tag:theconversation.com,2011:/uk/topics/award-wages-10257/articlesAward wages – The Conversation2019-11-11T02:18:44Ztag:theconversation.com,2011:article/1262792019-11-11T02:18:44Z2019-11-11T02:18:44ZNo, a ‘complex’ system is not to blame for corporate wage theft<figure><img src="https://images.theconversation.com/files/300579/original/file-20191107-12481-1uxq5px.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The heads of the Business Council of Australia and Australian Retailers Association are among those blaming "inadvertent payroll mistakes"on an overly complex industrial relations system.
</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>Is Australia’s award system so complex major corporations capable of handling millions of customers and billions of dollars can’t manage to pay employees properly?</p>
<p>That’s the spin flowing freely in the wake of Australian supermarket behemoth Woolworths admitting it had underpaid about 5,700 staff by up to A$300 million. </p>
<p>Woolies joins a conga line of companies this year admitting to shortchanging employees, from household brands <a href="https://www.smh.com.au/business/workplace/qantas-to-pay-out-thousands-to-staff-after-embarrassing-bungle-20190208-p50wge.html">Qantas</a>, <a href="https://thenewdaily.com.au/money/finance-news/2019/04/17/commonwealth-bank-staff-underpaid/">Commonwealth Bank</a>, <a href="https://thenewdaily.com.au/money/superannuation/2019/09/26/bunnings-admits-underpaying-staff/">Bunnings</a> and the <a href="https://www.abc.net.au/news/2019-01-10/abc-says-it-underpaid-casual-employees/10705334">ABC</a> to the fine-dining empires of celebrity chefs <a href="https://www.news.com.au/finance/work/at-work/rockpool-restaurant-chain-accused-of-underpaying-workers-at-least-10-million/news-story/6df4a96ef58e667773ccf69966438b48">Neil Perry</a> and <a href="https://www.sbs.com.au/news/masterchef-judge-george-calombaris-faces-sacking-calls-over-7-8-million-wage-underpayment">George Calombaris</a>.</p>
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<p>The head of the <a href="https://www.smh.com.au/business/companies/woolworths-underpays-workers-by-up-to-300-million-20191030-p535l5.html">Business Council of Australia</a> has suggested these “inadvertent payroll mistakes” are due to an overly complex industrial relations system, with “122 awards, multiple agreements, multiple clauses”. </p>
<p>The head of the <a href="https://www.smh.com.au/business/workplace/beyond-hopless-complaints-about-award-system-excuse-for-underpayments-20191031-p53630.html">Australian Retailers Association</a> agrees there’s a need to “simplify the system”. Woolworths’ chief executive, Brad Banducci, has chimed in with his desire “to come back and talk about the <a href="https://www.smh.com.au/business/workplace/beyond-hopless-complaints-about-award-system-excuse-for-underpayments-20191031-p53630.html">lack of flexibility in awards</a> when interpreted literally”.</p>
<p>Here’s why this blame-shifting is wrong.</p>
<h2>The system is not as complex as employers claim</h2>
<p>Australia’s workplace relations system has already been significantly simplified in the past 15 years. </p>
<p>We used to have an interlocking web of federal and state industrial relations laws and tribunals. The system had evolved without much logic over a century, from the creation of the Commonwealth Court of Conciliation and Arbitration in 1904. For a national company, it meant workers in some states might be covered by state awards and others by federal awards, with differing pay rates and conditions. </p>
<p>In 2005, however, the Coalition government of John Howard tackled this problem with its Workplace Relations Amendment (Work Choices) Act. The Work Choices “flexibility” agenda was bad news for workers, but it did implement a national workplace relations system.</p>
<p>The benefit of this was recognised when the Labor government of Kevin Rudd repealed Work Choices but kept the national system with the Fair Work Act in 2009. </p>
<p>The national system covers companies around the country. State industrial relations laws now mostly cover state public-sector workers. Several thousand federal and state awards have been reduced to just 122 federal awards applying to specific industries and occupations. </p>
<h2>Businesses have made things more complex for themselves</h2>
<p>The real problem highlighted by a lot of these cases isn’t that there are so many awards with different allowances that it’s hard for someone in the payroll office to keep track. Rather it’s a problem of employers’ own making: the use of annualised salary arrangements.</p>
<p>Annualised salaries roll up the overtime and penalty rates workers are entitled to under an award into an annual sum. This is often done for convenience. It’s lawful only if employees are paid the same or more than their award entitlements. So it requires regular checking and monitoring.</p>
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<p>It is now clear many businesses caught underpaying employers were not doing this.</p>
<p>In the case of Woolworths, the 5,700 underpaid staff were mostly department managers placed on annualised salaries (of about A$73,000). Their salaries were supposed to cover their ordinary working hours, overtime and any other payments they were entitled to under the <a href="https://www.fwc.gov.au/documents/documents/modern_awards/award/ma000004/default.htm">General Retail Industry Award</a>. But when the actual hours being worked were calculated, it turned out the salaries amounted to less, not more, than the award.</p>
<h2>Paying workers properly not a top priority</h2>
<p>The central problem is that, despite all the talk of how much “w<a href="https://team.woolworths.com.au/">e pride ourselves on putting our team first</a>”, the need to ensure staff are paid what they are owed apparently just didn’t rate highly enough.</p>
<p>I’m not saying the system is devoid of intricacies. But there are many other “complex” dimensions to running a large business. Woolworths, for example, encompasses a thousand supermarkets and about 30 million customer transactions a week. The logistics of procurement, distribution and storage are immense. Imagine what it takes to keep track of use-by dates to comply with food safety regulations. </p>
<p>If Woolworths can do that, it’s hard to believe, with all the lawyers, accountants and professional advisers at its disposal, it couldn’t ensure it complied with industrial relations laws.</p>
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Read more:
<a href="https://theconversation.com/how-to-stop-businesses-stealing-from-their-employees-83363">How to stop businesses stealing from their employees</a>
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<p>The fact the federal attorney general, Christian Porter, hasn’t shied away from describing these underpayments as <a href="https://www.abc.net.au/news/2019-10-31/christian-porter-discusses-wage-theft-and-the-aged/11660508">wage theft</a> indicates how flimsy he thinks the case is for blaming underpayments on award complexity.</p>
<p>Accusing corporate Australia of being “asleep at the wheel”, he has suggested directors of companies that underpay workers might be disqualified from <a href="https://www.theguardian.com/australia-news/2019/nov/07/company-bosses-should-be-disqualified-from-boards-for-underpaying-workers-christian-porter-says">sitting on boards</a>. His department has also released <a href="https://www.ag.gov.au/Consultations/Documents/industrial-relations/strengthening-penalties-for-non-compliance-discussion-paper.pdf">a discussion paper</a> about criminal penalties for the most egregious forms of underpayment. </p>
