Let’s be clear about what the Fair Work Commission has done.



It has cut the pay of some of the lowest-paid workers in the country – not all of them by any means, but some of them – it’s hard to say with precision just how many, but it’s fair to assume in the hundreds of thousands.

The commission acknowledged the human consequences of its ruling in the decision handed down on Thursday.

The judgment references testimony from two trade unions during its deliberations which provided “an eloquent individual perspective on the impact of the award variations”.

“Many of these employees earn just enough to cover weekly living expenses, saving money is difficult and unexpected expenses produce considerable financial distress. The immediate implementation of the variations to Sunday penalty rates would inevitably cause some hardship to the employees affected, particularly those who work on Sundays,” the summary of the full bench decision says.

In the human world, this might be a reason not to proceed.

But the full bench determined it would proceed with its on-balance judgment, and provide “appropriate transitional arrangements ... to mitigate the hardship caused to employees who work on Sundays”.

Perhaps these transitional measures might mitigate the harshness. We’ll have to wait and see.

The on-balance judgment of the Fair Work Commission in relation to cutting penalty rates, if you are interested, is threefold.

Sunday penalty rates cut by up to 25%, hitting retail and hospitality workers Read more

The first aspect of the judgment is Sundays are just not what they used to be in a modern, 24/7, serviced-based economy; the second is cutting penalty rates might generate more employment; and the third is cutting penalty rates will likely lead to an extension of trading hours, which could allow those people facing a pay cut to chase the lost dollars through working extra hours.

But this ruling doesn’t take place in a vacuum.

As my colleague Greg Jericho pointed out in a blog published before the decision, this cut takes place in a very specific context.

The cut to penalty rates in the retail, pharmacy, fast food and hospitality industries comes at a time when workers’ wages in Australia are growing at record lows, and real wages remain at the level they were nearly four years ago.

The Reserve Bank governor noted this week household debt was at record highs. The combination of these two factors means household incomes are being squeezed.

As the RBA governor Philip Lowe said, increased indebtedness increases household stress, and if households soon decide they have borrowed too much, they’ll put the brake on consumption.

If consumption moderates “sharply” (Lowe’s term), this will hurt the economy and and employment. “It is difficult to quantify this risk, but it is one that is difficult to ignore,” the governor said.

So that’s the real-world picture lurking outside the quiet contemplation spaces of learned industrial tribunals, and outside the zero-sum game of politics.

Australians who are working very hard, and trying to get ahead, are feeling like they are standing still or sliding backwards. In that context, cutting wages goes down like the proverbial lead balloon. The Fair Work Commission’s judgment assumes wider potency than the people it directly affects.

Now let’s cast our glance in the direction of the government, which is in a tight political spot courtesy of this ruling.

While there are people who will be sitting in despair around their kitchen table tonight wondering how they are going to absorb the impact of a pay cut – the commission’s ruling will send a little frisson of excitement into the Liberal party base.

This is fighting stuff from the Fair Work Commission, cutting penalty rates. It’s a reason to regroup then rally, then campaign – pushing the government to move ahead with more labour market deregulation.

Happy times.

Except the government has given no public sign it wants to bite this particular bullet. No conservative government has wanted to bite this bullet seriously since the political debacle of Work Choices.

Australia's record household debt a threat to economy, says Reserve Bank chief Read more

But because of the enlivened sensibilities of the conservative base, the Turnbull government is also not in a position to do what sharp daily politics would demand: distance itself politically from the ruling of an independent umpire.

It has to try and walk a convoluted line. The employment minister, Michaelia Cash, weaved around the various sensitivities thusly on Thursday.

Endorsement. (Independent tribunals are entitled to make independent decisions, that’s welcome.) And, look over there. (If people are unhappy, this is all Bill Shorten’s fault, because he changed the law to require penalty rates be included in four-yearly award reviews.)

Nice try. But I’m not sure that will wash, not when the guns of the union movement can be heard firing test rounds in the distance.

Thursday’s decision is not only galvanising for Liberal true believers, it gives the union movement, and progressive political parties, something tangible to campaign for, a development to rail against.

And given the ferocious efficiency of the progressive field operation at the last federal election, that’s going to send a little shiver through a government which is already behind, and struggling to get secure a toe hold.