Right: a Sydney cafe in the 1940s: female wages were less than half those of men and women were the employees favoured by hospitality industry employers.
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Arguments in favour of abolishing penalty rates
1. Penalty rates damage some businesses
The high cost of meeting penalty rates has been said to damage some businesses.
There are those who suggest that opening on public holidays is not profitable for them, yet they are compelled to remain open and bear the loss.
Best Western Hobart, general manager, Janine Livingston, has stated, 'Penalty rates for 60 staff on Good Friday, Easter Sunday and Monday mean it is not profitable.
However, we have to open and provide a service...It would hinder us all year if we closed for those periods because people would see us as unreliable.'
Harvey Norman's executive chairman, Gerry Harvey, has stated, 'It's very, very difficult to make money when you're paying unskilled people $42 an hour [on a Sunday]...
If we put ourselves in a position in Australia where our wages and costs of doing business is higher than anywhere in the world we become uncompetitive and that leads to unemployment and we've just buggered ourselves.
Some businesses have claimed that the need to combat foreign competitors with lower wage structures means that they cannot afford to pay penalty rates.
The brickworks sector, for example, has claimed that it is struggling in the face of cheaper Asian-based competition. It has further claimed that paying penalties on weekends and other public holidays is eating into the companies' profits.
Australia's biggest brickmaker, Brickworks, has made a submission to the Productivity Commission. It wants its workers to start at 4am, instead of the current 6am, without penalties and abolish weekend penalty rates. It claims to have the support of its 1500-strong workforce for the changes.
Another sector which has claimed to be adversely affected by penalty rates is the tourism industry. Under the banner of the National Tourism Alliance (NTA), thirteen tourism bodies have urged the Productivity Commission to recommend changing penalty rates.
Juliana Payne, the chief executive of NTA has claimed that tourism is a 'highly labour-intensive, 24/7 service industry' suffering under an 'unworkable' penalty rates system.
2. Penalty rates cause some businesses to deny customers service
Many businesses have claimed that penalty rates make it too expensive to open over the weekend or on public holidays and so they have to remain closed or to operate using a reduced number of staff.
Dozens of restaurants and small businesses in Sydney have indicated that they will close for the whole Easter long weekend because it is too expensive to pay junior staff $350 a day (a rate which some have claimed they would be forced to pay).
Kate Carnell, the chief executive of the Australian Chamber of Commerce has stated, 'Customers lose because the services they want are harder to access, staff lose because they don't get the hours many are seeking at work and business proprietors lose because they get little benefit from the holiday traffic.'
Ms Carnell has further stated, 'We are encouraging small retailers and hospitality businesses to put up posters in their windows explaining to their customers why they are closed or why they are operating with reduced staff.'
The posters read, 'We're sorry we're closed today. We'd like to be able to serve you. We'd like to give local people jobs. But the špenalty rates are too high.'
In a media release issued on May 2, 2012, the New South Wales Business Chamber stated, 'We all know of examples where our favourite cafs and restaurants are closed on Sundays. That's because the owner simply can't afford to pay staff penalty rates. Many actually lose money if they open for customers.
A major cruise liner came into Sydney Harbour earlier this year. Passengers disembarked to have breakfast on a Sunday morning, and within half an hour most had returned to the ship because there were such limited options for dining in Sydney on a Sunday morning.
It's actually embarrassing that a global city like Sydney makes this impression on international tourists, let alone its own residents.'
Tasmanian Hotels Association general manager, Steve Old, has claimed that some hospitality businesses would be forced to stay shut because the cost of doing business on public holidays was simply too high.
Mr Old has stated, 'While the impact of public holiday penalty rates is felt across the sector, operators in regional areas will be faced with the likely possibility that opening their doors will cost them money.
With public holiday penalty rates set as much as 275 per cent of an employee's base rate, the cost of providing drinks, meals and hospitality services is simply more than many businesses can realistically expect to take.'
3. Penalty rates reduce employment opportunities
It has been claimed that penalty rates reduce profit and thus reduce employers' capacity to employ additional labour. In particular, it has been claimed that penalty rates on Sundays and public holidays may simply make casual staff too expensive to employ.
One group of employers which has indicated it would definitely employ more staff are newsagents.
On April 23, 2014, the Australian Newsagents Federation (ANF) issued a media release stating that 'unlike other businesses who close, or introduce surcharges to cover penalty rate costs on Sundays and public holidays, the majority of Australia's 4000+ newsagents would have been open every day over Easter and will be open again this Anzac Day Friday.
This is because newsagents have contractual obligations to publishers to deliver their products and limited scope to change set prices despite the additional cost.'
The consequence of this is that some 96 percent of newsagents themselves work hours they would prefer to give to employees if they could afford to do so.
In an article written in 2014, Phil Lewis, Professor of Economics at the University of Canberra, has written in relation to the caf, restaurant and catering services industry, '[P]enalty rates for 10pm-midnight work are projected to have reduced demand for labour by between 5 and 30 per cent below what would be the case with no penalty rates. Penalty rates for midnight-7am work have reduced demand for labour by between 7.5 and 45 per cent below what would be the case with no penalty rates. Penalty rates for work on Saturdays are projected to have reduced demand for labour by between 12.5 and 75 per cent below what would be the case with no penalty rates. Penalty rates for work on Sunday are projected to have reduced demand for labour by between (under the low-estimate scenario) 75 per cent and 100 per cent (under the high-estimate scenario). Penalty rates for public holidays are projected to have almost eliminated demand for hired labour.'
Professor Lewis has concluded from the above that if penalty rates were removed, 'There would unambiguously be more employment in the industry as turnover increased. There would be greater choice of shifts available. There would be more employment opportunities for the unemployed, with the potential for providing a stepping-stone into further employment.
Some employees, although their wage rate may fall, may even receive higher total earnings without penalty rates since the potential to work a greater number of hours will increase.'
4. Penalty rates cause increased prices for consumers
It has been claimed that penalty rates cause an increase in prices charged consumers as employers attempt to defray some of their increased labour costs.
Port Macquarie restaurant owner Lou Perri has explained that his customers were being disadvantaged, as he was forced to raise prices on public holidays by 15 per cent to cover employee wages after penalty rates.
Mr Perri stated, 'The consumer is the one missing out because if it wasn't for penalty rates, we may be even able to cut prices because wage costs wouldn't be killing us.'
In an article written in 2014, Phil Lewis, Professor of Economics at the University of Canberra, has written in relation to the caf, restaurant and catering services industry, 'The biggest beneficiaries from removing penalty rates would be consumers. They would pay lower prices, eat out more and at times which better suit their lifestyle.'
The same point was made by John Freebairn, Professor, Department of Economics at University of Melbourne, in an opinion piece published in The Conversation on March 19, 2015.
Professor Freebairn argues that one of the consequences of removing penalty rates would be a 'flow to consumers... of lower prices and greater availability and choice for products which are intensive users of low skill and penalty rate labour inputs. These industries are highly competitive, and most of any cost reduction, including lower labour costs, is passed forward to buyers as lower product prices. These benefits of lower prices and greater choice are spread across most citizens.'
5. Penalty rates are no longer relevant
Opponents of penalty rates argue that workers no longer need to be compensated for working non-standard hours. They claim that with changing work patterns, the concept of standard hours is becoming an anachronism.
In an opinion piece published in The Conversation on February 19, 2014, Phil Lewis, Professor of Economics at the University of Canberra, states, '[P]enalty rates have their origins in the early 1900s in a labour market quite different to that of much of the Australian labour market today.'
Professor Lewis then goes on to describe the employment conditions which used to justify the awarding of penalty rates. 'The Australian economy used to be characterised by mostly males working full-time in industrial jobs. There was little part-time or casual work. Working married women and jobs with flexible hours were rare. Most retail outlets shut at midday on Saturday and reopened on Monday. The weekends were for many the only time available for socialising, recreation, participating in sport and worship.'
Professor Lewis argues that these conditions no longer apply and that many Australians now actually prefer to work outside supposedly conventional hours, while the uses to which weekend time is put by a large minority of Australians has changed dramatically.
Professor Lewis argues, 'While the majority may work standard hours and the weekends are the traditional periods for "socialising, recreation, participating in sport and worship", this is not true for a large minority of workers.
The ABS Time Use Survey indicates that even under this extremely broad category of sport and outdoor activity, the time spent, even on weekends, is not large and pales into comparison with other activities. For most people, working on weekends would not significantly impose on their time spent on sport and outdoor activities.'
In another article published in 2014, Professor Lewis summarised his view of the situation in the following manner, 'The Australian economy today is dominated by the service sector - part-time work, casual work, working women and flexibility are the norm for many. Also, the social mores which defined Australian society have to a large degree changed radically over time. Among the most relevant here are the growth in participation in education and the consequent supply of part-time and casual labour, participation in the workforce of women with children, and the use of leisure time for other activities, including church attendance and participation in sporting activities. Both of the latter account for a very small percentage of people's leisure time on weekends.'