<p>Clearly there is an insufficient level of deterrence. Too many businesses think they can underpay with impunity. </p>
<p>When a chief executive complains about having to interpret awards (which are legal documents) “literally”, it’s clear we also need a major shift in corporate culture.</p><img src="https://counter.theconversation.com/content/126279/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anthony Forsyth is currently undertaking an Australian Research Council-funded project on trade union training with collaborators from the University of Melbourne, the ACTU and the Trade Union Education Foundation. He is Vice-President (Independent Representative) of the Australian Institute of Employment Rights. He blogs on workplace issues at: <a href="https://labourlawdownunder.com.au/">https://labourlawdownunder.com.au/</a></span></em></p>Employers are blaming underpaying employees on the the complexity of industrial awards. They should blame themselves.Anthony Forsyth, Professor of Workplace Law, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1180532019-05-30T19:55:18Z2019-05-30T19:55:18ZWe’ve been given a pay rise. Were it not for concern about the economy, it would have been bigger<p>The Fair Work Commission has <a href="https://www.fwc.gov.au/documents/wage-reviews/2018-19/decisions/2019fwcfb3501.pdf">announced a 3% hike</a> in the national Minimum Wage, effective July 1 – taking it to A$19.49 per hour, or $740.80 per week. </p>
<p>The increase will apply to over one-fifth of Australian employees: not just those working for the absolute minimum, but also those working under award-determined wages that are set in relation to that minimum.</p>
<p>This year’s increase is higher than inflation, and higher than wage increases on offer in non-award jobs, but it is lower than the 3.5% increase that the Commission granted last year. And despite appearances, it’s inadequate to meet both the needs of the economy and low-wage workers.</p>
<p>In explaining its decision to slow down wage growth for the lowest-paid Australians, the Commission argued the <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0">recent slowdown in economic growth</a> (raising the <a href="https://www.livewiremarkets.com/wires/australia-in-2019-2020-recession-likely-rates-heading-to-zero">spectre of Australia’s first recession</a> in 28 years) necessitated extra caution – an argument that could, of course, be turned on its head. </p>
<h2>A weak economy cuts two ways</h2>
<p>The weakest component of economic growth over the last year has been retail sales – which, when seasonally adjusted, were actually <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/8501.0">weaker in volume terms</a> in the three months to March than in the three months to December.</p>
<p>Consumer spending accounts for more than half of gross domestic product, and nothing boosts consumer spending more directly than higher wages. So if the Commission had been truly concerned about weak GDP growth, it could be argued that it ought to have erred on the side of ambition for wages rather than caution.</p>
<p>Another issue raised by the Commission in justifying a 3% rather than a 3.5% increase is also unconvincing. It pointed to the benefits of the <a href="https://theconversation.com/what-just-happened-to-our-tax-heres-an-explanation-youll-understand-114913">tax offsets of up to $1080</a> promised by the Coalition. But for low earners on less than $37,000 per year they are worth only $255 – just $4.90 per week.</p>
<h2>Tax offsets barely benefit low wage workers</h2>
<p>Workers on even less, up to $20,000 (as are many on the minimum wage workers who face inadequate hours as well as low rates), will get <a href="https://theconversation.com/the-budgets-dirty-secret-is-the-hikes-in-tax-rates-youre-not-meant-to-know-about-115457">no benefit whatsoever</a> from the tax offsets. For these people, the Fair Work Commission was wrong to conclude the tax changes were a reason to slow increases.</p>
<p>Finally, the Commission suggested the recent decline in inflation (symptomatic of a weak economic climate) also justified a smaller increase. </p>
<p>Certainly it is true that this 3% wage increase is significantly higher than the current inflation rate of 1.3%. And in March, the quarterly rate came in at <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/mf/6401.0?opendocument&ref=HPKI">zero</a>, meaning there was no net increase in prices at all.</p>
<h2>And low inflation also cuts two ways</h2>
<p>Inflation has indeed languished well below the Reserve Bank’s 2% to 3% target for years now, and weak wages are a key reason why. </p>
<p>The Commission faces a chicken-and-egg problem: if wage increases are restrained purely because of low inflation, they will ensure low inflation continues and create the conditions for wages and prices to chase each other down in the future, with a recession the likely result. </p>
<p>In one respect, the Commission’s judgement was assertive and convincing. It noted that its last two increases (3% in 2017 and 3.5% in 2018) both exceeded inflation, and yet did not have any <a href="https://www.fwc.gov.au/documents/wage-reviews/2018-19/decisions/2019fwcfb3501.pdf">“adverse employment or other effects”</a> – contrary to the scaremongering of employer lobbyists, who predictably warn each year that the economic sky will fall if real wages go up.</p>
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Read more:
<a href="https://theconversation.com/the-five-not-so-easy-steps-that-would-push-wage-growth-higher-107510">The five not-so-easy steps that would push wage growth higher</a>
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<p>Indeed, there is growing consensus both in Australia and overseas that minimum wage increases do not “destroy” jobs. Stronger purchasing power helps offset other sources of weakness in the economy, including very weak business investment.</p>
<p>Despite the Commission’s decision to scale back last year’s wage increase, the 3% will nevertheless support badly needed wage growth. Since 2013, wages have been growing at their <a href="https://assets.nationbuilder.com/theausinstitute/pages/2972/attachments/original/1553100722/Open_Letter_on_Wages_Full_List.pdf">slowest sustained pace since the end of the Second World War</a>. Despite seemingly tight labour market conditions, there’s <a href="https://www.abc.net.au/news/2019-05-15/wage-price-index-march-quarter-2019-shows-pay-stagnate/11115044">no sign of a recovery</a>. </p>
<h2>It could have been bigger</h2>
<p>In fact, increases such as the one we have just been granted are one of the only things preventing wage growth from decelerating even further. <a href="https://www.futurework.org.au/the_impact_of_minimum_wages_on_recent_wage_trends">My research suggests</a> that wage growth for workers not covered by awards has been creeping along at less than 2% per year.</p>
<p>Waiting for “market forces” to reverse recent record weakness in wage growth hasn’t worked. Nothing does more to create sustainable economic momentum than strong, sustained increases in the minimum wage. The Fair Work Commission is helping, but it could have been more ambitious.</p><img src="https://counter.theconversation.com/content/118053/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jim Stanford is a member of the Australian Services Union.</span></em></p>Workers on awards and the minimum wage will get 3%. There was a case for awarding even more.Jim Stanford, Economist and Director, Centre for Future Work, Australia Institute; Honorary Professor of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/884742017-12-03T19:22:03Z2017-12-03T19:22:03ZIt’s not just women at the top who are paid less than men<figure><img src="https://images.theconversation.com/files/197253/original/file-20171201-30931-13z7xqt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Wages are low among hospitality workers, who are disproportionately female.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Debate around gender pay gap often gravitates towards the higher-wage end of the labour market but it misses the employees at the other end of the pay spectrum – those who receive the legal minimum wage for their job. It’s the gender pay gap among these low-wage workers <a href="http://melbourneinstitute.unimelb.edu.au/__data/assets/pdf_file/0011/2586359/wp2017no31.pdf?platform=hootsuite">we should be most concerned about</a>. </p>
