Analysing the employment impact of Sunday wage premiums reductions: Implications for minimum wage research

Abstract

This article tests the employment impact of recent reductions in Australian wage premiums, or penalty rates, using surveys of 1828 employees and 236 employers in Retail and Hospitality sectors. In applying wage premium reductions for Sunday work, the national regulator, the Fair Work Commission, anticipated improvements in trading hours, employment and hours worked as a consequence. However, the authors found no statistically significant evidence for these predictions. Nor did difference-in-differences methods indicate substitution of workers subject to cuts for those who were exempt. The authors present the first systematic purpose-designed empirical evidence on the employment impact of wage premiums. In the absence of empirical evidence, the regulator had referred substantially to minimum wage research. This study also has implications for minimum wage research, and contributes to it with a novel methodology examining both aggregate hours and employment, comparing those subject to cuts with those not, and surveying both employees and employers.