ABC Radio National Saturday Extra

27 January 2017


SUBJECT/S:  Inequality; fair pay; worker exploitation; labour hire; penalty rates; Turnbull Government’s $50 billion company tax cut


GERALDINE DOOGUE, HOST: Now we’re going to kick off today with a subject that we think is going to be a feature of this year’s national debates – inequality – and what we all know about disenfranchised voters, both here and in the US and in the UK related to inequality, because the reality is that our income gap is widening.


So here on Saturday extra, we plan to look for some fresh angles on this question and we’re going to kick off with a look at fair pay and the importance of a rules-based system for employment. This is sparked partly by a piece in the latest issue of The Monthly, which is just out, by Radio National's own Ann Arnold, which looks at the spread of underpayment and exploitation and its broader implications politically. It suggests that, in some sectors at least, there's been a cultural shift in this country where ignoring the minimum wage - that is, the legal wage - has become the new normal, as has paying off the books, the black economy.


So I'm joined now by James Pearson, the CEO of the Australian Chamber of Commerce and Industry and by Jim Chalmers, the Shadow Minister for Finance. He's a former executive director of the Chifley Research Centre and probably won't mind me describing him as a bit of a policy nerd. Welcome to you both.






DOOGUE: Jim Chalmers, do we have a problem here in Australia? We've been guided historically by the notion of a fair day's work for a fair day's pay. Is that slipping away?


CHALMERS: Inequality in Australia, Geraldine, is at 75-year highs, which is something that should trouble us all. We want this to be a country where economic growth is inclusive, where hard work is rewarded and where there is a decent safety net for those at risk of being left behind. And there's enough in recent trends to trouble us that that fair go that we've cherished - that notion of inclusive growth, which we've cherished for so long in this country is at risk.


DOOGUE: And is there a particular area? Is it casualisation that you are proposing is contributing?


CHALMERS: When it comes to inequality in the labour market, there are a whole series of manifestations. There's casualisation as you mentioned; the broader field of less secure work; there are more instances coming to light of worker exploitation, which are mentioned in your introduction; there's underpayment; there's record low wages growth, that series has been kept since 1998 and the stats on wages are very troubling. We've got record underemployment, the highest underemployment we've had since 1978 when that stat was first kept.


So all of those things combined do create a situation where we do have troubling trends in the labour market, which are feeding through to those inequality measures at 75-year highs.


DOOGUE: And does getting paid in cash necessarily disadvantage someone? Many people prefer it.


CHALMERS: The cash economy is something which should trouble everyone who pays their taxes, because underpayment is more likely where cash is involved.


DOOGUE: And that has implications for super, doesn't it? I just noticed before Christmas, Industry Super said there were billions of dollars not being paid each year with employer non-compliance, partly due to the cash economy.


CHALMERS: Absolutely. There are a whole series of consequences when people aren't playing by the rules in the work place. Superannuation is one of them. The non-payment or underpayment of the superannuation guarantee, all of these things flow from a situation where a minority of players or businesses don't do the right thing by their workers.


DOOGUE: Now James Pearson, do you agree that there has been a shift away from a sort of ready adherence to the wages regime set by the employment regulator, the Fair Work Commission, partly prompted by the decline of unions?


PEARSON: Look there's a separate issue here, and that is, we operate under a workplace regulation system nowadays which has become so complex and so hard for businesses, particularly small businesses who have limited resources, to understand that often now we're seeing that non-compliance with the regulations is borne of ignorance and it has just become too difficult.


So I don't accept the notion that there is a change in culture and I'd like to make it very clear from the outset that if employers are deliberately breaking the law in the manner in which they're engaging staff, then they should be prosecuted to the full extent of that law.


DOOGUE: This question of, in The Monthly it quotes Brien Trippas, a restaurant industry leader, a former president of their industry body, estimating that 80 per cent  of restaurants and cafes would be paying off the books and probably underpaying. And he actually finds it quite annoying because he says it's people undercutting him on wages.


PEARSON: That's right.


DOOGUE: So how significant are those people prepared to undercut? And is it leading to a sort of “new normal” in attitude that really could lead to disenfranchised voters?


PEARSON: No, I don't see evidence that it's leading to what you call a new normal. Now I don't have a handle on the exact percentage of people who are not doing the right thing, but we do have some evidence. So, for example, from the Fair Work Ombudsman, which is a well-resourced and effective, in our view, operator in this area - the number of employees where they got involved and achieved a recovery of unpaid wages and the like, is fairly static. In fact, if anything, it's declined even in the last couple of years, around about 11,000 employees. That equates to a little under one-tenth of one per cent of Australia's 12 million workers.