<p>In 2016, almost a quarter of Australian jobs were paid at the minimum or “award” rate, a rate that is in most cases set by the Fair Work Commission. It might seem like there should no gender pay gap among minimum-wage workers, since by definition they are all being paid the minimum wage. However, there are in fact many different minimum wages in Australia. </p>
<p>There are currently 122 federal awards, covering a variety of industries and occupations, and with each specifying numerous different minimums depending on things like the tasks and duties of the job and the qualifications and experience of the employee. </p>
<p>This, combined with the fact that men and women differ considerably in the types of jobs they do, means it is still possible for a gender pay gap to exist among minimum-wage workers.</p>
<p>Indeed, according to data from the <a href="http://melbourneinstitute.unimelb.edu.au/hilda">Household, Income and Labour Dynamics in Australia (HILDA) Survey</a>, women on a minimum wage earn roughly 10% less per hour than men on the minimum rate. While the minimum wage gap is smaller than the 19% gap among those paid above the minimum wage, it is still sizeable.</p>
<p>Moreover, the gender wage gap among award-reliant employees can’t be explained by differences between men and women in their skills and abilities.</p>
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Read more:
<a href="https://theconversation.com/its-too-soon-to-celebrate-a-narrowing-gender-wage-gap-87669">It's too soon to celebrate a narrowing gender wage gap</a>
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<p>Unlike wages for workers earning above-minimum wages, the gap among minimum-wage workers cannot stem from employer discrimination, superior negotiating skills of men, or higher productivity of men, since everyone is being paid the minimum permissible rate of pay. </p>
<p>In fact, minimum wages are systematically lower in jobs more commonly held by women. For example, minimum wage workers in the health care sector earn substantially less than similarly skilled minimum wage workers in road transportation.</p>
<p>The higher the male share of employment in an occupation or industry, the higher the wages for both men and women. The gender wage gap among minimum wage earners could be reduced if it was neutral with respect to the gender composition of occupations and industries.</p>
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Read more:
<a href="https://theconversation.com/the-gender-pay-gap-is-wider-in-the-arts-than-in-other-industries-87080">The gender pay gap is wider in the arts than in other industries</a>
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<p>Whether and how policymakers should address this issue depends on why there are lower minimum wages for jobs more commonly held by women. There are two main explanations that have sound economic rationales underpinning them. </p>
<p>In order not to hurt employment in an industry, the Fair Work Commission might have intentionally set lower minimum wages where employers have lower “capacity to pay”. For example, this might be because employers have little market power – there’s a lot of competition – and so they can’t charge high prices.</p>
<p>Higher minimum wages might also partially reflect fair compensation for job characteristics unrelated to skill requirements, such as danger or dirtiness.</p>
<p>However, these explanations are at best only partially convincing. Nursing, for example, is both female-dominated and characterised by high employer market power.</p>
<p>And while compensation for jobs with unpleasant characteristics is a plausible explanation for higher award wages of mostly-male construction workers, we find wages are low among award-reliant hospitality workers, who are disproportionately female and often perform physically demanding work in hot and loud environments. </p>
<p>This is not to say that this “capacity to pay” and other job characteristics have no role in the patterns of minimum wages across industries and occupations. However, there is little transparency in the reasoning that is driving the differences in minimums set by the Fair Work Commission, and so we have no way of knowing the nature and extent of these forces at play.</p>
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Read more:
<a href="https://theconversation.com/the-gender-pay-gap-is-hurting-productivity-76780">The gender pay gap is hurting productivity</a>
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<p>This leaves room for the possibility that the lower minimum wages in female-dominated occupations and industries are driven – at least partly – by an undervaluation of “women’s work”. </p>
<p>A wage-setting process that explicitly acknowledges and quantifies the factors considered in determining minimum wages could ease this concern.</p>
<p>Until then, we cannot have confidence that the minimum wage system does not systematically disadvantage women relying on minimum wages.</p><img src="https://counter.theconversation.com/content/88474/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roger Wilkins receives funding from the Australian Research Council.</span></em></p><p class="fine-print"><em><span>Barbara Broadway does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Women in minimum wage jobs earn 10% less than their male peers. Wages are systematically lower in jobs more commonly held by women.Roger Wilkins, Professorial Research Fellow and Deputy Director (Research), HILDA Survey, Melbourne Institute of Applied Economic and Social Research, The University of MelbourneBarbara Broadway, Senior Research Fellow, Melbourne Institute of Applied Economic and Social Research, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/750482017-05-24T20:15:23Z2017-05-24T20:15:23ZFactCheck: will 700,000 workers be ‘ripped off’ by penalty rate cuts, as Bill Shorten said?<blockquote>
<p>Malcolm Turnbull’s cuts to penalty rates will rip off 700,000 workers… <strong>– Labor leader Bill Shorten, in a Labor-produced <a href="http://thenewdaily.com.au/money/work/2017/03/17/malcolm-turnbull-backs-penalty-rate-cuts">recorded phone call to voters</a> released in March 2017.</strong></p>
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<p>The Fair Work Commission recently held a new round of <a href="http://www.skynews.com.au/news/politics/federal/2017/05/09/fair-work-hold-hearing-into-penalty-rate-cut.html">deliberations</a> on <a href="https://www.fwc.gov.au/awards-and-agreements/modern-award-reviews/am2014305-penalty-rates-case">how to implement</a> its recommendation that Sunday and public holiday penalty rates be reduced for workers on awards in the hospitality, fast-food and retail sectors.</p>
<p>The federal opposition has condemned the recommendation, with Labor leader Bill Shorten saying in a recorded phone call to voters earlier this year that “cuts to penalty rates will rip off 700,000 workers”. </p>
<p>Is that accurate?</p>
