significant factor in the commission reaching its decision to reduce penalty rates is the apparent rise in consumer expectations for services to be available on weekends and outside of normal hours, and that hence there does not appear to be any impediment to such reasoning being applied to other sectors. We have some lists of other sectors that our advice gave us.

Hence Maurice Blackburn concludes that the reasoning in the penalty rates decision may indeed open the door to changes to penalty rates in other industries. The commission has already flagged a review of Saturday penalty rates in the clubs and pharmacy awards, and Sunday penalty rates in the hair and beauty and restaurant awards. Whilst we respect the independence of the Fair Work Commission, the penalty rates decision highlights deficiencies in the legal framework within which the commission operates, and shows that the Fair Work Act needs to be amended in order to strengthen the safety net. As an immediate priority, legislative changes are needed to clarify that an award cannot be varied in such a way as to reduce an employee’s or future employee’s take-home pay. This should be amended posthaste to prevent the penalty rates decision being implemented. More broadly, reform is necessary to ensure that the safety net can never be reduced and only progressed.

26 April 2017 Penalty Rates and Fair Pay Select Committee 3 We believe the decision flies in the face of community expectations that take-home pay should be protected. Australians have firmly rejected the attempt to cut workers’ pay and they are not agreeing with or buying the arguments put forward by the current government — the federal government, that is — and business groups that this will create jobs or rates should be cut because the weekend no longer matters. National opinion polling since the decision consistently shows strong community support for the retention of penalty rates. It is also worth noting that 62 per cent of people that have been surveyed believe that the main result of the penalty rates cut will be lower wages for the workers affected and not the creation of jobs. Polling also shows similar numbers of Australians believe Sundays are different to Saturdays, and no matter what rhetoric we hear from the apologists about living in a 24/7 world, people know that weekends and Sundays still matter.

It seems to us that the federal government only respects the independent umpire when it suits them. The idea that nothing can be done and this is simply the independent umpire’s decision is, we believe, an avoidance technique from the Prime Minister. The Australian people believe he should take action. The Fair Work Commission made a decision based on the rules it was given by Parliament and Parliament can set new rules to protect workers’ pay. The Prime Minister can do something about the Fair Work decisions. We know that he had no problem stepping in, cutting wages for truck drivers and abolishing an independent tribunal. The Prime Minister also stepped in and intervened in the CFA firefighters dispute, purely for political reasons we believe.

Finally, this is a real pay cut for hundreds of thousands of Australians who can least afford it. Sunday workers rely on penalty rates to earn a living wage. As I said in the tables before, some people will lose thousands of dollars a year. It could force them to make terrible choices between putting food on the table or taking medicines. We have heard from affected workers that they will be forced to work longer hours and take up second or third jobs, or rely heavily on family or Centrelink support.

This decision will not create jobs. Cutting people’s pay does not create jobs; it simply hurts workers and enriches employers. It is a basic case of supply and demand. Employers make hiring decisions based on demand. It is demand for goods and services that increase supply and therefore increase businesses’ need to employ. The Fair Work Commission itself was unable to point to any specific outcome for job creation while handing down its decision. The best it could come up with was

… reducing penalty rates may have a modest positive effect on employment. There is a growing body of evidence right around the world to actually say that raising or cutting wages has minimal impact on the labour market.

The commission acknowledged that if the cuts are implemented, award-reliant workers will face a loss of pay, but it is not known to what extent employers will roster more work or hire more people.

I saw that you had a presentation from John Hart, the chief executive of the Restaurant and Catering Industry Association. It is quite interesting that he himself has said on the public record that for those people losing pay it does not matter because they are likely to get extra hours. We simply know that people will be asked to work longer for the same amount of money — again, reducing any impact on extra hours that might be created going to new people who are indeed looking for jobs.

The member for Gilmore, Ann Sudmalis, said this was a gift for young people. James Pearson from the Australian Chamber of Commerce and Industry said women will be thrilled at getting this pay cut. I am afraid the ACTU begs to differ.

The CHAIR — Thank you, Ms Kearney. I will give the Deputy Chair an opportunity to ask the first question.

Mr CLARK — Could you explain to the committee what the ACTU’s policy is in relation to EBAs and what they should or should not be allowed to do in terms of affecting penalty rates?

Ms KEARNEY — I know that this is often an argument put forward by the government, by the small business association and by other people in this debate. They argue that the ACTU is being hypocritical because penalty rates are often rolled up in enterprise bargaining.

It is a completely separate and different situation. When you bargain, you get something in return. If something is highly valuable to you, like a Sunday penalty rate, and you were prepared to give that up, you would expect

26 April 2017 Penalty Rates and Fair Pay Select Committee 4 something highly valuable in return, for example, extra leave or paid parental leave. You may even take higher penalty rates like we have in some awards for working evening shifts during the week. Those are things that you get in return. That is bargaining.

If there are employees who feel disaffected by that bargaining, they have recourse and can go to the Fair Work Commission and have those decisions overturned. We have seen that happen. With the Fair Work decision on penalty rates, there is nothing in return — nothing. It is a pay cut. It is not being traded for something else. There is no recourse for the worker to go back to the commission and say ‘We don’t like this’ and have it overturned. This is a completely different situation to bargaining and cannot be compared.

Mr CLARK — So is it fair to conclude from that that the ACTU’s main concern with the Fair Work decision is the overall impact on take-home pay rather than the relativities between penalty rates and ordinary pay?

Ms KEARNEY — We believe that penalty rates are a necessary part. If we feel that penalty rates can indeed be protected, we think that that should happen, except in the case where workers are prepared to trade those penalty rates. We need to make allowance for those workers who would like to do that. Take-home pay, we think, is a much better way to actually determine advantage or disadvantage.

The CHAIR — Just following on from that final comment about take-home pay, it has been raised in these hearings earlier — by John Hart, in fact — the argument that more hours being worked for the same or perhaps a little bit more money puts somebody in a situation that is better off overall. We are seeing this notion, as you have identified, that you will get extra hours.

I was just wondering whether you wanted to tease out any further or make comment on that claim in greater detail, because part of what has been discussed previously goes to if you are having to work longer hours for the same amount of money or marginally more, are you in fact better off overall, particularly given that the cohort of people we are talking about are predominantly women. We know that this cohort of women that are affected by this decision are also likely to be caregivers, whether that be to children or elderly parents, or fulfilling roles that might mean that taking on extra hours poses a particular challenge. I was hoping you could speak to the notion of whether someone is in fact better off overall if they have to work longer hours for the same amount of money.

Ms KEARNEY — I think if you asked anybody that question — any of you on the committee — the answer would be no. To say that you have to work longer hours for the same amount of pay, is that your question? Whether that is fair?

The CHAIR — Yes.

Ms KEARNEY — How you could deem that to be better off overall I do not know. We are talking about predominantly women who work full time in the retail sector, for example, or full time in hospitality and take home $38 000 a year with their penalty rates. We are not talking about highly paid people. We are talking about people at the very lowest ends of the income scale who work full time. They work shift work. They work Sundays. They give up time with their family and with their friends, and they do that for that little bit of extra money they can get. To ask them to work extra hours for the same amount of pay, I cannot see how there is any ‘better off, overall’. Is that what Mr Hart was suggesting?

The CHAIR — He was suggesting that the take-home pay may be increased as a result of working extra hours.

Ms KEARNEY — I think that nobody would say that they want to work extra hours for the same base rate, even if there was a small increase. That is crazy.

The CHAIR — As a supplementary — and you actually touched on it when you referred to the average pay — $38 000, you said, as a retail worker. Is that right? I am just clarifying this with you: that would put it well below the male average weekly or annual earnings in Australia.

Ms KEARNEY — One of the interesting things that is happening with award-reliant workers in Australia at the moment is that the minimum wage and award-reliant rates are slipping as a percentage of the average wage. The OECD recommends that the minimum wage should sit at around 60 per cent of the average wage. Ours is

26 April 2017 Penalty Rates and Fair Pay Select Committee 5 well below 50 per cent, and that gap is getting wider and wider. This is causing greater inequality. Also, the interesting thing about that is that the award-reliant workers I think are about 20 per cent of the workforce. So the vast majority of the workforce are the ones who are earning a much higher income; therefore the economy reflects their income. Prices reflect the majority of the workforce’s income — they are quite high. So if you are on a lower income, it is very, very difficult to get by. Does that make sense what I am explaining? So prices reflect the majority of the market. The majority of the market is on a much higher income than award-reliant workers.

The CHAIR — So just to clarify, that $38 000 figure you used, currently that is before the cuts?

Ms KEARNEY — Yes, and that is including penalty rates.

Ms RYALL — I will just take up what was mentioned before. A question was put to Mr Hart about the Fair Work ruling staying as it is — that was the response he had. But when asked later, in relation to the Fair Work ruling, he mentioned an appeal that they have put in to Fair Work — and I note that it was in April, so this month — in relation to the ruling that take-home pay be maintained. So my understanding of what you have just said is you would support that?

Ms KEARNEY — Yes. For the same amount of hours.

Ms RYALL — Correct. And that is my understanding of what they have suggested.

Ms KEARNEY — Not for more hours.

Ms RYALL — No, that is right — and they were two separate ones. Would you be prepared to share with the committee your Maurice Blackburn legal advice?

Ms KEARNEY — Yes, I would. I am really sorry I did not bring it with me, but I am happy to table that. Can I send a soft copy of that to the committee? Is that okay?

The CHAIR — Sure. It will be circulated to the committee and we will provide you with the details of the secretariat to circulate it.

Ms KEARNEY — Sorry, I meant to bring a copy with me.

Ms RYALL — Thank you; I appreciate it.

Ms BLANDTHORN — If I could just pick you up in relation to your comments earlier in terms of the impact of this decision on enterprise bargaining, and you referred to the kikki.K agreement, which I think received some press last week or the week prior. It seems, and I would be interested in your view, that there were some big employers who perhaps are operating with enterprise bargaining agreements, who were seen to be waiting for the outcome of this decision to work out whether the employers would be better off, as opposed to the workers being better off. They are waiting to see whether they will continue bargaining with employees or whether instead they might actually choose to revert to the award because they can get away with paying their workers less under the award than what the workers had actually bargained for in the enterprise agreements that perhaps already exist in those workplaces. Do you have a comment about that?

Ms KEARNEY — I believe that a number of employers have delayed bargaining to see the outcome of the decision and that in the interim the SDA, for example, have had to resort to memoranda of understanding to try to get interim pay rises for their employees because there has been some delay in the bargaining process. But we do know in other industries — and I have only anecdotal evidence, so I cannot give you any hard evidence of this — that again there have been delays in bargaining because employers have been waiting to see the outcome of this decision.

Ms BLANDTHORN — The other — it is not quite a supplementary — secondary question which I have been asking other witnesses here today is: I have a concern that the impact of this decision is basically to say that we value the time of the people in these industries as opposed to the time of people who are perhaps nurses, paramedics, police et cetera, because no-one is questioning whether those people are entitled to penalty rates for unsociable hours but people are questioning and have said that obviously these cohorts of workers are not

26 April 2017 Penalty Rates and Fair Pay Select Committee 6 entitled to penalty rates for working unsociable hours. What do you think that says about us as a society and where we are going in terms of recognising the value of one person over another?

Ms KEARNEY — That reasoning has been given to us from the very beginning. The Australian chamber of commerce in particular were very fond of that argument: ‘Oh, we’re not cutting penalty rates of people who matter like paramedics and nurses. We’re only cutting the penalty rates of hospitality workers and retail workers’.

It is absolutely extraordinary reasoning to say that. But I am very pleased to say that all of our research shows that the majority of Australians do not believe that. They believe that no matter who you are and what industry you work in, you should be compensated fairly for working unsociable hours, All of the research shows that time and time again, even with the majority of conservative voters, the majority of Labor voters — it does not matter what political side you sit on the fence — you value the weekend and you think people should be paid appropriately. It might be a view of the employers is what I am saying, but luckily it is not the view of the broader community.

