Labor Regulation Reform and Sectoral Employment Outcomes: A Case Study of Penalty Rate Reductions in Australia
In 2017 Australia's central employment relations regulator determined a decrease to wage premiums (penalty rates) paid to minimum wage Retail and Hospitality industry employees on Sundays and public holidays. Employers claimed that these penalty rate cuts would stimulate greater employment levels and hours and reduce pressure on owner-managers to work on these days. In this paper, we test these claims for public holiday employment outcomes using a natural experiment setting, a unique survey of both employer and employee outcomes, and difference-in-differences modelling accounting for program non-compliance. Ultimately, we failed to establish any evidence for positive public holiday employment outcomes emanating from the penalty rate reduction. We discuss the potential reasons for this outcome, including the inadequate and flawed evidence presented in the penalty rate determination case, confounding factors associated with adjacent minimum wage rate determinations and weak income growth affecting consumer confidence and demand in Retail and Hospitality sectors.