<h2>Checking the source</h2>
<p>When asked for a source to support the claim, Shorten’s office referred The Conversation to a spokesperson for Labor’s shadow minister for employment and workplace relations, Brendan O'Connor, who pointed to a February 2017 <a href="https://mckellinstitute.org.au/app/uploads/McKell-Institute-The-Impact-of-the-Fair-Work-Commission%E2%80%99s-Penalty-Rates-.pdf">report</a> by the <a href="https://mckellinstitute.org.au/">McKell Institute</a>. The spokesperson said:</p>
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<p>The McKell Institute’s independent figures combined with pharmacy retail workers show around 700,000 workers could face cuts to their penalty rates … The prime minister himself has used the figure 600,000.</p>
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<p>You can read the full response from O'Connor’s office <a href="http://theconversation.com/full-response-from-a-spokesperson-for-brendan-oconnor-76572">here</a>. </p>
<p>However, my calculations show that the real number of people likely to experience a pay cut, should the rate reduction proceed, is actually closer to 355,000 employees – about half the number suggested by Labor.</p>
<h2>‘Could’ vs ‘will’</h2>
<p>The first problem is the difference between the words “will” (what Shorten said in Labor’s <a href="http://thenewdaily.com.au/money/work/2017/03/17/malcolm-turnbull-backs-penalty-rate-cuts">“robo-call” to voters</a>) and “could” (the language used in Labor’s full response to The Conversation, as well as in the McKell Institute <a href="https://mckellinstitute.org.au/research/reports/the-impact-of-the-fwcs-february-23-sunday-penalty-rates-decision/">report</a>). </p>
<p>The McKell report said:</p>
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<p>Around 680,000 Australians are estimated to be working on awards that may be impacted by the proposed changes.</p>
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<p>Do you see the difference? The report is estimating how many people are on the awards affected. Labor has taken that a step further and said in its recorded phone call that this figure relates to how many people <em>will</em> experience a Sunday pay cut.</p>
<p>The McKell Institute report goes so far as to say “the proposed penalty rate changes will impact up to 681,000 workers”. But even “will impact” is not quite the same as saying penalty rate cuts “will rip off 700,000 workers”, as Shorten said.</p>
<p>The crucial point here is that not everyone who is on the award will necessarily work Sundays.</p>
<p>In <a href="http://theconversation.com/qanda-on-the-methodology-for-the-mckell-institutes-report-on-the-impact-of-penalty-rate-cuts-75466">response to questions</a> sent by The Conversation, the author of the McKell Institute report, Edward Cavanough, said:</p>
<blockquote>
<p>The point of the report was not to say “681,000 workers [work] every Sunday and will therefore lose x amount”. This point was really that there are 681,000 individuals currently on awards subject to the changes. Should any of these workers choose in the future to work a Sunday in their current job, they will be subject to a financial impediment … while on any given Sunday, only 250,000 to 400,000 of these workers will be working, a change in the award affects each worker currently on that award, and limits their ability to receive additional remuneration should they choose to work on Sundays. </p>
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<p>Now let’s take a closer look at how the McKell Institute arrived at its estimates.</p>
<h2>How did the McKell Institute calculate its estimate?</h2>
<p>When calculating how many people work in the affected industries (hospitality, retail, pharmacy and fast food), the McKell Institute report used data from the Workplace Gender Equality Agency and IbisWorld.</p>
<p>But the Workplace Gender Equality Agency only includes organisations with more than 100 employees, so its employment estimates don’t give the full picture. The McKell Institute estimate didn’t use official statistics like the Australian Bureau of Statistics (ABS) Labour Force Survey, which covers workers in organisations of any size. </p>
<p>In response to my <a href="http://theconversation.com/qanda-on-the-methodology-for-the-mckell-institutes-report-on-the-impact-of-penalty-rate-cuts-75466">questions about methodology</a>, report author Edward Cavanough said IbisWorld can be more up to date than ABS data, but said ABS data could also be used.</p>
<p>Regarding the McKell report’s calculation of how many employees are paid at award rates, Cavanough <a href="http://theconversation.com/qanda-on-the-methodology-for-the-mckell-institutes-report-on-the-impact-of-penalty-rate-cuts-75466">said</a> his estimates were based on discussions with employee representatives, and a search on previous enterprise bargaining agreement negotiations between the major hospitality union and industry groups. </p>
<p>But the ABS has better data than that on how many people are paid by award, which the McKell Institute didn’t use in its report. </p>
<h2>Using ABS data to estimate how many Australians would likely get a Sunday pay cut</h2>
<p>To estimate how many workers would likely face a Sunday penalty rate cut under the Fair Work Commission’s decision, we need to combine data sources and make some informed assumptions.</p>
<p>We need to know three things:</p>
<p><strong>1. How many people work in the hospitality, retail, pharmacy and fast-food industries?</strong></p>
<p>The ABS <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6306.0/">Survey of Employee Earnings and Hours</a>, conducted in May 2016, found the total number of employees working in the retail trade industry, including pharmacy workers, was about 1,065,800. The total number of employees working in the accommodation and food services industry, including hospitality and fast-food workers, was about 742,200.</p>
<p><strong>2. How many workers are paid by award?</strong></p>
<p>The workers who would be immediately affected by the proposed penalty rate cut are those whose pay is set by an “award”, and not by an enterprise bargaining agreement. Data from the same May 2016 <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6306.0/">Survey of Employee Earnings and Hours</a> show that 42.7% of employees in the accommodation and food services industry were paid by award, along with 34.5% of employees in retail trade. </p>
<p><strong>3. How many of those people work on Sundays?</strong></p>
<p>The Fair Work Commission decision specifically relates to cutting penalty rates on Sundays and public holidays. The ABS <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6333.0">Characteristics of Employment Survey</a> from August 2015 shows on which days of the week employees usually work, broken down by industry.</p>
<p>To calculate how many work on Sunday, I included those who usually work on this day, and those whose work days vary during the week and could include Sunday. Data aren’t available to say whether award-reliant employees work the same number of Sundays as others in their industry. For this calculation, I assumed they did.</p>
<p>There’s an important difference between my calculations and the calculations the McKell Institute made. The McKell Institute’s figure of around 680,000 relates to the number of people in affected industries that it estimates are paid by award and <em>could</em> work on Sunday (even if they do not right now).</p>
<p>I limited my estimate to people who, according to the most recent ABS data, <em>are</em> working or likely to be working on days that include Sunday. The fact that the Fair Work Commission plans to reduce the Sunday pay premium is unlikely to increase the appeal of Sunday work for those who aren’t already doing it. </p>
