Sunday, bloody Sunday

A couple of weeks ago I traipsed off to the local shopping centre near where I live in Melbourne and noticed a surprising number of shops with their shutters down. Many of the other stores had what could be best described as a skeleton staff – usually just one or two bored looking workers hanging by the register.

Given the comments of the Australian Retailers Association this week, I expect more than a few of the shops with skeleton staff will decide to pack it in on a Sunday for a very simple reason – rising wages and penalty rates in the retail and hospitality sector mean many shops are losing money by trading on a Sunday.

Australian Retailer Association executive director Russell Zimmerman made penalty rates the focus of his evidence to the Productivity Commission’s hearings on the retail sector earlier this week.

The ARA argument is that the Labor Government’s decision to harmonise awards in sectors such as retail and hospitality have resulted in a spike in penalty rates and wages in some states.

“It is vital that retailers remain competitive,” Zimmerman said on Monday.

“We don’t want to return to Work Choices. We believe that employees do need some compensation (for working weekends) but it is a seven-day-a-week business and you just cannot compete with the wages they’re paying at the moment.”

The penalty rates problem provides a perfect snapshot of the structural and cyclical forces smashing the retail sector at present.

As Zimmerman says, retailers want to extend trading hours as far as possible to compete with the always-open convenience of online shopping. But structural changes (that is, the Labor Government’s modern awards) and cyclical changes (that is, the consumer spending strike) are making it unprofitable to trade at some times such as Sunday, where penalty rates mean hourly wages are typically two-and-a-half times normal.

Five years ago, when consumer spending was booming and the online threat was much lower, retailers could have perhaps coped with the increase in penalty rates.

But those days are gone – the GFC and the frankly ineffective way that Australian retailers have risen to the online challenge made sure of that.

The question is: Where to from here?

The focus of the retail lobby’s attention (perhaps because it’s seen as the easiest fix) is the Labor Government’s Fair Work Act and the increased penalty rates it has ushered in.

However, unions have predictably slammed the retail lobby group over the ideas that penalty rates for Sundays, public holidays and Saturdays might be wound back, saying that workers shouldn’t be penalised for something which isn’t their fault.

That may be so, but unions may unfortunately find themselves in a position that they’ve been in before in industries like manufacturing – protecting wages and conditions is all good and well, but when shops start shutting the doors on Sundays, hours and jobs will start drying up.

It could be argued that in the case of retail and hospitality, industrial relations is another area of our economy that has been overtaken by the pace of structural change.

Back in 2007, when Kevin Rudd and Julia Gillard floated their Forward with Fairness policy that underpinned the Fair Work Act and the award modernisation process, Australia appeared well placed to handle a shift to higher wages.

Four years on, the Australian economy has changed, particularly in sectors such as retail.

If our IR system can’t change with it, everyone – consumers, unions, employees – is going to have to get used to the fact more shop shutters will be staying down.