The pain caused by penalty-rate cuts won't be neutralised by phasing in the changes over time and some transition measures being suggested could make things worse, new research claims.

Simulations of various proposals made by political and business leaders to soften the impact of a reduction in Sunday and public holiday penalty rates have found none "capable of truly avoiding the resulting hardship".

The report, by the left-leaning Australia Institute's Centre for Future Work, warns that transitional measures "in some cases, would make things worse."

Last month, the Fair Work Commission triggered a political storm when it ruled Sunday and public holiday penalty rates would be reduced for workers in the hospitality, retail and fast-food industries. It is now considering proposals for implementing the cuts.

Earlier this month, Prime Minister Malcolm Turnbull suggested the penalty-rate cuts be phased in over several years, so they are masked by routine wage increases over time.

But the centre's report says, at current rates of wage growth, it would take 17 years until higher base wages for retail workers fully offset the effect of lower penalty rates on nominal incomes.

"Making matters worse, ongoing inflation during those 17 years would reduce the real purchasing power of wages by 22 per cent: almost equal to the reduction in Sunday pay proposed," it said.

Dr Jim Stanford, director of the Centre for Future Work and the report's author, said wage cuts of the scale proposed, can't be disguised by introducing it in stages.

"Taking several years to implement a painful, damaging policy does not erase the impacts of that policy," he said.

Another transitional proposal is a one-off increase in the minimum wage for retail and hospitality workers to offset the impact of lower penalty rates.

But the centre's report argues this strategy would substantially increase labour costs across retail and hospitality sectors and create pressure to lift base wages paid to workers on other days of the week, too.

"This approach would be fiercely resisted by retail and hospitality employers," it said.

Some have argued that the penalty-rate cuts be "grandfathered" so that existing employees are not affected.

But the centre says this suggestion is unfeasible because employers could easily reschedule existing workers to other days of the week or end their employment in favour of new, cheaper employees.

Dr Stanford said lower penalty rates would exacerbate the challenges caused by the recent bout of very low wages growth in the Australian economy.

"Deferring or phasing in the change cannot avoid the negative macro-economic impacts of lower penalty rates," he said.


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