The politics of wages – penalty rates & the cost of living

This week (which has now spread over about a month), in my very limited spare time these days, I have decided to raise the issue of penalty rates paid in Australia; though as usual I will comment on other things along the way.

Recently a Senator for South Australia, Nick Xenophon, presented a private members bill to the senate that would make amendments to the fair work act. If it were passed, it would strip penalty rates for some employees.

I was concerned enough about this that I decided to write to each senator individually (all 76 of them, minus one – I missed accidentally) in order to raise my concern. In my letter to the senate, I raised quite a few issues that relate to working in Australia; the high cost of living, the low minimum wage (in relation to the high cost of living), and the high cost of housing in Australia (which I will comment on at a later date, as it is one of my annoyances).

While most Senators were supportive of penalty rates, there were some who made quite concerning comments. One in particular, which came from a Liberal Senator for Western Australia, I will raise today.

In Xenophon’s bill, he proposes that penalty rates be scrapped for retail and hospitality – restaurant, catering, or retail businesses, that have less than 20 employees will be covered by his private members bill. Under Xenophon’s bill, if the employee works less than 38 hours per week, or they work less than 10 hours in a 24 hour period, they would not be entitled to penalty rates.

This in itself opens up a whole can of worms:

  1. It is possible that an employer could employ a number of staff that don’t work more than 38 hours per week, and they would not have to pay penalty rates.
  2. It is also feasible that an employer could employ someone for 10 hours several times per week and not pay them overtime.
  3. Also an entire workforce of one employer could feasibly be made up of casual staff working less than 38 hours per week, or less than 10 hours per day, and this employer would not have to pay overtime to any one staff member.

What is more concerning, is the way in which it is determined whether an employer has more than 20 full-time employees. It is a very broad definition, and is subject to interpretation. It could easily be abused, and likely would be abused if this bill were to be passed.

Essentially if an employer is deemed to have less than 20 full time employees, or full time equivalent (whatever that is), the employer is exempt from paying penalty rates. If the employer has 18 full time employees, and many part time employees, those part time employees are not counted. Therefore the employer effectively has only 18 full time employees and is exempt from paying penalty rates.

I am quite certain that if an employer is given this opportunity, they will take it and employ many casual staff at less than 38 hours per week, and less than 10 hours per day, and not have to pay penalty rates. We could potentially then end up with huge numbers of employees working less than 38 hours per week, up to 10 hours per day, and never be paid penalty rates.

I might add, that under the Work Choices legislation that was introduced by John Howard’s government, my understanding was that they wrote into the legislation that an employee was required to undertake a “reasonable” amount of overtime as determined by the employer. I note however that this was modified by Labor and differs slightly. The current Fair Work legislation states:

“An employee can refuse to work overtime if the request is not reasonable, for example where there are risks to their health and safety, or because of personal circumstances including family responsibilities.”

I would imagine that this could be abused by an employer if they found reason to do so. It would have to be tested in court I guess. But anyway that is a little off track.

The main issues that I raised with the Senators in response to Xenophon’s bill are as follows:

  1. The low minimum wage, in relation to the high cost of living.
  2. The high cost of living
  3. The high cost of housing in Sydney as an example (and the associated mortgages)
  4. The cut to penalty rates would filter down to all industries (as have all other changes to conditions – historically speaking)
  5. Other options for government to address the needs of businesses

Australia’s minimum wage

The minimum wage in Australia is currently set at $15.96 per hour (as at Nov 2012). Many many employees in Australia are currently enduring this low wage, regardless of their tasks. As work is scarce, employees are forced to accept whatever jobs are available, even if they don’t pay an acceptable wage.

I might also point out that under changes initiated by the Howard government, if you are currently receiving Newstart allowance (a welfare subsidy) you are required to accept whatever job that comes up, regardless of whether it pays enough for you to cover your expenses or not. If you don’t accept this poorly paid job, you have your allowance stopped for up to eight weeks.

Faced with these outrageous situations, workers in Australia have no choice but to accept these pitiful wages, regardless of whether you are highly qualified or not.

Whether this wage is considered high or low, depends entirely on the cost of living; this is raised below.

The high cost of living in Australian cities

In 2004, Sydney was placed as the 20th most expensive city in the world to live in [Mercer Human Resource Consulting]. In 2012, this has now jumped to 11th place [Mercer]. In the 2012 survey 214 cities were surveyed, placing Sydney at 11th. This nearly places Sydney in the top 5% of the most expensive cities in the world to live in. Mercer also suggests that almost all of Australia’s capital cities fall within the top 12% of the most expensive cities in the World to live in. I think this is quite a disgraceful situation for a country that has around 22.5 million people; one that is rich in resources.

