Reducing Penalty Rates works against the Laws of Supply and Demand

Jenna Price in her article on penalty rates nails it with those fatal words… price signal.

Penalty rates are a price signal. That signal signifies a scarce supply of labour. That scarcity occurs as not everyone is able or willing, regardless of what the Prime Minister says, of working weekends, public holidays, night-shift or 24 by 7.

By the laws of supply and demand, the only way a scarce supply will satisfy an increased demand is through paying a higher price. Only increased prices will be the incentive a scarce labour force require to satisfy the greater demand of working out-of-hours.

Which means by the laws of supply and demand, that paying people less to work out-of-hours will lead to… less people working out of hours!

One would think that the business people supporting cutting penalty rates would actually understand the laws of supply and demand. Apparently not.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: