Review could lead to working poor: Labor

Federal Labor fears the government's workplace review is so broad it could create a class of US-style working poor.

Penalty rates, the minimum wage and unfair dismissal laws are among the issues being reviewed by the Productivity Commission, which has called for fresh ideas on Australia's industrial relations system.

Despite previously saying the government had no intention of lowering or abolishing penalty rates, Prime Minister Tony Abbott insists a better balance is needed to ensure business is not discouraged from hiring workers.

But opposition employment spokesman Brendan O'Connor says there is no evidence to support the argument that cutting workplace conditions improves employment prospects.

He has demanded Mr Abbott rule out taking an axe to penalty rates and the minimum wage.

The commission's terms of reference were so wide "as to impact on every possible area that would affect Australian workers in their workplaces", he said.

Up to 4.5 million Australians would lose out if penalty rates were cut, Mr O'Connor claimed, while 1.5 million were dependent on the minimum wage.

"What we do not want to see ... as happens in the United States, millions of workers who work a full-time week and yet they receive an income lower than the poverty line," he told reporters in Melbourne on Tuesday.

Treasurer Joe Hockey said the government would seek a mandate at the next election for any changes it wants to make to the industrial relations system.

"We want to seek the support of the Australian people on this sort of change," he told Macquarie Radio.

Flagging a coalition push for greater workplace flexibility, Mr Hockey said everyday life was "going 24/7".

"Small businesspeople don't clock on at nine o'clock in the morning and close at five o'clock," he said.

"That's not the way small business operates."

Unions fear the review will lead to the erosion of working conditions, but businesses say change is needed to give them more flexibility, and to create more jobs.

Employment Minister Eric Abetz has accused Labor and the unions of mounting a scare campaign about the review.

"The story of the Productivity Commission inquiry appears likely to become the story of the union bosses who cried wolf," he said.