While bemoaning the low penalty rates retail and hospitality staff received for the Easter holiday break, federal Opposition Leader Bill Shorten reminded Australia that he has promised legislative changes to increase penalty rates and to convert casual staffers to permanent employment. The promises are among a raft of changes in industrial relations policy that will confront retailers if the opposition wins government on May 18. To its credit, Labor has consistently detailed its policies, for th
for the most part without pushback from the businesses that will face significantly higher wage bills or forgo sales by shutting their doors.
Rosters juggled, doors shut
Labor’s policy on penalty rates is not simply to restore the rates that were cut by the Fair Work Commission after a review established by a Labor government. It is keen to lift all wages, which have stubbornly remained flat over an extended period, impacting on consumer spending.
The problem with the policy is that many businesses lack the capacity to pay higher wages, especially for weekends and public holidays. The Easter holiday period this year saw many stores and restaurants close their doors, despite families being out and about. Shops and restaurants in shopping centres and in retail strips simply could not afford to open because of the existing penalty rates – never mind any increase in rates.
Most retailers have already drastically cut employment levels and revised rosters, while others have illegally underpaid staff wages and award entitlements.
The underpayment of wages is inexcusable, but the extent of the problem across the retail and hospitality industries points to an issue of survival as much, if not more, than greed by businesses.
International comparisons of floorspace to population suggest that Australia is under-shopped but, in reality, the concentrated population centres in this country arguably indicate that Australia is over-shopped.
Certainly, there has been a substantial contraction in store networks for many retail chains, including some of the largest such as Big W, Myer and franchise chains. There has also been the exit of a number of significant specialty retail chains, most after financial collapse.
Retail sales remain subdued, and there is not a lot of leeway for retailers with wage costs, rents, cost of goods, cost of finance and regulatory charges.
David Jones has recently asked local suppliers to buy back unsold stock, with the underlying threat that their brands will be discontinued in favour of private-label ranges if they don’t play ball.
The department store’s move has twice before been attempted by Target and, on a more limited scale, by Myer. While such pressure on suppliers is a high-risk strategy, it is not entirely surprising given sluggish sales, falling margins and increasing costs.
Substantial wage increases under a new government industrial relations regime would include wage-theft legislation, which would make underpayment of employees a criminal offence and have a significant impact on the retail and hospitality industries.
Pressure on prices, rent
For some chains and independent businesses, it would mean further store closures, as marginal locations become unprofitable or even a total exit from the industry.
For other chains and businesses, it would mean reduced trading hours, a problematic action for shopping malls that set mandatory opening hours.
Consumers are likely to face higher prices, with hospitality outlets already adding surcharges to weekend and public holiday bills to cover the higher wages costs.
Franchise retail chains, which have been responsible for much, though not all, of the underpayment of staff and exploitation of foreign students with restricted working visas, will face increased challenges with their business models.
Shopping centre landlords also face further challenges from wage increases for retailers and food outlets if they are to retain tenants, with increased pressure on rents and occupancy charges.
The question of the viability of businesses and their capacity to pay penalty rates was the reason for the Fair Work Commission’s decision to reduce rates.
To ignore the commission’s independent review in a popular election pitch could have some very serious consequences, including a loss of thousands of jobs for women and young people.