How to stop the exploitation of migrant workers in Australia

The serious problem of migrant worker exploitation shot to prominence in 2015, when a joint Fairfax Media and Four Corners report uncovered widespread underpayment of 7-Eleven employees.

Recent governments have taken some steps to reduce exploitation, such as increasing maximum penalties for firms that knowingly underpay their workers and making improvements to the small claims process. But these changes don’t go far enough, and progress has stalled since the pandemic.

Our new report, Short-changed: How to stop the exploitation of migrant workers in Australia, provides solutions to stamp out the exploitation of migrant workers.

Trent Wiltshire, Deputy Program Director, discusses the report with co-authors Brendan Coates, Program Director, and Tyler Reysenbach, Associate.

Transcript

Trent Wiltshire: The serious problem of migrant worker exploitation shot to prominence in 2015 when a joint Fairfax Media and Four Corners report uncovered widespread underpayment of 7 Eleven employees. Recent governments have taken some small steps to tackle exploitation, such as increasing maximum penalties for firms that knowingly underpay their workers and making improvements to the small claims process.

But these changes don’t go far enough, and progress has stalled since the pandemic. Our new report, Short Changed, How to Stop the Exploitation of Migrant Workers in Australia, provides solutions to stamp out the exploitation of migrant workers. I’m Trent Wiltshire, Deputy Program Director, Migration and Labour Markets.

Today I’ll be discussing the report and its recommendations with my co authors, Brendan Coates, Economic Policy Program Director. and associate Tyler Raisenbach. So, Tyler, you’ve done some really detailed analysis of the extent of migrant work exploitation. Can you explain how widespread the problem is?

Tyler Reysenbach: So, we know that, from anecdotal stories, that it is a problem. You hear it in the media all the time and, you know, as you mentioned, 7 11. So, one of the problems with this though is that we just don’t know how widespread it is. So, what we’ve done is using ABS surveys, which, you know, are rigorous. and randomly selected, we tried to assess how many people are underpaid vis a vis the minimum wage.

And so what we find is that 16 percent of recent migrants, that is migrants who arrived in the last five years paid below the minimum wage. And what we find across, no matter how you kind of measure it, is that Below the minimum wage, 1, 3, 5, migrants are consistently twice as likely than long term residents to be underpaid vis a vis the minimum wage.

Trent Wiltshire: Great. So that’s just all relative to the minimum wage. So we’d say it’s a fairly conservative measure of underpayment.

Tyler Reysenbach: Yeah, absolutely. And I think we chose that because we know the award system is complicated. People get it wrong, but you know, the minimum wage, it’s the simplest measure. Everyone should be getting that at the bare minimum, right?

But it is conservative. It doesn’t include things like penalty rates. If your award rate is higher, unpaid superannuation, cash and hand arrangements. So in reality, the actual number is probably much higher. Our

Trent Wiltshire: report looked at it and said it’s fair to say that while most employers do the right thing we find that underpayment is still widespread.

So it shows that, you know, many employers actually don’t do the right

Tyler Reysenbach: thing. Yeah. And I think I would just jump in and to add, you know, below the minimum wage, you know, if it’s 20, 30 cents. We, we agree that could be an innocent mistake, but what we clearly see is that there’s a lot of what seems to be deliberate underpayment, more than 5 below the minimum wage.

That doesn’t seem like an accident

Trent Wiltshire: anymore. So Brendan, just to bring you in. So why are migrants more likely to be underpaid than long term residents?

Brendan Coates: Thanks. So there’s a few reasons here, right? So migrants, naturally, they’ve come to the country more recently. They’re going to have weaker networks to find to find work.

They’re more likely to be young. They’re more likely to be working in industries like hospitality, agriculture, underpayment rates are higher, but there’s also something about the fact that migrants themselves and the visa rules, if they’re a temporary visa holder, they actually increases their risk of underpayment because if speaking out means risking getting deported, then you’re less likely to do it.

And so, you know, some of Tyler’s work that we’ve done is that when you compare migrant workers, To Australians working, you know, in the same job the same industry with the same skills and occupation and all the rest of it. We’re still finding that those recent migrants, those who arrived less than 5 years ago, 2 thirds of whom are temporary visa holders, are 40 percent more likely to be underpaid than the equivalent long term resident.

And those that arrived, you know, five to nine years ago, of which most of whom are now permanent visa holders 20 percent more likely to be underpaid than long term residents, you know, in the same job, in the same industry and the like. So Tara,

Trent Wiltshire: that regression analysis you did, which is a really important contribution to the report.

Were there any other findings in that that really jumped out to you?

Tyler Reysenbach: I think there was a lot that we kind of expected, you know, hospitality, agriculture, kind of problem industries, lower skilled work.

I think one of the more interesting ones was we found that a non union member is 65 percent more likely to be underpaid than a union member. Now I think you need to interpret that with a little bit of caution. That’s not saying that unions solve all our problems. It’s just more that union members are probably more likely to care about their workplace rights and that will happen regardless of whether they’re in a union or not.

Trent Wiltshire: Interesting. Yeah. Yeah. So I think. We dig into a bit in the report how unions, we think that, you know, more union representation or higher union membership will probably help to limit exploitation a bit, but there’s been a long term decline in the proportion of employees who are union members. And it’s going to be hard to turn that around.

