Paying the Penalty? The High Price of Penalty Rates in Australian Restaurants

As a result of decisions by numerous state and federal commissions and tribunals, most recently the Fair Work Commission, penalty rates have become an important influence on the labour market in Australia. The paper investigates how relevant are the myriad penalty rates to today's social mores and the modern service-based economy. What are the consequences of penalty rates for employment, productivity, profitability and consumer welfare? What would be the impact of their removal? A number of data sources are analysed in the context of the economics of labour markets to answer these questions. The restaurant, cafe and catering industry is used as a specific example to illustrate the effects of penalty rates.