<h2>Crunching the numbers</h2>
<p>To estimate how many employees the penalty rates decision is likely to affect, I multiplied the total number of employees by the percentage of people paid by award, and then by the percentage who work in Sunday in each industry.</p>
<iframe src="https://datawrapper.dwcdn.net/ZugZ4/3/" frameborder="0" allowtransparency="true" allowfullscreen="allowfullscreen" webkitallowfullscreen="webkitallowfullscreen" mozallowfullscreen="mozallowfullscreen" oallowfullscreen="oallowfullscreen" msallowfullscreen="msallowfullscreen" width="100%" height="354"></iframe>
<p>By these calculations, some 355,000 employees – about 163,000 in retail trade and roughly 192,000 in accommodation and food services – would likely get a pay cut due to the Fair Work Commission’s penalty rates decision. </p>
<p>This is about half the number suggested by Labor’s claim that “Malcolm Turnbull’s cuts to penalty rates will rip off 700,000 workers”.</p>
<p>It’s true the prime minister has <a href="https://malcolmturnbull.com.au/media/interview-with-neil-mitchell-3aw7">used the figure 600,000</a> in at least one interview, but the official Australian government <a href="https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/am2014-305-sub-ausgov-240317.pdf">submission</a> to the Fair Work Commission estimated that the number will be between 300,000 and 450,000.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=229&fit=crop&dpr=1 600w, https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=229&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=229&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=288&fit=crop&dpr=1 754w, https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=288&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/164778/original/image-20170411-31873-1r9im1j.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=288&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://www.fwc.gov.au/documents/sites/awardsmodernfouryr/am2014-305-sub-ausgov-240317.pdf">Australian government submission to the Fair Work Commission.</a></span>
</figcaption>
</figure>
<p>The Fair Work Commission itself has <a href="http://parlinfo.aph.gov.au/parlInfo/download/committees/estimate/13746b70-2bbd-43ea-98c5-8491718706f0/toc_pdf/Education%20and%20Employment%20Legislation%20Committee_2017_03_02_4780.pdf;fileType=application/pdf">not made an estimate</a> of how many people face a cut.</p>
<h2>Verdict</h2>
<p>Bill Shorten’s claim that “cuts to penalty rates will rip off 700,000 workers” is an exaggeration.</p>
<p>It is based largely on a McKell Institute report, which estimated that around 680,000 Australians are working on awards affected by the proposed changes. Crucially, that estimate relates to the number of people in affected industries who are paid under an award but might not currently be doing any Sunday work.</p>
<p>My calculations – based on ABS data on who actually <em>is</em> or <em>is likely to be</em> working on Sundays under the award in affected industries – found that the figure is closer to 355,000 workers. <strong>– Joshua Healy</strong></p>
<hr>
<h2>Review</h2>
<p>This FactCheck provides better estimates of the number of workers that are likely to be directly affected by changes to Sunday penalty rates than those provided in the McKell Institute report.</p>
<p>The author has taken the time to understand the complexities of obtaining estimates of workers affected by the penalty rate cut and the limitations of the assumptions and data underlying the estimates provided by the McKell Institute. </p>
<p>However, the estimates provided by the author do still require a number of assumptions and the data sources are limited. </p>
<p>The first assumption in this FactCheck is that any person who states they work varied days each week is categorised as working on a Sunday. This assumption effectively doubles the new (but more realistic) estimates provided by the author to gain a figure of 355,000.</p>
<p>Removing this assumption and using only those that state they <em>do</em> work on a Sunday (according to the ABS data), the estimated number of workers affected is 169,000 – much, much fewer than Labor’s claim of 700,000.</p>
<p>Further, those who state they work on a Sunday can also select that they work varied days each week within the <a href="http://www.abs.gov.au/ausstats/abs@.nsf/mf/6333.0">Characteristics of Employment Survey</a>. This will mean some people will be double-counted in these estimates.</p>
<p>The second issue is that the estimates of people working on a Sunday are not confined to award wage workers only and are instead derived from all workers in each industry regardless of pay-setting arrangement. This is because the data used cannot provide this breakdown.</p>
<p>The <a href="http://melbourneinstitute.unimelb.edu.au/hilda">Household Income and Labour Dynamics in Australia Survey</a> is able to provide more accurate estimates of workers who meet all three conditions: </p>
<ol>
<li><p>working in retail or accommodation and food services; <em>and</em></p></li>
<li><p>working under an award; <em>and</em> </p></li>
<li><p>working on a Sunday</p></li>
</ol>
<p>Using the HILDA data, the total number of people that I have estimated to be directly impacted by the penalty rate cut is 217,270 – again, much, much fewer than Labor’s claim of 700,000.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=190&fit=crop&dpr=1 600w, https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=190&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=190&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=239&fit=crop&dpr=1 754w, https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=239&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/170077/original/file-20170519-12257-53m4s5.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=239&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The reviewer’s calculations from HILDA 2016 data of the number of workers that will attract a Sunday penalty rate cut.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>This constitutes 9.7% of workers in the retail trade sector and 13.8% of workers in the accommodation and food services sector. The majority of these workers (68%) are women. <strong>– Rebecca Cassells</strong></p>
<hr>
<figure class="align-left zoomable">
<a href="https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/162128/original/image-20170323-13486-72k52f.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The Conversation FactCheck is accredited by the International Fact-Checking Network.</span>
</figcaption>
</figure>
<p><em>The Conversation’s FactCheck unit is the first fact-checking team in Australia and one of the first worldwide to be accredited by the International Fact-Checking Network, an alliance of fact-checkers hosted at the Poynter Institute in the US. <a href="https://theconversation.com/the-conversations-factcheck-granted-accreditation-by-international-fact-checking-network-at-poynter-74363">Read more here</a>.</em></p>
<p><em>Have you seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at <a href="mailto:checkit@theconversation.edu.au">checkit@theconversation.edu.au</a>. Please include the statement you would like us to check, the date it was made, and a link if possible.</em></p><img src="https://counter.theconversation.com/content/75048/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Joshua Healy is a researcher at the Centre for Workplace Leadership, which was established in 2013 with support from the Commonwealth Department of Employment and The University of Melbourne.