However according to a report “Worldwide Cost of Living 2012” Sydney was found to be the 7th most expensive city to live in. However the terms of reference were not clear.

Regardless of the statistical sources, Australia has become a very expensive place to live, out of proportion to the size of the population and the resources that are within our province.

The high cost of housing

As an example of the increasing costs, the cost of housing has been continuously rising. According to (Dec 2011), the median house price in Sydney was $636,822, and the median unit price is $449,231.

Based on these figures, to actually afford a place to live, that is if you intend to buy, is out of reach of most people – certainly if they were living on the minimum wage. However knowing that this is a median price, there are lower and higher house prices that can be found in Sydney. It just depends on where you want, can afford, or NEED to live. It also depends on the quality of housing.

If one has to travel for 2 hours to get to work, and then another 2 hours to get home, where you live is important, particularly if you want to have a life. Further to this, as there is very limited public transport system in many of our cities, but particularly in Sydney, one must use one’s car in order to get to work, with all of the associated costs therein – tolls, parking, petrol etc. etc. – which might erode half of your wage each week. If you are on the minimum wage, you might have to reconsider where you live.

As an indication of where we currently stand in relation to the cost of housing and the cost of living, my understanding of how the minimum wage was determined, was that it took into consideration all costs associated with living, having a family and owning an average home. This was based on the male working, with the female staying at home with the kids. The mortgage length was based on an average mortgage length of 20 years. The minimum wage was then set accordingly – but no longer.

It now generally takes two people 30 years to pay off a mortgage – if you can afford one at all. So not only does it take two people to work to now pay the mortgage, it also takes an extra 10 years (or longer) to do so. This essentially adds up to a 250% increase in the cost of housing in Australia, in relation to wages. (2 x people {instead of 1 person} = 200%, extra 10 years = 50%)

Cuts to penalty rates would filter down to all industries

This is generally how it starts out. One change gets made to one industry, and then it filters down to the remaining industries. This has been the way change to our working conditions has occurred historically.

Industry, through various powerful, influential, and well funded business lobby groups, have been campaigning for lower wages, without penalty rates (and less conditions) for decades. This has been occurring over time since the Accord was introduced by Labor in the Hawke era. It has seen our conditions and wages continuously eroded in relation to the increasing cost of living.

With lobbying from industry, politicians will continue to erode the worker’s wages and conditions. It has been happening for decades, and will continue to happen. Governments have even clamped down on dissent, by stopping union protests, removing the power of unions, and eliminating strike action. Thereby eliminating any protest or dissent by workers to defend their rights.

The right to strike, or refuse work, used to be a human right of every one of us; to have this right made illegal by successive governments, demonstrates a lack of freedom of the people.

While this may be confronting for some, who see media coverage of striking workers labelled as trouble makers or so forth, they don’t understand the difficulties that employees face in some workforces where employees are powerless. Successive governments have now made it illegal to strike. It is now illegal to take industrial action in almost all circumstances.

As an example of how extreme the situation became in Australia recently, building workers for instance, could be locked up in jail for failing to answer questions about a work meeting that may have taken place. The employer simply had to phone the ABCC (Australian Building and Construction Commission) and indicate that workers had had a meeting, and the ABCC could investigate – regardless of what that meeting was about. If any worker refused to answer questions, they could be locked up in jail without trial. This is the extend of abuse of rights in some workplaces. The ABCC has now been abandoned by the current government, however Labor allowed it to continue to harass workers for years after its election in 2007. There have even been calls for it be returned by some Labor ministers.

If we cannot say to our employer, I do not like what you are doing, {whether it be over safety issues or not}, and we will stop work today, then we are little more than slaves.

Under Australian law, it is illegal to stop work, as it is considered strike action (officially called “unprotected industrial action”), and you can be prosecuted. For industrial action to be “protected” essentially you have to apply for a ballot to be held by Fair Work Australia, you have to be going through negotiation for a new agreement, the previous work agreement must have expired, and the bargaining representatives must be genuinely trying to reach an agreement. If all of these conditions are not met, the industrial action is considered unprotected, and employees are in breach of the law as it now stands.

WTF!!! Essentially what this means is that you are a slave. Management can make you do whatever they like, and if you don’t like it you can leave – not that there are any other jobs, or many jobs that may pay a better wage. And if you are in a small specific industry, good luck finding another generous employer when they have to compete with all of the other red necks out there. Many companies, particularly big companies, are trying to cut costs by sacking staff, making fewer staff work harder, and moving work offshore, so as to make more money for shareholders – and the CEOs.

I might point out that Malcolm Turnbull’s reported speech makes it quite clear where both government and industry are coming from. In the media he was reported as saying that ‘we need to be more like Asia’. Hmmm. Does that mean $2 per day, per hour? Perhaps a bowl of rice a day? Turnbull is one of the right wing Liberal millionaires.

Then there was Reinhart (Australia’s richest woman – a billionaire) suggesting that we need to be more like Africa. They work for just $2 per day and work harder than Australians – apparently.

So is this what business aspires to? Perhaps this is what our politicians would like to see? Or is it just the rich and famous business owners? Perhaps one day we’ll find out!

Other business expenses

I also raised the areas that government could address in order to assist small businesses if they really wanted to. However the business lobbies have all tried to pound the poor worker, and government can’t seem to see beyond that (or are complicit) – at least that is my interpretation.

As an example of the cost to some businesses, the owner of the local shopping centre, AMP, has continually increased prices for tenants. A shop-keeper indicated to me that this was apparently because AMP wasn’t doing very well financially and needed to subsidise its losing investments by putting up the rent for shop-keepers – so that shareholders didn’t suffer too much hardship. The shop keepers who couldn’t accommodate this price rise, either moved out or raised their prices for consumers – increasing the cost of living.

Small businesses are being burdened by costs due to big business wanting to make more money, by council rates, and insurance companies – all wanting to make bigger profits for themselves and their shareholders. Electricity prices over the last 5 years, have gone through the roof. In Sydney I have witnessed a 75% increase in electricity costs. Water, gas, telephone and internet have all increased in price also.

All of these costs, some of which affect the average person as well, have all burdened businesses. Then there are the tax burdens. Some businesses (the multinationals) are able to buy debt from their subsidiaries, this results in a loss on the books, and therefore they don’t pay tax, while other businesses, which can’t hide profit, have to subsidise those that can. Small businesses are the ones that suffer.

Perhaps if government were to address these costs, rather than hammering the poor worker all of the time, government could perhaps assist small businesses to become more profitable, and therefore pay the employees an appropriate wage for the cost of living.

“The” response from a Liberal Senator.

What concerned me about the response from the Liberal Senator – Alan Eggleston, was his arrogance, and his apparent “suck it up” attitude – which I found offensive. It seemed to demonstrate that he wasn’t really interested in representing the people whom he was elected to represent.

His first argument was that many people work shift work throughout the 24 day, and that in a “contemporary world… [he supports] the concept of the working week being 37 hours workable any day of the week and any time [of the] day before penalty rates apply.”

That could result in some employees working a permanent shift from say 9pm to 5am, regardless of how this might impact on your health, your family or your life, and you would never receive any financial compensation for this. Is this a Liberal belief, or is it a personal belief of Eggleston? In his letter he says “I support”, implying that it is the policy of others. The Liberal party perhaps?

He goes on to say: “It is not acceptable that restaurants and shops are not open at weekends because the owners can not afford the penalty rates.“

I have already covered above why some businesses cannot make a buck. Perhaps if Eggleston addresses these issues, businesses could open on weekends and pay an appropriate wage. Perhaps then it might become more “acceptable” to him, and therefore his suggestion that “penalty rates” were to blame would then become just an irrelevance.

I might also state, that to my knowledge there is a flat tax rate for all businesses, and if some small businesses don’t make enough money to cover costs, the owners don’t earn enough money to pay themselves and their bills. I do understand this, but to punish the worker, who also can’t afford the cost of living, is a ludicrous situation of rob peter to pay paul – but this is an easy solution, and workers are an easy target.

Address the reasons why businesses can’t afford the cost of running their business, and you might solve the problem.

Eggleston states that one reason why some housing is unaffordable is that in some areas, he mentions the “Pilbara, towns like Hedland and Karratha”, I assume he is referring to mining areas, there is a shortage of land which artificially drives up prices for locals.

So is he suggesting that we need to clear bushland so that miners can build houses for their short term use and then let them rot for the next 5 decades after they finish with them? The big miners aren’t interested in building towns; it is an unnecessary expense that reduces profits.

I think I remember Joh Bjelke-Petersen trying to force mining companies to build towns so that they contributed to the community, but I think it was a failure – and big miners aren’t interested in contributing, they want to “rape” the environment as quickly as possibly to make as much money as possible and pay shareholders and CEOs big dividends.