So I think we need to keep the problem in perspective. I'm not denying, I'm not saying that there is a problem out there. I'm a believer in what former Labor Prime Minister Julia Gillard one said, that "sunlight's the best disinfectant". And I think we've seen, in recent months, how the exposure of practices which are unlawful has resulted in real damage...


DOOGUE: ...You mean like 7-Eleven?


PEARSON: Well, I always prefer not to speak about specifics, but you've mentioned...


DOOGUE: ...franchisees, OK...


PEARSON: ...It's not the only example and I do believe that large firms, franchisors, who have a very, very big investment in maintaining a strong and positive reputation, they will act, in my experience - and they all act very quickly - to fix things up. And it's good to see that's happening. And it's also good to see that Government and other bodies have launched a number of inquiries and taskforces into this area. And the Government is acting to increase penalties and make it harder, through stronger laws, for people to do the wrong thing - to make sure they do the right thing.


DOOGUE: Do you agree, Jim?


CHALMERS: Can I just pick up on something James said then, Geraldine? He said rightly that sunshine's the best disinfectant and then he said it's not helpful to mention individual companies. I think some of those scandals which have come light, whether it be 7-Eleven; whether it be what was attempted at CUB; whether it was what happened at Esso; whether it was what happened at the chicken supplier who tried to get 19 hour shifts at $11.50 an hour; or even this week what’s come out about the evidence about Pizza Hut severely underpaying its workers by reclassifying them wrongly as independent contractors - all of these examples when they come to light, they do serve a very useful purpose.


Partly, they act as a deterrent for businesses who are tempted to do the wrong thing. But they also show that the more that we put these cases out there, the more people understand that these contracts - or maybe it's the role of a labour hire company or whatever it is - these are things going on in our workplaces that are wrong and the companies who engage in these practices should be named.


For the people who are outside the system, people, as you mentioned, in that Monthly article who might be new migrants or others who are being exploited, they're being treated badly outside the boundaries of the industrial relations system and that's a problem that needs addressing.


One of the things that's happening here is the use of labour hire companies - again, not all of them are dodgy, but some of them are dodgy - and they give some employers an excuse to offer the same workers doing the same work dramatically reduced conditions. That's what we saw almost happen at CUB, with the 65 per cent pay cut. We've seen it in other examples, including some of those that I mentioned before. So we do need to ensure that the Ombudsman is empowered; we do need to make sure that there's a national licensing regime for labour hire firms, because that is one of the problems that has emerged, which is really exacerbating and accelerating some of the trends that we're concerned about. 


DOOGUE: Let me just tell listeners that you're listening to Jim Chalmers, who's the Shadow Minister for Finance and James Pearson, who's the CEO of the Australian Chamber of Commerce and Industry and we're discussing underpayment and whether there's a sort of trend underway that is starting to eat away at a lot of our nostrums and understandings about a fair day's work for a fair day's pay. So where do penalty rates fit in to this discussion, would you say James?


PEARSON: Well penalty rates are a subject of considerable debate. I noticed the Leader of the Opposition just a few days ago in fact was speaking on the issue in advance of the industrial umpire, the Fair Work Commission's decision, which is expected to be handed down on the matter sometime in the next few weeks.


No less of a body than the independent Productivity Commission, amongst others, has identified that penalty rates are a barrier to increasing employment. And one of the concerns that I have is that while it's right to talk about the conditions of work and the situation of employed people, what about the three-quarter of a million Australians who currently don't have a job and are looking for work? And what about the quarter of a million of young men and women in our country who are in that position? And penalty rates are part of the problem that's making it harder, not easier, for employers to give jobs to these people.


It's important to remember that in Australia more than four out of five jobs in this country are actually provided by the private sector. So any sensible approach that comes to addressing unemployment has got to address making it easier, not harder, for the private sector to employ more people.


DOOGUE: Can I just read you, Andrew Leigh, who's a colleague of Jim Chalmers, just put it in a very good speech that he gave just before Christmas: 


"Cut weekend and holiday loadings and you'll make the nation less equal. If you love Australian egalitarianism, one simple way to defend is to support lower-paid workers getting a bit extra for working when everyone else is on holiday."


You know James, it's pretty arresting, that.


PEARSON: Well, you know Geraldine that what we put to the Fair Work Commission is not about cutting, let alone abolishing penalty rates, as has been misreported in a number of places. Not necessarily by the ABC, but it's certainly an accusation made by some in the debate.


All we're looking for is to do this - we're looking to harmonise across the weekend Saturday and Sunday rates of pay, so that penalty rates on Sundays, which generally speaking are double time, are brought in line with penalty rates on Saturdays, which generally speaking are time and a half. Now that is not by anyone's measure a radical change and I really don't think, as a proud Australian citizen, that that is going to make a really serious difference to the quality of our country...




CHALMERS: James, I...


