Penalty rate changes to cost $667m: report

Dimetapp - Cafe screen - June 2014Claims from a left leaning think tank that Sunday penalty rate changes will cost regional workers more than $660 million a year is fundamentally flawed, Australia’s peak business body says.

A report by the McKell Institute says rural and regional workers in the hospitality, retail and pharmacy sectors will lose hundreds of millions of dollar in take home pay annually under a Fair Work Commission ruling to reduce Sunday penalty rates.

The institute also says the decision could cost the broader regional economy $290 million a year – based on assumptions that most larger businesses are chains and not locally owned, and that they will not necessarily reinvest money saved back into local communities.

But the Australian Chamber of Commerce and Industry says the research and assumptions behind it have “fundamental flaws”.

“Research out today by the McKell Institute is part of a broader political campaign to undermine the Fair Work Commission’s decision on penalty rates. The research has fundamental flaws that damage its credibility and relevance,” the peak body said.

It says the McKell analysis “wrongly assumes that no shops, cafes or pubs will open for additional hours following a moderate reduction in Sunday penalty rates” and deliver more jobs.

The FWC in February ruled to reduce Sunday penalty rates in the hospitality sector from 175 per cent to 150 per cent, and penalty rates in the fast-food industry from 150 per cent to 125 per cent.

Also under the changes – due to come into effect on July 1 – Sunday penalty rates for retail workers, and for pharmacy employees working between 7am and 9pm, were set to drop from 200 per cent to 150 per cent.

Casual workers on Sunday shifts would be paid 25 per cent more than full-time and part-time employees.

The McKell Institute, which says it’s often ideologically but not formally aligned with the Labor Party, used 2011 census data to estimate retail and hospitality worker numbers in each electorate and applied that estimate to the number of employees actually working on weekends.

The institute then factored in the reduced Sunday penalty rates, assumed a 19 per cent marginal tax rate and used the total number of workers in each industry for the disposable income loss estimates.

It used a similar methodology, as well as 2016 workforce data, to estimate the impacts of penalty rate cuts for the pharmacy sector.

McKell’s report also claimed that Leichhardt in Far North Queensland would be hit hardest by the penalty rate reductions, with workers across four sectors losing up to $21 million a year in disposable income.

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