Mr HIBBINS — I am just going back to where you made some comments in regard to EBAs, and you mentioned that take-home pay should be one of the overriding factors in terms of how we judge the cuts to penalty rates. But there have been a number of EBAs negotiated with fast-food outlets — KFC, Hungry Jack’s, McDonald’s — by the SDA that have cut take-home pay and abolished penalty rates, and you have got employees who are now worse off than they would be under the award. So I am following up on the question that was asked about your stance on EBAs. I am wondering what the ACTU’s position is on the EBAs that actually had workers who were working for less than the award.

Ms KEARNEY — I think we should be very careful in saying that those EBAs do reduce take-home pay. You may need to speak to the SDA about that. My understanding is that is not the case. There were things that were bargained that meet the better off overall test. One of the reasons that there is a belief, particularly the KFC one is my understanding, is because the award rate that is on the commission’s website is not actually reflective of the memoranda of understanding that have been undertaken because they are one of the companies that is not bargaining. That is quite an old EBA. So I think it would be worth the committee actually looking at that a little more closely. As I said before, if any employees feel that they have been hard done by with regard to an EBA, they can appeal that and they can go to the commission. You cannot do that in this case.

Mr HIBBINS — By way of supplementary, you may be aware of a private members bill that has been introduced by Adam Bandt called the Fair Work Amendment (Pay Protection) Bill 2016, which closes that loophole in the Fair Work Act so EBAs cannot fall below the full rate of pay, which includes penalty rates. At the moment whilst they cannot fall below normal working hours, those penalty rates can be reduced or abolished. Do you support that legislation?

Ms KEARNEY — I am not familiar exactly. That is not the one that has been put with Bill Shorten and the ALP? It is a separate one?

Mr HIBBINS — No, this is a separate bill that was put in November of last year.

Ms KEARNEY — I would have to take that question on notice. I am not entirely familiar with the content of it, so I would have to have a look at that.

Mr HIBBINS — I would be happy to furnish you with a copy of that bill. If you could take that on notice, that would be great.

Ms KEARNEY — That would be excellent. Absolutely, no problem. Thank you.

Mr J. BULL — Thank you for your presentation and for being here this afternoon. My question is a follow-on from the member for Pascoe Vale’s. I guess this notion around the fact that cuts do not affect people who matter is a somewhat concerning and disturbing notion to me. What sort of message do you think that sends individuals in these industries? And how do you think that affects their mental health and the health of their families?

Ms KEARNEY — It can only have a devastating effect, I think. I mean, the concern that we have from our members about losing pay full stop is enough of a concern to affect their mental health and their wellbeing,

26 April 2017 Penalty Rates and Fair Pay Select Committee 7 from very young people who rely on penalty rates — for some reason there are views that they only work weekends to collect pocket money for cigarettes and alcohol, which is again offensive; many young people rely on it to survive — right through to women with families and men who just need penalty rates to survive.

It is a very interesting question. The effect on their mental health I know is distressing. I know people are very concerned about it. We were lucky enough to take a delegation of about 20 workers right across all affected industries to Canberra a couple of weeks ago, where they talked a lot about this to the federal MPs, about how it will affect them. One woman said she already works three jobs. She will probably have to try to either get extra hours or pick up another job just to support the family. She is a single mum. She took home, across three jobs, $58 000 a year. So for her to have to work another job or more hours will just mean virtually no time at home. You worry who’s going to mind the kids, who’s going to manage the household. So it is a very interesting question. My personal experience with the people who are going to be affected is that, yes, they are very distressed by it.

Mr J. BULL — By way of your experience what can you tell us about the regional and rural areas and the effects that the cut will have, in your view, on those people?