PEARSON:...but it will help generate more employment and our members have told us that around about half of the companies who currently operate on Sundays will hire more people and about half of the companies which currently can't afford to operate on Sundays will open their doors. That means more jobs for more Australians. That sounds like a fair go to me.


CHALMERS: James, I don't think you're being upfront with the listeners this morning. I mean, you say that this is not about cutting penalty rates, but you're saying that if wages were lower, people would put on more people. There's a logical disconnect there.


You use words like "harmonise", you've used words before in your media material like "adjust" penalty rates. But for the hundreds of thousands of Australians who rely on penalty rates, not as a luxury but to put food on the table as compensation for working when other people are putting their feet up, I think it's important that the real nature of this agenda is put out there for people to evaluate.


It's not about harmonisation, it's not about adjustment, it's about cutting penalty rates and I think the more that you're honest about that, like the 60 or so Liberal Party members...


DOOGUE: ...You think even the Saturday, you're saying Jim Chalmers?


CHALMERS: No, James' argument is there won't be a cut to Sunday penalty rates because it's all about harmonising with Saturday penalty rates. It's just rubbish.


PEARSON: No, I'm saying that Sunday rates - our argument is to lower Sunday rates...


DOOGUE: …So there is a loss to the workers you say, James, but the benefit is more work offered, is that what you're saying?


PEARSON: More work offered so there are more hours available for people who choose - won't be forced, but who choose - to work more hours if they want them and more jobs available for those who would like to work at the weekend, including on Sunday but at the moment don't have the job opportunity to do that.


CHALMERS: This whole argument that cutting wages creates jobs has been thoroughly discredited, not just in Australia, but around the world, where people understand...


DOOGUE: ...It can't be completely wrong though, Jim?


CHALMERS: Where people understand that the less equal an economy is, the bigger threat to economic growth that is. We need to make sure, when we're talking about things like demand in our economy and spending power in our economy and all of those important things that keeps growth ticking over, that people on low and middle incomes have the capacity to spend in our economy.


This whole idea that if you cut wages, or even by the way if you give a big corporate tax cut, that all of a sudden it will flow through to all these extra jobs is not backed up by the evidence here and around the world. 


PEARSON: Well on the corporate tax cut issue, I do have to differ with what Jim says, because Treasury's own research demonstrates that some two-thirds of the benefit of that proposed tax cut will flow to households and families.


Jim's right in the sense that employers don't want to see less demand in the economy, quite the reverse. We are very keen to see more demand in the economy and we believe very strongly that having more people employed is a great way of generating more demand. We would like to see workers getting reasonable wage increases. We'd like to see sustainable increases in living standards, because that's good for the private sector as it's good for people in Australia who consume the goods and services that the private sector produces.


But what we're wrestling with at the moment is a set of workplace regulations that make it too difficult, particularly for smaller businesses to hire...


DOOGUE: ...Are you talking about minimum wage there as well, or are you just talking about penalty rates?


PEARSON: Well look on minimum wage, let's recognise that Australia has one of the highest minimum wages in the world and we have one of the strongest social safety nets in the world and we have a progressive tax system. And the Australian Chamber of Commerce and Industry…


DOOGUE: Likes that?


PEARSON: …is not looking to change those things. Those are part of the things that make Australia one of the best places in the world in which to live. But it's also time for us to recognise that unless we are more productive as nation - and that means our bosses and our workers are better at what they do and we free them up, we give them more flexibility to actually get out there and produce more for each dollar invested and each hour of work worked - we are going to fall further and further behind in that ruthless competition with other countries in the world, who are lifting their own people out of poverty and who are increasingly able to compete with us for the production provision of goods and services - many of which Australians are able to consume and is one of the reasons, in fact, why the costs of living in Australia have been under downward pressure and Australians have a higher standard of living than they have for many years.


DOOGUE: OK, it sounds as if that whole notion of inclusive growth, Jim Chalmers, which I know if very much modern Labor's big mantra - it struggles to be fully grasped would you say? Or not?


CHALMERS: The concept?




CHALMERS: I think people understand the concept. Whatever title you want to attach to it, I think people do appreciate in Australia that one of the things we can be most proud of over our history is that when we grow, we try to grow together; we try to grow in an inclusive way. It really means that the benefits of economic growth are fairly shared so that there is a decent safety net for those at risk of being left behind.


And all of these industrial relations institutions and policies like a minimum wage, like penalty rates, all of those sorts of things - they're fundamental to what it has made us fairer than others around the world. But what we want to do is ensure that the fair go and inclusive growth is part of our future and not just part of our past.


DOOGUE: Well Jim Chalmers and James Pearson, thank you for kicking us off this year. I feel sure that this will be a version of a debate we will have many times. Thanks for your time.


CHALMERS: Real pleasure, thanks to you both.


PEARSON: Thank you both.