Reduced Sunday and holiday penalty rates for retail and hospitality workers have failed to ignite the 'boom' in employment, as promised by employer groups who supported the change.

There needs to be more of a focus on the adverse effects of lower wages for the economy as a whole, argues John Quiggin.

Penalty rates are a long-standing and important part of Australia's workplace relations framework. They are rightly seen as an important mechanism to ensure that people are adequately compensated for missing out on family activities, on social and family gatherings, and participating in community events.

In February 2017, the Fair Work Commission decided to reduce minimum Sunday and public holiday rates for some award workers in the retail, pharmacy and hospitality industries. Opposition spokeswoman for justice Clare O'Neil claims it amounts to a pay cut.

This report argues that reform is required to allow for greater flexibility over penalty rates in what is currently a highly centralised system.