Myer CEO Bernie Brookes was in the news yesterday, complaining that it's too expensive to employ staff because holiday agreements mean that Myer has to pay at least $62 an hour for the privilege. He argues that being internationally competitive would require paying around one-ninth of that figure. Let's put this in perspective: on a conservative estimate and with no leave loading whatsoever, Brookes gets paid more than 10 times as much per hour as Myer permanent employees earn on a public holiday, and 16 times more than casual staff.
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Our sibling publication Business Insider noted yesterday that Brookes had spoken at an Australian Retailer Association event (hardly an unsympathetic audience) about labour costs in Australia. We'll focus on two of his complaints: that staff on public holidays are spectacularly expensive and that overseas staff are much cheaper and provide the baseline we should compete with.
Firstly, on the subject of casual staff, Brookes had this to say:
When we open on Anzac Day, I think the cheapest person is $62 an hour because of the penalty rates.
How do those numbers come about? According to the current Myer Enterprise agreement, full-time Level 1 staff work 38 hours a week and earn $709 per week. That works out at $18.66 an hour -- a long way short of $62.
However, no-one routinely gets paid that rate to work on a public holiday, because full-time staff are given the day off on public holidays. This is why public holidays are public; we all get them.
If a full-time employee agrees to work on a public holiday, they are entitled to a 250 per cent loading under the agreement. I suspect this is the basis for Brookes' $62 an hour figure, though this actually slightly understates the case (a 250 per cent loading on $18.66 comes in at $65.30). I'm not surprised he doesn't like it, but that number doesn't tell the whole story.
If full-timers aren't available , those roles have to be filled by casuals, and the enterprise agreement (which, let's remember, Myer agreed to) grants a 150 per cent boost to the hourly rate on public holidays, designed to compensate for the fact that they don't receive holiday pay or other benefits. A 150 per cent boost to the $18.66 rate works out at $46.65 -- not insubstantial at all, but somewhat lower than the number Brookes is complaining about.
The bottom line? It's definitely costly to open on a public holiday, but it's not true that $62 an hour is the opening figure for everyone who might happen to be working that day. Equally importantly, it is not a regular cost of business every time your local Myer opens its doors. Most people are being paid way less than that most of the time.
Next, let's compare that figure Brookes' own salary. Myer's most recent annual report discloses that in the 2011-2012 financial year, Brookes made $3.08 million before tax. (By comparison, a Level 1 staffer would make $36,868 in a full year if they work regular hours.)
Let's be really generous and assume Brookes worked twice as many hours as a normal full-time employee and took no holidays whatsoever. That works out at an effective hourly pay of $779.35 an hour -- more than 10 times more than the permanent staff he is complaining about on public holidays, and 16 times as much as the casuals. And that's the average hourly rate; no penalty rates attached. Brookes makes 40 times as much as the standard Level 1 hourly rate.
You could argue share benefits don't count. I'd say that's ridiculous; pumping up the share price is a key task for the CEO, and that's why some of their compensation is paid that way. But if we made that assumption, looked only at his base salary of $1.74 million, his hourly rate (again assuming a double workload) is still around $429 an hour. If we're looking for the most expensive employee, this seems like the place to start.
Something else to note: Brookes earned that money and didn't receive a performance bonus, since Myer didn't meet targets. So that's not a reward for doing well; it's a basic salary for not doing exceptionally.
With that said, let's look at Brookes' second complaint: the cheapest rates paid in some roles overseas:
[Retail merchandise is] picked out of a distribution centre in Birmingham at GBP4.30 ($7.12) an hour, and we're trying to get that same product picked at a distribution centre in Altona at $27 an hour.
First point: according to the UK government, the per-hour national minimum wage is GBP6.31 for anyone over 21, and GBP5.03 for someone 18-20. So I'm really not sure where the GBP4.30 figure is coming from.
Second point: comparing the absolute maximum you can pay someone here with the absolute minimum somewhere else is highly disingenuous. As is comparing pay rates for customer-facing roles for those for someone working in a warehouse. The jobs aren't the same.
Thirdly: I wouldn't dispute that people overseas often get paid much less than Australia, and you don't need to head to third-world economies to make that point. Just last week, we calculated that people employed at McDonald's in Australia earned about twice as much as McDonald's workers in the US.
However, that didn't mean they were overpaid; by our analysis, they still barely had enough to cover living costs. In the US, where the wage was similar to what Brookes was suggesting as a competitive UK wage, someone would have to work two full-time jobs to make ends meet. If Brookes wants to argue that we should force all his staff to work two jobs just to live, that's his choice, but let's be very clear what he is actually arguing for.
Brookes also had this to say:
We have seen an enormous uncompetitiveness occur and decreasing productivity in Australia, that I think the next generation should not only be scared about, but they should be frightened to the extent of making more noise to do something about it.
I don't doubt that competing with overseas stores that don't pay decent wages is a major challenge if you happen to manage Myer. I strongly doubt that suggesting we slash wages by a factor of ten and render people unable to survive on a basic wage is the answer. I find that much scarier than Brookes' current corporate predicament.
I'm all for discussing costs, but let's not do it in a vacuum. In particular, let's not assume that a man effectively being paid more than $780 an hour is in the ideal position to propose that paying people $7 an hour is reasonable.