Full response from the McKell Institute regarding its report on penalty rate cuts

In relation to this FactCheck on how many workers are expected to be affected by proposed cuts to Sunday penalty rates, the author of the FactCheck, Joshua Healy, submitted the following questions for The Conversation to send to the McKell Institute.

The questions relate to the methodology for the McKell Institute’s February 2017 report on the impact of the Fair Work Commission’s penalty rates decision.

• Regarding how many people work in the industries affected by the Fair Work Commission decision: Retail Trade, and Accommodation and Food Services. The McKell report uses data from the Workplace Gender Equality Agency (WGEA) and IbisWorld. What’s the reasoning behind using these sources? In the case of the WGEA, their remit only includes organisations with 100-plus employees, so their employment estimates are not a full picture. Is there a reason why ABS stats were not used, such as those found in the ABS Labour Force Survey?

• For each of the two industries, you need to know how many workers are paid according to award rates of pay, since these rates are being adjusted by the Fair Work Commission decision. For example, on page 14, the author states: “This report makes a conservative estimate that 75% of hospitality workers … are working under awards.” Can you explain how the author arrived at this this estimate? Is there a reason why the ABS’ Survey of Employee Earnings and Hours was not used instead?

• Once you have an idea how many of each industry’s workers are paid by award rates, you then need to estimate how many of them are likely to be Sunday workers, since the Fair Work Commission decision involves changing Sunday penalty rates. Again, there are official statistics such as the ABS’ Characteristics of Employment Survey on this, but the McKell report doesn’t use them – is there any reason why?

– Joshua Healy, Senior Research Fellow, Centre for Workplace Leadership, University of Melbourne

The following is the response from Edward Cavanough, McKell Institute manager of policy.

First, there are a couple of clarifications with the total figure:

This is the estimated number of all hospitality, fast food, and retail workers on awards that are subject to potential changes to their awards.

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.

I think this is important and justified, as it is clear that, while on any given Sunday, only 250,000 - 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.

While the ALP have argued a $6,000 loss figure for some individuals, our report isn’t the source for that. We outline various hypothetical scenarios that would apply to certain individuals on the award, some of whom would be subject to losses up to $3,500 should the work every Sunday. Obviously, for workers who work only the occasional Sunday, the losses would be less.

In terms of the justification for the sources:

From recollection, the WGEA data was primarily used to determine the gender breakdown across industries. They have exceptional data in this regard. I understand your point with the WGEA not collecting much info unless the businesses employ 100-plus, but in terms of identifying the gender breakdown in each industry, it’s actually really valuable. This is how the 55/45 gender split was determined through this data.

IbisWorld has in my determination a really strong source of the number of total employees in an industry. I personally have used this a lot in the past, and find it can at times be more up to date than ABS data. Hence my natural inclination to use that source in this instance. That being said, the ABS data sets you have tabled below are obviously worthwhile and could also be used.

My estimates of the number of workers in each industry in enterprise bargaining agreements was done through a couple of sources: the first is ringing around and asking about publicly negotiated enterprise bargaining agreements under certain industries (with employee representatives).

You look at negotiations with the SDA (the Shop Distributive and Allied Employees Association, the union representing workers in retail, fast food and warehousing) for example, and there is a bunch of info around how many individuals they’ve signed up to their enterprise bargaining agreements. I’ve assumed the remainder are working as per the award.

With the hospitality figure, this is an estimate again based on a search on previous enterprise bargaining agreement negotiations between the major hospitality union and industry groups. Most hospitality venues are actually individually run, and it is clear through conversations that most hospitality workers work as per the award. Unfortunately, many also work below the award.

The estimate of 75% working as per the award was determined by calculating the percentage of hospitality businesses that were independently run and operated. Most of these types of businesses pay per the award and not as a part of enterprise bargaining agreements.

I think it should be acknowledged as well that my estimate arrived at on February 25 of around 681,000 workers on an affected award was effectively corroborated by the Australian Department of Employment on March 2, 2017. Their estimate is 685,000 for the same measurement (number of individuals on affected awards). (see The Australian that date).

While my estimate was marginally different, I am confident the methodology I’ve adopted was accurate and justified, and I think the Department of Employment’s own statistics also reflect that. – Edward Cavanough, manager of policy at The McKell Institute

Read the FactCheck here.