Has there ever been a federal election that so strongly illuminates the thorny issue of intergenerational inequality? This battle between the interests of wealthy older Australians and their younger less wealthy children and grandchildren is an emerging feature of the twenty first century, an intergenerational divide that infuses the politics of climate change, housing, tax, wages and superannuation. A key intergenerational battleground in this election is the debate over penalty rates. This election will determine whether the interests of older wealthy Australians continue to prevail over the generations that follow them.
Inequality is multi-faceted and the divide between young and old can be overstated. Not all baby boomers are wealthy; indeed, a significant number fall below the poverty line. A significant percentage of young employees have enjoyed above-average pay rises. But as the Grattan Institute has observed: ‘Australians are becoming wealthier, but much of the increase is concentrated in the hands of older generations.’ That increase in intergenerational wealth inequality is largely attributable to housing and superannuation policy together with a labour market that is increasingly hostile to younger workers.
In February 2017, the Fair Work Commission decided to cut penalty rates for work on Sundays and holidays, phased in over three or four years. The Commission accepted employer complaints that Sunday penalty rates were a disincentive to employment, and that employers were restricting trading hours because of them. Lower penalty rates would stimulate employment with further jobs and more hours. Two thirds of those who work on Sundays and holidays are under 34 and in that cohort, a majority are young women. A typical young hospitality employee working a regular eight hour shift on Sundays will have suffered a pay cut of $2100 per annum once the cuts are fully phased in (after 1 July 2019). Retail employees will lose up to $4200 each once their rates have been fully cut (after 1 July 2020).
The divide between the major parties on this issue is stark. The Morrison government has endorsed the decision of the Fair Work Commission to cut the penalty rates for working on Sundays. The Opposition has vowed to reverse the decision. This means that hundreds of thousands of these workers will have their pay cut further on 1 July unless Bill Shorten wins the federal election and enacts his promised new laws.
The labour market confronting millenials is radically different to that experienced by older generations. According to an analysis of recent ABS data by the Centre for Future Work, for the first time less than half of employed Australians enjoy permanent, full-time jobs with access to sick leave and holiday pay. Insecure work, in all its forms, has become the new norm.
The economic case for cutting penalty rates fiercely promulgated by the business community has now been exposed as hollow. In urging the Fair Work Commission to cut rates, the Australian Chamber of Commerce and Industry argued, ‘A reduction in penalty rates on Sundays/Public Holidays will increase employment, increasing the hours offered to employees…’
But this promise has collapsed. In reality, no new jobs have been created by the penalty rate cuts, and no more hours have been offered. That is the shocking assessment of Peter Strong, the CEO of Small Business Australia. He recently admitted to The Australian that, ‘There’s no extra jobs on a Sunday. There’s been no extra hours. Certainly, I don’t know anyone (who gave workers extra hours). It’s been just a waste of time.’
As economist Branko Milanovic states, ‘In every political system, even a democracy, the rich tend to hold more political power,’ creating a danger ‘that this political power will be used to promote policies that further cement the economic power of the rich.’ Billionaire Clive Palmer’s ability to parlay $40 million of his formidable wealth into strong polling and a preference deal with the Liberal Party provides a spectacular and somewhat crude illustration of the phenomenon.
In this election campaign, the voices of young people have been barely heard above the din of those seeking to maintain what academic Emily Millane has recently described as ‘age-based privilege’. Angry, wealthy baby boomers are campaigning to retain tax perks that disproportionately advantage them at the expense of the rest of the community—like franking credits negative gearing loopholes, and capital gains tax concessions.
It is a bitter irony for young workers that several years into an unprecedented slowdown in overall wage growth, the Fair Work Commission decided to cut their pay further. The low pay crisis is an economic and political crisis unlike any other. Unlike crises declared by the Federal Government over border protection, energy prices, or public debt, there have been no bold policy announcements by government to address this one. All that’s been offered is an exhortation to be patient and let market forces work their magic. Indeed, even after the Reserve Bank of Australia acknowledged that the low wage crisis threatened future economic growth, the federal government then announced a plan to fund ten thousand interns to work for below-award wages.
Petrol: meet fire.
Intergenerational inequality inevitably generates intergenerational resentment. There is great popular support for reversing the cuts to penalty rates. However, a recent poll has found that the electorates least in favour of reversing the penalty rate cuts are Higgins, Kooyong, Wentworth and Curtin, the oldest (and wealthiest) electorates in Melbourne, Sydney and Perth.
Australians who have so benefited from the vibrant economy of the past, should now think about how to help the next generation build successful work lives of their own—despite a labour market that is far more hostile and unforgiving than the one we grew up in. Many young people can only find a series of part-time gigs to try to support themselves, in low-wage industries like retail and hospitality. Cutting their penalty rates for that work, is adding insult to injury.
Josh Bornstein is a lawyer and writer. He tweets @joshbbornstein.