</span></em></p><p class="fine-print"><em><span>Rebecca Cassells is a Principal Research Fellow with the Bankwest Curtin Economics Centre. The Bankwest Curtin Economics Centre is an independent economic and social research organisation located within Curtin Business School at Curtin University. The Centre was established in 2012 with support from Bankwest (a division of Commonwealth Bank of Australia) and Curtin University. The views in this article are those of the authors and do not represent the views of Curtin University and/or Bankwest or any of their affiliates.</span></em></p>In a recorded phone call to voters, Labor leader Bill Shorten said that “cuts to penalty rates will rip off 700,000 workers”. Is that true?Josh Healy, Senior Research Fellow, Centre for Workplace Leadership, The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/576392016-04-13T01:08:44Z2016-04-13T01:08:44ZFactCheck: do better pay rates for truck drivers improve safety?<blockquote>
<p>The evidence is that if you ensure that people travel safely in terms of safe rates you will get proper outcomes … you will get improved safety. – Shadow Minister for Infrastructure and Transport, Anthony Albanese, <a href="http://mpegmedia.abc.net.au/rn/podcast/2016/04/bst_20160411_0737.mp3">speaking on</a> RN Breakfast, April 11, 2016.</p>
</blockquote>
<p>Australian Prime Minister Malcolm Turnbull has promised <a href="http://www.smh.com.au/federal-politics/political-news/turnbull-government-to-abolish-road-safety-remuneration-tribunal-if-reelected-20160410-go2pl6.html">to abolish the Road Transport Remuneration Tribunal if re-elected</a>.</p>
<p>That announcement came after the tribunal issued a <a href="http://www.rsrt.gov.au/index.cfm/remuneration-orders/enforceable-rsros/pr350441/">Road Safety Remuneration Order</a> setting minimum pay rates for self-employed truck drivers consistent with the <a href="https://www.fwc.gov.au/documents/documents/modern_awards/pdf/MA000038.pdf">2010 Road Transport and Distribution Award</a>. </p>
<p>Turnbull <a href="http://www.pm.gov.au/media/2016-04-10/joint-doorstop-minister-employment">told reporters</a> that the tribunal is not effective in improving safety and that it undermines owner operator drivers and family businesses. </p>
<p>This FactCheck will not examine whether the Road Transport Remuneration Tribunal is the best way to improve road safety. It confines itself only to testing against the evidence a recent assertion by Shadow Minister for Infrastructure and Transport, Anthony Albanese, that better driver pay results in improved safety.</p>
<p>Is that assertion correct?</p>
<h2>Checking the source</h2>
<p>When asked for evidence to support his statement, Albanese’s spokesman referred The Conversation to Shadow Minister for Employment and Workplace Relations, Brendan O'Connor.</p>
<p>O'Connor’s spokeswoman referred The Conversation to the 2016 <a href="https://docs.employment.gov.au/system/files/doc/other/2016_review_of_the_rsrs.pdf">Review of the Road Safety Remuneration System</a> conducted by PricewaterhouseCoopers for the Commonwealth government, which recommended the tribunal be <a href="https://docs.employment.gov.au/system/files/doc/other/2016_review_of_the_rsrs.pdf">abolished.</a></p>
<p>On the question of pay and road transport safety, the Pricewaterhouse Coopers report said:</p>
<blockquote>
<ul>
<li><p>directly comparing remuneration and safety does demonstrate statistically significant correlations. However, results vary substantially.</p></li>
<li><p>the four most recent papers range in conclusion from a) a very <a href="http://www.is.wayne.edu/mbelzer/pubs/PayAndSafety_Report_020910.pdf">large effect</a>, b) a <a href="http://www.rsrt.gov.au/default/assets/file/exhibits_draftrsro/twu40.pdf">U-shaped curve</a>, in which a large positive effect of initial remuneration rises eventually turns negative, through to <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1937-8327.2007.tb00432.x/abstract">c)</a> and <a href="http://ntl.bts.gov/lib/25000/25000/25037/5monaco.pdf">d)</a> with a very small effect</p></li>
<li><p>the literature is very limited in size and focuses on employee drivers</p></li>
</ul>
<p>Drivers are likely to benefit the most [from tribunal orders] due to increased remuneration and fewer road accidents, followed by government and members of society who face costs following road crashes, and will therefore benefit from an improvement in safety.</p>
</blockquote>
<p>You can read the full response from O'Connor’s spokeswoman <a href="http://theconversation.com/full-response-from-a-spokeswoman-for-brendan-oconnor-57659">here</a>. </p>
<p>If you just read that Pricewaterhouse Coopers report excerpt above, you might think that the evidence is fairly mixed. In fact, the overwhelming weight of evidence supports Albanese’s claim: there is persuasive evidence of a connection between truck driver pay and safety.</p>
<h2>What do other Australian studies say?</h2>
<p>Australian <a href="http://www.rsrt.gov.au/default/assets/File/Subs_on_draft_RSRO_TWU/exhibits/MQ%206.1990.Hensher%20et%20al.pdf">studies</a> conducted since the 1990s <a href="http://trove.nla.gov.au/work/30390391?selectedversion=NBD11011473">found</a> a significant link between scheduling pressures, unpaid waiting time, insecure rewards and access to work, and hazardous practices such as speeding, excessive hours and drug use by drivers. The researchers found that those on trip-based payment schemes (typical for owner drivers but also increasing amongst employee drivers) drove on average 15km per hour faster than those on fixed rate payments (like hourly wages). </p>
<p>A 2001 <a href="https://infrastructure.gov.au/roads/safety/publications/2001/pdf/Fatig_Trans_6.pdf">study</a> found drivers who were paid in terms of the amount of work they did reported fatigue more often than drivers who were paid in terms of the time they were working (for example, hourly rates).</p>
<p>An Australian <a href="http://aje.oxfordjournals.org/content/166/11/1320.full">study</a> published in the American Journal of Epidemiology in 2007 analysed drug use by drivers in both surveys and concluded that:</p>
<blockquote>
<p>the strongest predictors of drug use were payment based on the amount of work completed and fatigue reported as a major problem … The strong association of payment by results and low pay with drug use among Australian long-distance truck drivers is consistent with other research suggesting that economic factors are an important influence on health and safety in the workplace.</p>
</blockquote>
<p>An Australian <a href="http://saferates.org.au/wp-content/uploads/2014/03/Economic-pressure-multi-tiered-subcontracting-and-occupational-health-and-safety-in-Australian-long-haul-trucking.pdf">survey</a> of 300 long haul drivers found owner-drivers experienced significantly worse health scores than employee drivers, especially when employed on the most competitive route (Melbourne - Sydney).</p>
<p>Owner-drivers and drivers working for small firms reported more injuries than those employed by larger firms and owner-drivers had a slightly <a href="http://saferates.org.au/wp-content/uploads/2014/03/Economic-pressure-multi-tiered-subcontracting-and-occupational-health-and-safety-in-Australian-long-haul-trucking.pdf">higher</a> crash rate.</p>
