Current Issue #487

Wage theft thrives in times of precarious employment, and 2020 is a perfect storm

Shutterstock

Last month the Legislative Council’s Select Committee on Wage Theft in South Australia released their interim report. The committee was established to investigate, among other things, the prevalence and impact of wage theft in our state – and it has uncovered a pervasive, pernicious problem.

As part of the committee’s proceedings the McKell Institute submitted their 2019 report The Economic Impact of Wage Theft in South Australia, which estimates that 1 in 5 South Australian workers experience ‘direct ordinary wage theft’ and that, collectively, workers are losing over $500 million a year – half a billion dollars – to wage theft in our state alone.

Wage theft or ‘non-compliance’ is the deliberate non-payment of wages, superannuation, and/or legal entitlements. It includes familiar workarounds like cash-in-hand payments, disingenuous volunteer or internship agreements, and more innovative forms of exploitation like ‘sham contracting’ – a term used to describe the increasingly common practice of employers (illegally) hiring workers as sole-contractors, rather than as employees, as a way of shifting administrative costs and responsibilities onto the individual. 

By prevalence alone it is clear that wage theft is a problem in South Australia that needs to be addressed. One of the issues that sits at the heart of the problem is that the penalty for wage theft is rarely more than what was owed to an employee in the first place. If the worst that happens to most offenders is that they are forced to pay what they already owed, it is not so much a deterrent as a method of payment delay.

There are some exceptions, most notably a recent ruling by the South Australian Employment Tribunal that forced service station chain OTR to pay $65,000 in penalties after an employee was forced to perform unpaid work. But such rulings have been rare, and another, bigger class action against OTR’s parent company offers just a glimpse of how these practices may have proliferated for years.

The tension between workers’ and employers’ interests has long underscored Australia’s political divide, but this issue needn’t be a partisan one. Wage theft is bad for government, business and workers. The McKell Institute’s report outlines how the anti-competitive behavior of what it describes as a “large minority” of bad employers is generating a downward pressure on wages across the economy which, in turn,  suppresses individual purchasing power and negatively impacts government revenue. The unscrupulous behavior of a minority, even a “large minority”, is giving business a bad name. After all, wages are not an optional extra – if you can’t afford to pay your workers, you can’t afford to run a business.

“If wage theft is the symptom, precarious employment is the illness. If we were to put the demographics of workers who are vulnerable to wage theft beside those most likely to be employed precariously in a Venn diagram, we would essentially be looking at a circle.”

But, if wage theft is the symptom, precarious employment is the illness. If we were to put the demographics of workers who are vulnerable to wage theft beside those most likely to be employed precariously in a Venn diagram, we would essentially be looking at a circle. And at the centre of that circle would be young and migrant workers who are less likely to be familiar with their legal entitlements, and less likely to be empowered to advocate for themselves. And that is because at its heart wage theft, like other forms of exploitation, is an issue of power imbalance. 

It thrives off asymmetric employment relationships and insecure employment is inherently lopsided. Calls to follow Victoria’s lead – where legislation criminalising wage theft with up to 10 years’ jail passed parliament in June – are one way to balance that scale, by implementing standards and regulations that ensure employers who knowingly or recklessly steal from their staff are held to account, much as staff who steal from the till are held to account.

Although wage theft was uncovered “in every known industry” we must acknowledge that many of the most precariously employed among us have collected another title this year: essential worker. That means those workers who have been bearing the brunt of the pandemic for the bulk of a year are also more likely to be the victims of exploitative and opportunistic employers.

For all its upheavals, the pause forced upon us by this epidemic does offer an opportunity to take stock and to reassess how we want to emerge from this crisis. What kind of society do we want for ourselves? Australians – and Australian politicians – love to invoke hard work and the ‘fair go’ as central to our national identity. Wage theft fundamentally undermines that idea of fairness, and it’s incumbent upon all sides of politics to make its elimination a priority.

Read the Select Committee’s interim report here

Read the McKell Institute report here

Gemma Beale

Gemma Beale

See Profile

Gemma Beale is a PhD candidate at the Australian Industrial Transformation Institute, Flinders University exploring the relationship between precarious employment and industry closure.

Get the latest from The Adelaide Review in your inbox

Get the latest from The Adelaide Review in your inbox