• Two things that make hospitality bearable: tips and penalty rates. (Getty Images)Source: Getty Images
Cutting penalty rates in Australia is a degrading assault on low-income workers, writes Ruby Hamad, forcing hospitality workers to rely more and more on tips to make ends meet, pushing us ever closer to US-style income inequality.
By
Ruby Hamad

22 Jun 2016 - 1:07 PM  UPDATED 22 Jun 2016 - 10:47 AM

Penalty rates are under threat again. Sunday rates could soon be a thing of the past when the Fair Work Commission hands down its decision on whether to bring them in line with Saturday rates for hospitality and retail workers, shortly after the federal election.

Whatever the commission decides, this issue won’t be going away any time soon, if ever. Attacks from conservative politicians and business groups have been relentless in recent years. Former Liberal PM Tony Abbott (incorrectly) implied there was no difference between working weekends and during the week, while campaigns like ‘Too Big To Ignore’, claim ‘excessive’ penalty rates make opening on Sundays too prohibitive for many small businesses, treating the issue as an attack on employers rather than as compensation for workers.

As someone who worked in hospitality for many years, often all weekend and five nights per week, let me leave you in no doubt as to how much you miss out on doing this type of work. Dinners with friends, music gigs, movies, or just merely hanging out. Effectively, you live your life in reverse.

There were two things that made this bearable: tips and penalty rates.

In an Australian context, tips were a nice bonus, something that helped make up for the drudgery of having no meaningful social life, rather than necessities to be absolutely relied upon to pay the bills.

However.

Working as a waiter in the US last year has made me both dubious about the benefits of tipping and more convinced than ever that penalty rates are nothing to be messed with. If the dodgy US model teaches us anything at all, it should be that reducing pay for service workers will have unpleasant consequences for consumers as well as workers.

In an Australian context, tips were a nice bonus, something that helped make up for the drudgery of having no meaningful social life, rather than necessities to be absolutely relied upon to pay the bills.

Cutting penalty rates will make hospitality work (where shifts can be as short as three hours) unviable for many workers, pushing us ever closer to the US model where the burden of ensuring people earn a living wage is outsourced to customers.

Working part-time in a New York restaurant for a little extra income, I was paid just $5 an hour for my trouble, for shifts ranging from four hours up to, on busy public holidays, 16 hours. No penalty rates. No overtime. And, although minimum wage is in the $7 per hour vicinity in most states, industries with ‘tipped’ workers, including hospitality, are permitted to pay their workers much less.

Although just a second job for me, for many of my co-workers it was their only or primary source of income. In a system where employers are inexplicably let off the hook when it comes to fair wages, it fell to customers to make up the shortfall. There is a reason servers expect 18 per cent minimum tip in the US; anything less means they cannot afford the cost of living, especially in a city as expensive as New York. Tips are not regarded as an option.

This arrangement worked out reasonably well when the restaurant was busy, not so well when customers were few. Factor in that floor staff have to ‘tip out’ bartenders and food runners, and give the taxman’s his share (yes, tips are taxed), and some days you wonder why you bothered coming in to work at all. Think $50 for a five-hour shift.

In the US, an increasing number of restaurants are voluntarily raising their staff wages and banning their customers from tipping altogether.

Not fun for workers, but also burdensome for customers. Hospitality staff are not the only service workers in the US who require tips, with everyone from taxi drivers to hairdressers to the valet expecting - and needing - their 15-20 per cent.

This model in the US is neither fair nor sustainable. And yet, the unfairness is so entrenched and normalised, that it is not the employers who grossly underpay, but the customers who fail to tip or who under-tip that incur the wrath of spurned workers.

Tipping is a fine tradition when it’s about throwing a little something extra for good service. It really does make the job that much more enjoyable. But that’s not what’s happening in the US and the danger in cutting penalty rates here is that it will make hospitality workers rely more and more on these tips to make ends meet, pushing us ever closer to US-style income inequality.

It is baffling the way so many Australian politicians (and business leaders) seem determined to march us into the direction of the United States. Think of the attacks on health and Medicare, and the ever-present threat of university fee deregulation, as well as this degrading assault on low-income workers.

Even more incongruous is that it’s happening just as the US is finally arising from its slumber. The Fight for 15 movement, seeking a blanket rise in minimum wage to $15, has seen some success as many fast food workers and other low-wage earners mobilise to demand a living wage. At the same time, an increasing number of restaurants are voluntarily raising their staff wages and banning their customers from tipping altogether.

Why is Australia going in the opposite direction? Having spent several years living in the US over the last two decades, I have experienced its income inequality up close in all its grotesque unfairness. I have seen it get more pronounced over the years. This is not a road that Australia wants to go down. 

 

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Where are we on penalty rates in Election 2016?
The issue of penalty rates will be in play during this election period because the Fair Work Commission is examining weekend rates for hospitality workers. Their decision will come after election day but Labor is being asked to take a stand now.