<p>Another <a href="http://www.tandfonline.com/doi/abs/10.1080/15389588.2014.928702">survey</a> of Australian heavy vehicle drivers published in 2014 found:</p>
<blockquote>
<p>piece-rate compensation methods were associated with higher levels of fatigue-related driving than non-piece-rate methods. Follow-up analysis also revealed higher caffeine and amphetamines use among piece-rate drivers for the purpose of staying awake while driving.</p>
</blockquote>
<p>In that <a href="http://www.tandfonline.com/doi/abs/10.1080/15389588.2014.928702">study</a>, the authors found no association between compensation methods and sleepiness.</p>
<h2>What do US studies say?</h2>
<p>A US <a href="http://www.is.wayne.edu/mbelzer/pubs/PayAndSafety_Report_020910.pdf">paper</a> published in 2002 found that driver pay has a strong effect on safety outcomes.</p>
<p>Similarly, a large <a href="http://www.ncbi.nlm.nih.gov/pubmed/26397196">survey</a> of long haul truck drivers undertaken by the National Institute for Occupational Safety and Health in the US detailed scheduling pressure on drivers, widespread unsafe driving practices, regulatory non-compliance and failure to report injuries.</p>
<p>Safety outcomes should not be confined to crashes, although understandably these are the focus of policy and public debate. Safety outcomes include unsafe work practices (like excessive hours, speeding, poor maintenance of trucks and use of drugs). </p>
<p>Most of the research has relied on cross-sectional surveys of drivers, meaning they analyse a snapshot of data from a population at a given moment in time (as opposed to longitudinal studies, which follow the same people over time). Cross-sectional surveys can have limitations.</p>
<p>Comparing safety outcomes between employee and owner drivers is also difficult because owner drivers are much more sensitive to market ups and downs. There has been a convergence of conditions between employee and owener-drivers, especially in the small firms (for example, many employee drivers are paid on trip-based rates now and Award non-compliance has also grown due to competitive pressures). Most truck safety studies have not examined this.</p>
<p>Nonetheless, the research findings are clear and consistent.</p>
<h2>Verdict</h2>
<p>Albanese was correct. There is persuasive evidence of a connection between truck driver pay and safety. <strong>– Michael Quinlan</strong></p>
<hr>
<h2>Review</h2>
<p>This is an excellent brief summary of the literature. Albanese is quite right that “safe rates” gets the public a safer outcome. The literature the expert cites is quite competent (Australians are way ahead of Americans on this) and is some of the same literature I would cite, and have cited, in my own work. I see that this expert has cited my work, which I modestly think is valid and has been peer reviewed.</p>
<p><a href="http://ai.fmcsa.dot.gov/CarrierResearchResults/WordFiles/PayAndSafety_Report.doc">Studies</a> my team performed for the US Department of Transportation Federal Motor Carrier Administration in 2002 demonstrated that higher compensation led to significantly safer truck driver performance. For every 10% more in truck driver mileage pay rate, a very large American truckload carrier found that the probability that a driver would have a crash <a href="http://www.is.wayne.edu/mbelzer/pubs/ILRR%20Rodriguez-Targa-Belzer-2006.pdf">declined 40%</a>.</p>
<p>Research shows this effect is true across carriers. <a href="http://ai.fmcsa.dot.gov/CarrierResearchResults/WordFiles/PayAndSafety_Report.doc">A cross-sectional study</a> of 102 non-union truckload motor carriers found that for every 10% increase in truckie compensation, carriers’ crash rates were 9.2% lower.</p>
<p>In sum, there is ample evidence that supports the relationship between compensation and safety in trucking and across other modes. In my own work, I see it in intercity buses. In others’ work, I see it in airlines and even in rail. <strong>– Michael H. Belzer</strong></p>
<hr>
<p><div class="callout"> Have you ever seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.</div></p><img src="https://counter.theconversation.com/content/57639/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michael Quinlan has received government funding to conduct a NSW truck safety inquiry (2001) and also prepare report assessing evidence on safety and pay link in trucking for the federal government and National Transport Commission in 2008.</span></em></p><p class="fine-print"><em><span>Michael Belzer received funding from the Federal Motor Carrier Safety Administration of the U.S. No current external funding, but funding for pay and safety study came from the Department of Transportation. Project completed in 2003. Funding for driver health and safety report on 2003 driver safety and health conference came from National Institute for Occupational Safety and Health, Centers for Disease Control and Prevention. Member of Transportation Research Board of the National Academies. President of Great Lakes Gateway, a Michigan Not for Profit Corporation. Member of NIOSH/NORA Sector Council. No other relevant memberships.</span></em></p>Was Shadow Minister for Infrastructure and Transport, Anthony Albanese, right to say that evidence shows better pay for truck drivers will improve safety?Michael Quinlan, Director of the Industrial Relations Research Centre, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/262142014-05-06T04:15:04Z2014-05-06T04:15:04ZCommission of Audit’s poverty traps for low wage earners<figure><img src="https://images.theconversation.com/files/47836/original/wwtt4dqk-1399338543.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">The Commission of Audit's minimum wage recommendation shows no understanding of issues facing the low paid.</span> <span class="attribution"><span class="source">'No understanding anytime': artist: Richard Tipping, from the Signed Signs series, Brisbane Powerhouse, 2001. </span></span></figcaption></figure><p>There was nothing in the Commission of Audit’s terms of reference inviting it to make recommendations on the minimum wage. The Commission was asked to produce a report on “government expenditure”.</p>
<p>Yet the commission has <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-11-unemployment-benefits-and-the-minimum-wage.html">recommended fundamental changes</a> to the fixing of the minimum wage including, over time, cuts averaging 21% across the workforce, and up to 31% for South Australian workers and 33% for Tasmanians. (Minimum wages should fall, it recommends, from 56% to 44% of average weekly earnings, and vary between states.)</p>
<p>It also recommends (but <a href="http://www.ncoa.gov.au/report/appendix-vol-1/9-11-unemployment-benefits-minimum-wage.html">in an Appendix</a>, not the main volume of recommendations on which journalists focus) that the responsibility for fixing minimum wages be removed from the independent tribunal, the Fair Work Commission, and be made “administrative”; that is, put in the hands of government.</p>
<p>With minimum wage fixing transformed in this way, the setting of award wages for all workers on classifications above the minimum wage would also be affected, as award wage relativities are integrally related to minimum wages.</p>
