Case Study – Wage theft in Australia
Introduction
Human resource is one of the factors of production in any organization that strives to make a profit or even help the less privileged in the society. Employees in the organization may be exploited for the benefit of the organization and this has proved to have a lot of impacts both socially and economically. Employee exploitation in this report is wage theft. Wage theft refers to non-payment or underpayment of full wages to which a worker in the firm is legally entitled to. Wage theft is illegal as it is malpractice by employers to deny employees their rights due to various reasons[1]. This report is written to highlight wage theft in Australia, its forms, and its effects on the workers and economy.
Forms of wage theft
Wage theft in Australia takes various forms and they include:
Overtime violations; Employees in the organization should be compensated for working above the stipulated working hours. The organization should reimburse the employee for the times spend doing the work as the employee should be somewhere else doing his or her business. This is not the case in some Australian firms as workers are forced to work overtime without pay[2]. The overtime work may result due to the employee performing tasks that should be performed by two people but the firm does not want to employ more employees to save the organization revenues.
Minimum wages violations: Workers in Australia especially migrant workers are faced with the problem of receiving wages which are below the recommended minimum wage in the country. This is due to the fact that the workers are threatened to be deported if such complaints are made. The threats force workers to receive wages that are below the minimum wages.
Illegal deductions: Some employees in Australian firms face illegal deductions from the employers and this leads to employees receiving wages which are below the recommended minimum wages in the country.
Overview of extent of wage theft in Australia
Wage theft in Australia is widespread starting with retail stores, fast food joints, labor hire companies, and unpaid internships. 17 % of the employee workforce has experienced illegal deductions in the workplace and this shows the extent to which the wage theft problem in Australia has spread. 51% of workers do not receive payment for overtime work or are underpaid. Wage theft in Australia has affected many workers and this has also affected the economy.
Impact of wage theft on workers
Wage theft has a lot of impact on workers in Australia which cannot be ignored in this report. The wage theft problem is faced by people who are not aware of the workers’ rights. Migrant workers and young workers are vulnerable to wage theft in Australia due to various reasons such as threats in the workplace[3]. The threats forced the migrant and young workers to endure the poor working conditions with poor payment so as to survive, pay bills, and avoid deportation. The vulnerable workers in Australia are faced with various forms of wage theft which include;
Full wage theft: Migrant workers in Australia in some cases miss getting paid for work done. This is the most brutal form of wage theft in the country. Employees work overtime or during breaks such as lunch breaks and fail to receive payment for the work done. The employers can withhold the payment of the workers due to the legal status of the workers as they may be in the country illegally and this is what worsens the working conditions of many migrant workers in Australia.
Misclassification of employees: Workers in Australia fail to receive benefits entitled to them due to misclassification of the employee job group. This forces the employee to work and receive payment which is below the normal rates due to being in the wrong job group. Independent contractors do not enjoy the same benefits as other employees as the worker is not entitled to minimum wages, insurance, employee protection, and overtime pay.
Minimum wages violations: The migrant workers’ legal status prevented them from receiving the necessary payment as employers took advantage of the situation. The workers endure the violations due to fear of being reported to the border security agencies and also avoid losing the student visas for working above the recommended working hours.
The migrant and the young workers are vulnerable to wage theft due to various reasons such as:
Legal status: The migrant workers and student workers are vulnerable to wage theft as they are not full citizens in Australia and some employers take advantage of the situation and this has led to the exploitation of the workers. The workers undergo wage theft without complaining to the authorities so as to avoid being deported.
Discrimination: Discrimination takes a lot of forms and in this case, it takes the form of wage theft. The migrant workers are discriminated against for not being the citizens of Australia. The workers get jobs with poor working conditions which are paid poorly as the migrant workers have no alternatives in the job market. Immigrants in Australia in many industries receive fewer wages than the white citizens of Australia.
Language and culture barriers: Workers from diverse language and cultural backgrounds are more likely to experience wage theft. The language barrier hinders the worker from getting many job opportunities and this may force the migrant worker to only access the poor quality jobs which pay poorly due to the nature of the work[4]. The language and culture barrier leads to workers getting insecure kind of jobs which are more vulnerable to wage theft in Australia.
Lack of knowledge: Migrant workers and young workers are not aware of employee rights in Australia. The lack of knowledge of employee rights leads to the exploitation of the workers. Employers may take advantage of such ignorance and exploit migrant workers.
Youth unemployment: Young unemployment forces youth in Australia to experience wage theft due to a lack of alternatives. The available jobs in the market are paying below the recommended wage rates and the youth are forced to take up the jobs so as to pay survival bills such as rent and food. The youth are forced to endure wage theft as there are no alternative job opportunities and this makes youth vulnerable to different forms of wage theft.
Lack of union representation: Migrant and young workers are not represented by union organizations in Australia due to various reasons such as lack of documentation and ignorance among the workers. Union organizations are responsible for fighting for workers union in Australia. The young workers and migrant workers due to lack of representation leads to wage theft in the organization.
Social and economic impact on workers
Wage theft has a social impact on workers’ stress and depression. Workers are exposed to poor working conditions with poor pay. The threats faced by the workers cause stress which affects the social life of the workers. The workers have no resting time and this affects the worker’s mental and physical health which affects the social life of the worker.