The next section of his letter really irked me. Eggleston indicates that we should perhaps be considering longer rents (30 years or more), longer mortgages (60-90 years). How obscene.

This would mean that we would never have any housing security. And this is acceptable according to him? We would have to rely on renting all of our life, or paying a mortgage for 90 years. Is this also a Liberal Party idea, or just his? God help us. Can you imagine the interest that you would pay on a 90 year loan.

Perhaps the bankers have suggested this. If this is the case, we need to buy up shares in the banks now!!! [me being cynical].

Eggleston also indicated that we need more medium density housing. How lovely. No more backyard, no more parks, more congestion, more pollution etc. etc.

We keep voting these ruthless right wingers in, and this is their plan for us! This is their ideology – their beliefs of what “we” should be prepared to accept – Graciously and for “our” good!!!

I guess they know what is best!

Eggleston also suggests that it is the state government’s fault that housing costs are so high; they don’t open up more land, and that this drives up house prices. What?

Is this the free market competition approach of the Liberal party at work here. What about negative gearing that is so lucrative for rich investors wanting to pay less tax. They can even reduce their capital gains tax by 50% if they keep the investment for longer than 12 months. The average person can’t afford this, but it drives up house prices.

What about developers. They have capitalised on all of the tax reductions and incentives first home buyers that were offered by governments, by artificially increasing their prices accordingly – because first home buyers now had an extra amount of cash. Who benefited Not the poor first home buyers, who were actually no better off, but the greedy developers.

Then there is the speculative housing market, that has rapidly increased the value of properties. Investors and developers speculate on what areas will be popular or growth areas, and buy up tracts of properties or land, then when the market appears to be ready, they increase their prices accordingly, and people have to pay if they want to live there.

These are the real reasons for inflated house prices, NOT the lack of new land. What Eggleston does is to sidestep the real issue, and shift the blame, while denying the real causes of housing unaffordability It is typical of a politician to shift blame and sidestep, when their party’s policies (and the opposition’s) have directly influenced the current housing crisis.

When I raised the cost of leases for businesses and how big business increases their costs, Eggleston states that “these are business agreements freely entered into and while there are alternatives such as cooperatives…” that “in the end retailers will close if the costs are too high which is a limiting factor”

In actual fact, the very bill before parliament indicates that what happens is that wages and conditions of employees are driven down, because businesses can’t make enough money – rents are too high, rates, electricity, gas, etc… are all too high. So rather than moving on, closing down or whatever, they just lobby government to reduce wages and conditions, which is what has been happening for the last 40 years and will continue to happen for the foreseeable future. After all, we can’t compete with developing nations where wages are concerned, as their cost of living is peanuts – or perhaps a bowl of rice – compared with ours.

His final closing comment on solving the problem of housing affordability, or the rising cost of living is:

“Perhaps you should think about getting a job with a Pilbara Mining company at 150 K per year while living in a company provided 4 bedroom air conditioned house subsidised by the company and pay off your house in Sydney In a much shorter period!“

He does offer his “kind regards” though. Perhaps he thinks his kind regards will solve the housing crisis, or the rising cost of living for the ordinary person!!!

I think this pretty much sums up the level of mentality for solving cost of living problems in Australia by at least some politicians! Is this the general view, or is it just some Liberals? Quite pathetic really, but typical! An inability to address real problems, just offer band aid solutions.

This is why penalty rates have been targeted. It is a band aid solution to keep some small businesses operational without really addressing the real causes of their inability to make a buck. It is also the easy solution, and the poor workers are again the easy target.


About Blog of Greg

I consider myself a thinker and I like to discuss everything in life with those around me. Mostly I am serious, sometimes I am funny, and occasionally I am rude. I like to wear my heart on my sleeve and say what I feel, or think! It is important to me to be honest about how I feel and why! I detest pretense, big egos and self importance. I believe that I am no more important than you, and similarly that you are no more important than me! [apparently I should reflect on this more often] This blog is a way of engaging people in different aspects of life; its goal is to present a different view of life and contribute to a broadening of our awareness. While this blog is essentially my opinion, I also understand that there are other opinions out there. Though I encourage discussion, I may “delete” comments that I find are unhelpful, argumentative, or offensive towards myself or another person. Often I write about politics – apparently that is an interest of mine – but I also like to write about other more personal things that affect us in our day to day lives. Along with this blog, I also write to politicians and newspapers; I often present a commentary on my blog about following comments or decisions. That way everyone understands what they have said – and sometimes of course how big a buffoon they are:) Please feel free to comment on my posts, as I would like to hear what you have to say. After all…. Your opinion is just as valid as mine!
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