<p>Indeed, it is difficult to see an independent industrial relations tribunal surviving such change. Other aspects of pay, such as penalty rates, overtime and allowances – previously the <a href="http://www98.griffith.edu.au/dspace/bitstream/handle/10072/29660/59864_1.pdf?sequence=1">target of the WorkChoices legislation</a> – would eventually be in the hands of government wage setters. The tribunal might end up just handling unfair dismissals and other disputes, as permitted by statute.</p>
<p>The recommendation is all the more peculiar because, other things being equal, a cut in minimum wages will lead to an increase in Commonwealth expenditures. At any given level of benefits, spending on benefits or pensions is higher when minimum wages are lower. This is because people on a lower minimum hourly wage, especially those working only part-time hours, would likely be eligible for higher partial pensions or benefits.</p>
<p>This would increase, not reduce, the deficit - counter to the stated purpose of the Commission.</p>
<p>The Commission cites one reason for abandoning independent minimum wage fixing – that cutting minimum wages would reduce unemployment. It cites one piece of evidence in support of this claim – that minimum wages are higher in Australia than in most other countries. It demonstrates this with a chart (below) depicting 2012 minimum wages in US dollar purchasing power parities in six countries chosen by the Commission.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=385&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=385&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=385&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=484&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=484&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47703/original/bt53j7s5-1399209849.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=484&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Commission of Audit report, page 147.</span>
</figcaption>
</figure>
<p>Yet Australia has one of the lowest unemployment rates amongst developed countries – and the lowest amongst the six countries in the Commission’s selected comparison group, as shown below. Australia’s <strong><em>youth</em></strong> unemployment rate is also the lowest of the six. </p>
<p>The USA, with the lowest minimum wage, had the second highest unemployment rate among the six. There, over 600 economists, including seven Nobel laureates, <a href="http://www.epi.org/minimum-wage-statement/">petitioned for an increase in minimum wages</a>. The chart suggests no significant relationship between unemployment and minimum wages in the countries chosen by the Commission.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/47704/original/kyrch8gd-1399210084.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption"></span>
</figcaption>
</figure>
<p>So the Commission comes up with an idea that is outside its formal mandate, without supporting evidence and with deficit-increasing effects contrary to its stated objectives. How does it deal with the budgetary consequence?</p>
<p>By recommending a tightening of the withdrawal rate for pensions and benefits.</p>
<p>That is, if you are on a pension or benefit and working part-time, the Commission proposes that the government claw back 75% of each extra dollar you earn (rather than the present 50% or 60%). It would mean pensioners and beneficiaries pay <a href="http://www.theage.com.au/comment/hockeys-commission-of-audit-anything-but-responsible-20140505-zr4nz.html">much higher</a> “effective marginal tax rates” than even millionaires.</p>
<p>The situation where you lose most of the additional income you earn is often referred to as a “<a href="http://keithrankin.co.nz/kr_uws1991.pdf">poverty trap</a>” and seen as a <a href="http://www.civitas.org.uk/pdf/workDependencyBriefingApr05.pdf">barrier to labour force participation</a>.</p>
<p>After all, why would you work an extra five hours a week if, after the government clawed back its take, you only got to keep $3 per hour? It wouldn’t cover transport costs, let alone child care.</p>
<p>The Commission claims that these increased barriers to working will <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-11-unemployment-benefits-and-the-minimum-wage.html">“improve incentives to work”</a>. Yet earlier in its report it recognises that withdrawing family tax benefits as you earn more, along similar lines, <a href="http://www.ncoa.gov.au/report/phase-one/part-b/7-5-family-tax-benefits.html">“reduces the incentive to work”.</a> Such self-contradiction is breathtaking.</p>
<p>This is just one of several aspects of the Commission report which would tend to increase poverty, including amongst the low paid. Others include the Medicare co-payment, charging for access to public hospitals, increased co-payments for pharmaceuticals, raising the pension age, cutting wage subsidies for the long-term unemployed, cutting unemployment, sickness and widows benefits for those aged over 60, abolishing vocational education programs and reducing funding for affordable housing and homelessness.</p>
<p>When the Commission makes recommendations well outside its terms of reference, with outcomes contrary to its objectives, it tells you that the driving motivation is not really public finance. It is much more about ideology.</p>
<p>That should not surprise. The review was headed by the then president of the <a href="http://www.smh.com.au/federal-politics/political-news/commission-of-audit--who-what-why-and-where-20140501-zr2af.html">Business Council of Australia</a> (BCA). Its secretariat was also headed by a <a href="http://www.theguardian.com/world/2014/jan/15/australias-budget-deteriorating-audit-head">BCA secondee</a>.</p>
<p>The BCA has long railed against <a href="http://www.bca.com.au/docs/426B6865-33EA-462E-98F3-357D463EE2F2/workplace_relations_action_plan_for_future_prosperity_15-2-2005-pdf.pdf">minimum wages</a> and was an <a href="http://www.aph.gov.au/%7E/media/wopapub/senate/committee/eet_ctte/completed_inquiries/2004_07/wr_workchoices05/submissions/sub045_pdf.ashx">enthusiastic supporter</a> of WorkChoices.</p>
<p>The Coalition had to offer a <a href="http://www.smh.com.au/federal-politics/federal-election-2013/liberals-ire-as-abetz-goes-freelancing-20130822-2seh8.html">minimalist target on industrial relations</a> before the election, but needed an <a href="https://theconversation.com/just-how-much-can-we-really-expect-from-the-national-commission-of-audit-22310">“independent”</a> justification for major action after it.</p>
<p>The mutual interest in having a BCA-led “Audit” Commission after the election deal with such issues was inescapable. But it was certainly not in the interests of low paid workers, for whom the Commission shows no understanding.</p><img src="https://counter.theconversation.com/content/26214/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Peetz receives funding from the Australian Research Council and, as a university employee, has undertaken research over many years with occasional financial support from governments from both sides of politics, employers and unions.</span></em></p>There was nothing in the Commission of Audit’s terms of reference inviting it to make recommendations on the minimum wage. The Commission was asked to produce a report on “government expenditure”. Yet…David Peetz, Professor of Employment Relations, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.