Ms KEARNEY — Well, as you know, in many regional and rural areas, jobs are very hard to come by anyway, and to have your pay cut simply means that you probably will not be able to get extra jobs. We do not believe that there will be any jobs created by this. A lot of people that are affected are people who work in hotels, large hotel chains, who have no trouble employing people and have a full employment complement. In fact one of the people we took to Canberra was one of these employees who worked for a major hotel chain in Canberra — I should not say Canberra is a regional town, but in Canberra — and they are at full complement. I do not believe that hotel will do anything else but pocket extra profit from these cuts. So for a regional town where you cannot get extra work I think it will have a devastating impact. In fact McKell Institute — I do not know if the committee has been given the McKell —

Mr J. BULL — It was mentioned to us today.

Ms KEARNEY — has done some very interesting research on the impact on regional and rural communities of the penalty rates cuts in terms of the amount of money that will be lost to the community by the cuts. Ultimately it will mean small businesses will struggle to survive. You cut people’s take-home pay, they cannot spend the money in the local shops and local businesses will suffer, there is no doubt about that. So the impact economically and emotionally I think is going to be severe for regional and rural areas.

Ms SULEYMAN — Thank you for your presentation. My question is, what can the Victorian government and federal government do to protect workers?

Ms KEARNEY — Well, from our perspective we work mostly at a federal level and we would very much like to see legislation passed as soon as possible to basically stop the cuts, and we believe there is a bill — or bills — before the Parliament at the moment that could do just that. So we would like that legislation supported. To be perfectly honest, can legislation be passed at a state level? I do not know about this, but that is something that I would have to take advice on. I do not know.

Ms SULEYMAN — This is in relation to a previous presentation by Mr Hart, who explained — and I think you have spoken about this — that there would be a ‘creation of jobs, additional hours, this is fantastic for industry and fantastic for employees — it is just fantastic for everybody’. I am very confused about how it is going to benefit them when, as you have rightly made the distinction, people will be working more hours to make up what they were usually getting paid, and these are people who are already receiving the lowest in tough circumstances — young kids, single parents, women. What is your opinion on this? You have got industries saying one thing, and then people and workers who are going to be disadvantaged unfairly. What is your opinion?

Ms KEARNEY — Well, the first thing is that the current rates of pay — if you look at employment in the sectors — employment has been rising quite handsomely in the sectors; it does not seem to have been a deterrent to employment. The sectors generally are doing quite well with regard to profit growth. I think it was about 11 per cent, the last data that we have — I am not sure, I could check on that — in the retail sector, and we do not believe that either of these sectors is suffering considerably with the current rates of pay. If you look at the indicators generally, they look quite healthy.

26 April 2017 Penalty Rates and Fair Pay Select Committee 8 Secondly, there is very little evidence anywhere to show that cutting people’s pay increases employment. In fact I really would struggle to quote any evidence at all to show that it would. In fact in Australia — I am trying to think when penalty rates were cut in South Australia — during the award modernisation process in the retail sector there was no impact on employment. When penalty rates went up in New South Wales — I think it was in the hospitality award during the award modernisation process — there was no impact on employment. In other countries overseas, in certain states in the United States where there have been huge increases in the minimum wage, like in the state of New York I think, there has been no impact on employment; in fact it has acted as a stimulus for the economy. The OECD, the IMF and the World Bank — there is lots of research to show that there is very little impact. So all of the research and all of the data, in our opinion, points to the exact opposite of what is being argued by the employers, and all it will do is make life incredibly hard for those low-paid people.

The CHAIR — I will offer the Deputy Chair another opportunity for a question, if he has one.

Mr CLARK — One of our terms of reference relates to safeguards to protect vulnerable workers and ensure fair pay. One of the things that was touched on earlier were some of the controversies about some of the EBA agreements that have been entered into in these sectors and whether they have prejudiced vulnerable workers. Of course there was similar evidence given to the trade unions royal commission about EBAs such as the Cleanevent EBA. What policies does the ACTU have about ensuring that unions are held to account and that union officials are held to account to make sure that they do not do EBA deals that sell out their workers?

Ms KEARNEY — Well, once again, as I said before, we are very aware that there are checks and balances in place with the commission. In instances where we find that workers have been hard done by, we would support any reference to the commission to have that rectified, as has happened with Coles and any other agreement.