Wage theft affects the living standards of the workers due to receiving wages which are below the minimum wages in Australia. Employees are not able to afford the basic commodities and this will force workers to work overtime to earn extra income[5]. This kind of work-life contributes to the low-quality life of the workers and this may lead to adverse effects such as homelessness.
Wage theft will lead to employees taking up loans and this will lead to low saving. The workers take up loans so as to compensate for the lost income of the workers. This will affect the future life of the worker due to a shortage of savings for investment and this will lead to financial insecurity among the workers experiencing wage theft in the workplace.
Broader impacts of wage theft
Wage theft has huge impacts to the extent it has impacts on employers who are paying workers correctly and does not engage in the malpractice of wage theft which exploits employees in the organization. Wage theft leads to an anti-competitive effect on rival businesses. Businesses in the same industry compete for supremacy to control a large market share. Organizations try hard to reduce the cost of doing business and one of the costs which can be reduced is wages and salaries[6]. The companies which are engaging in wage theft malpractices are saving a lot of resources and makes the companies operating ethically to appear as less performing. The companies engaging in wage theft even receive awards for making huge profits and this discourages the companies from paying workers well. Such actions may force the ethically operating companies to start breaking the law. The organizations begin to compete on who can break the set rules better and this will adversely affect the employees in the firm.
Wage theft also affects the broader economy in Australia as it leads to a reduction in consumer demand. The economy has workers who are poorly paid and cannot afford basic commodities offered by various businesses in the country. The businesses Australia lacks revenue due to lack of demand for commodities and services offered by the business[7]. The businesses in Australia are not able to employ people due to a lack of resources and this leads to an unemployment increase in Australia. Unemployment is one of the contributors to wage theft and the cycle continues. Lack of consumer spending in the country affects the whole economy which results to slow economic growth or even stagnant economy. Spending has a ripple effect on the economy and lack of spending power among the workers affects the whole economy of the country.
Wage theft leads to reduced taxes as workers are paid low wages and this translates to the taxation of low wages. The government will have fewer resources and this may affect service delivery in the country. The government due to a shortage of resources may lack resources needed to grow the economy of the country and this will affect economic growth.
Solutions
Wage theft should be made a criminal offense as it involves exploiting workers’ rights intentionally in a systematic manner to avoid detection by the fair work commission in Australia. Employers who are more aware of workers’ rights use the knowledge to exploit the ignorant workers and such actions should be criminalized and carry a heavy prison sentence so as to discourage other employers who engage in the wage theft malpractices in Australia[8]. There is no reason to underpay workers and wage theft should be criminalized at all costs because creating exemptions will lead to the emergence of loopholes that employers can exploit to exploit workers in the work place.
Enough resources should be allocated to the relevant authorities engaged in fighting this menace. This will help to empower the organizations so as to have enough resources in terms of manpower to carry out a comprehensive investigation which will lead to arrests of the wage theft culprits. Enough resources will also help to reduce the case of corruption in the investigating entities and this will lead to better results which can help to eliminate wage theft in Australia.
Penalty increases will also help to eradicate wage theft in Australia. Interest in the stolen wages should be applied and the affected party should be awarded the lost income. Time value of money should also be utilized when calculating the interest and penalty to be imposed on the employer. This will discourage the vice as employers will be afraid of the repercussions and hence act according to the set employment acts in Australia.
Whistleblowing incentives and protection should be enhanced. Employers have financial muscles than whistleblowing employees. The government should establish incentives that will encourage more people to report cases of wage theft in various organizations[9]. The whistleblowers also need to get the needed protection as whistleblowing may attract threats. The whistleblowing incentives and protection will encourage reporting of wage theft cases to the necessary authorities and this will help in the fight against wage theft in Australia.
Conclusion
Wage theft occurs when the employer denies the employee the stipulated minimum wages. Wage theft occurs in many forms which include overtime violations, salary denial, minimum wage violations and illegal deductions. The most vulnerable groups experiencing this vice are migrant workers and young workers. Criminalizing wage theft and increasing penalties will help in eradicating the problem .
References
Berg, Laurie, and Bassina Farbenblum. “Wage theft in Australia: Findings of the national temporary migrant work survey.” Available at SSRN 3140071 (2017).
Cavanough, Edward, and Lachlan Blain. “Ending wage theft: eradicating underpayment in the Australian workplace.” (2019).
Clibborn, Stephen, and Chris F. Wright. “Employer theft of temporary migrant workers’ wages in Australia: Why has the state failed to act?.” The Economic and Labour Relations Review 29, no. 2 (2018): 207-227.
Farbenblum, Bassina, and Laurie Berg. “Wage Theft in Silence: Why migrant workers do not recover their unpaid wages in Australia.” UNSW Law Research Paper 19-1 (2018).
Macdonald, Fiona, Eleanor Bentham, and Jenny Malone. “Wage theft, underpayment and unpaid work in marketised social care.” The Economic and Labour Relations Review 29, no. 1 (2018): 80-96.
Thornthwaite, Louise. “Australia’s wage theft crisis.” Advocate: Journal of the National Tertiary Education Union 24, no. 1 (2017): 28.
Thornthwaite, Louise. “The living wage crisis in Australian industrial relations.” Labour & Industry: a journal of the social and economic relations of work 27, no. 4 (2017): 261-269.
Whiteford, Peter, and Alexandra Heron. “Australia: Providing social protection to non-standard workers with tax financing.” (2018): 43-73.