Mr CLARK — Yes, we have seen some of that done by the commission where there have been applications made. There have also been EBAs that have been approved by the commission and which have then under scrutiny been shown to not be doing the right thing by the workers, so do you believe that the current regime is adequate? Do you believe that there also needs to be greater accountability for union officials as well as the ability to resort to the Fair Work Commission in order to protect vulnerable workers?

Ms KEARNEY — In my answer to that I would say that our major concern right now is that the Fair Work Commission under the current legislation has been able to oversee a pay cut for vulnerable workers, for low-paid workers. I believe we are talking about penalty rates here at this committee, and with regard to penalty rates, we think the laws need to change to say that the Fair Work Commission cannot preside over a pay cut for workers and improvements.

Ms BLANDTHORN — Can I just go back to your comments about other jurisdictions that you made just in the answer previous to the last question? There is not a lot of good international comparisons in terms of this conversation around penalty rates based on the different systems of work laws in other countries, but one example that perhaps is comparable is New Zealand and the situation that arose there, particularly in terms of the social impact of the decision to reduce penalty rates in New Zealand. I wondered, with your international experience, whether you had any comments and whether you could enlighten the committee a little bit about the situation in New Zealand.

Ms KEARNEY — Well, the decision to cut penalty rates in New Zealand came with the abolition completely of the award system there. It was not just penalty rates cuts, but they got rid of all of the awards completely, it was my understanding, and it sent the economy into complete freefall. It was a disaster: it was a disaster for workers, and it was not at all good for the New Zealand economy to the point that, I understand, they actually had to legislate some pay rises for some workers in New Zealand at that time just to prop up not only the living standards of their workers but some of their local businesses and the economy there. So I always am highly surprised when people use the New Zealand example as a good example, because it is not. It is a really bad example of what happens when you cut dramatically people’s wages and conditions very quickly. Over time, I believe, the economy is picking up again there, but they still have very low minimum wages, and I think they are still struggling. So I think it is a poor example for this.

Ms BLANDTHORN — There have been some New Zealanders that have used their own examples in Australia to suggest to both the Fair Work Commission and to the people with the power to make decisions

26 April 2017 Penalty Rates and Fair Pay Select Committee 9 around this issue as to why we should not go down the New Zealand path. What recommendations would you make about what we can do in terms of addressing the social impact? If this decision proceeds, as we anticipate it will, do you have recommendations or what you would suggest are the implications of the decision in terms of the societal impact rather than just the take-home pay issues?

Ms KEARNEY — Well, whenever anybody loses pay, there are societal impacts, I think, and you have to look at that. There are implications for the individuals, for the communities that they live in, for local businesses, for small businesses, and I think if you look at the New Zealand example, you really do not want to go down that path. What we need to do is boost our award system. We need to maintain a very strong minimum wage in this country, we need to make sure that the minimum wage and the award wages do not differentiate too largely from the average wage to make sure that inequality does not continue to grow in this country, and we need to change the laws. I mean, the ACTU is very clear that the laws that have allowed the commission to do this need to be changed dramatically so that it cannot do it again.

The CHAIR — Thank you.

Ms KEARNEY — And reverse the decision if indeed it does come in. We will be looking to do that.

The CHAIR — With the minute that we have left I might just ask the final question, which touches on something you raised earlier, and it is quite a simple question. Does this decision risk growing a large population of working poor here in Australia?

Ms KEARNEY — We believe we are already seeing a large proportion of working poor in this country. We definitely have an underclass of migrant workers. We have an underclass of workers in the black economy who are being paid cash under the table outside of the award system, and we now risk having workers legally within our system becoming working poor simply by the fact that their wages are kept low by decisions like this and the minimum wage is not keeping up with the average wage.

The CHAIR — So this can only make it worse.

Ms KEARNEY — It can only make it worse. The ACTU is concerned about all of those issues, definitely.

The CHAIR — Thank you very much, Ms Kearney. Thank you for your time and your contribution to the committee here today.

Ms KEARNEY — My pleasure.

Committee adjourned.

26 April 2017 Penalty Rates and Fair Pay Select Committee 10