And they’re particularly. Migrant workers are much less likely to be union members as well, so that’s another factor too. So the data clearly shows that underpayment of migrant workers and of local workers as well, it’s a massive problem and it may get worse now that the labour market is expected to weaken and more temporary migrants are returning.

So, and there’s a whole range of reasons that’s really driving this underpayment. So, our report outlines three sets of reforms that we think will help stamp out exploitation. Tyler, can you outline? What these are?

Tyler Reysenbach: Yeah, absolutely. So we think that there are three things, as you’ve mentioned. So the first one is reforming the visa system to help address migrant vulnerability.

That includes, you know, addressing visa conditions that make migrants more vulnerable, but also we suggest introducing a new visa to help migrants come forward. The second thing is strengthening the enforcement regime to deter. exploitation. We focus quite a bit on the Fair Work Ombudsman, who’s the workplace regulator in the space, but we also call for Home Affairs to do a better job of enforcing the laws it already has on its books to combat exploitation.

And the last thing we suggest is that might, we should make it easier for migrants to come forward and pursue employers for their wages.

Trent Wiltshire: Let’s dive into how to improve the workplace relations enforcement regime. So to take a quote from our report, Few employers who underpay their workers get caught, and the penalties are far too small when they are caught.

So Brendan, what has the regulator, the Fair Work Ombudsman, been doing wrong, and what should change?

Brendan Coates: You know, just reflecting on the report itself, we went into this thinking this would largely be a report that’s about fixing visa rules that make migrants vulnerable to exploitation. And what we’ve ended up writing a report that is largely partly about that, but partly about fixing the enforcement regime for workplace rights generally, because that’s actually where a lot of the issues are.

So, you know, migrants are more likely to be underpaid, but even 9 percent of all workers in Australia are paid less than the national minimum wage, particularly younger workers who are 6 times as likely to be underpaid in their 20s compared to, say, workers in their 30s. So, you know, the issue is that the enforcement regime.

Is not up to scratch. It’s not doing its job of deterring those employers, which are obviously a minority that are seeking and willing to underpay their workers. So when we look, for example, at the penalties that have been issued for underpayment, you know, by the ombudsman and the courts, they total just 4 billion for breaches of workplace laws last year, you know, compared to 3 billion for the ATO when it came to people who have been caught out cheating on their taxes.

And 230 million when it comes to the ACCC levying penalties via the courts for breaches of competition and consumer law. So it’s pretty clear we’re just not taking this issue, the enforcement of workplace laws, as seriously as we’re taking the enforcement of other laws. So there’s a few things that certainly do need to change, but it’s hard to see how an employer is being deterred from underpaying their workers.

When that regime, when those penalties are, in fact, as small as they are.

Trent Wiltshire: So is it fair to say the, the ombudsman hasn’t been enforcing the laws strongly enough, but also the government hasn’t given enough powers to actually you know, really deter that underpayment and bad behavior by employers.

Brendan Coates: Yeah, that’s right. It reminds me a lot of what we saw in the financial services, rural commission where, you know, APRA and ASIC caught the heat on the stand for, for being the ones that had. Allowed some of the misconduct that was uncovered to take place, but, you know, a lot of the issues actually related to the powers that ASIC and APRA had and the tools they had at their disposal to make sure that, you know, the law was enforced.

So, you know, at its at its highest level, the big changes that are needed here is that we need to massively ramp up those penalties. So those penalties at the moment. You know, if you’re underpaying a worker under a serious contravention and it goes to court, then the maximum penalty that you have to pay as an employer is 825, 000 per breach for corporates.

And that’s often those breaches if you underpay multiple workers, they’re grouped together. If you’re talking about the ACCC, the maximum penalty that a court can order is three times the attributable benefit. So like three times the value of the underpayment or 30 percent of the annual turnover. So the scope of those penalties is just much less.

The Ombudsman also lacks the ability at the moment just to issue infringement notices. So they’re on the spot fines for underpayment. You can only do that. for where pay slips haven’t been kept. Again, that looks nothing like what the ACCC or the ATO can do in enforcing those laws. And there are no criminal penalties as well.

So at the moment, you can, there is a risk of up to 10 years jail time for cartel conduct. There’s 10 years of jail time for the fraud provisions of the criminal code that the ATO enforces. There is no criminal penalty at the moment for the underpayment of workers, even when it is systemic and knowing.

The government is. Currently consulting on potential changes to that, that penalty regime, but we think that they should go further. They need to be stronger even than what the government has proposed. So those penalties for civil penalties should be up to 5 times the value of the underpayment if the conduct is reckless and systemic and the criminal penalty, it should be 10 years in line with state laws, but only for situations where there is deliberate.

When it comes to the conduct of the ombudsman, the ombudsman could also do a much better job of enforcing the laws that it has on its books. It’s not just a question of it lacking the powers. The ombudsman, as its name suggests, sort of, sort of, has historically seen itself as a mediator. And in fact, it had formal targets around Resolving disputes without the use of other regulatory tools.

We think that Ombudsman should be overhauled into what we would describe as a workplace rights authority to make clear the job of the new authority, the workplace cop on the beat is to enforce the law using the tools that are available, including those more serious tools when there’s serious contraventions, when it’s reckless.

When it’s intentional, but still making sure we’re not punishing employers that are trying to do the right thing and just, you know, underpaid by 20 cents on the hour and it’s an accident. We seek to use simpler tools to allow them to write that without big penalties.

Tyler Reysenbach: I might just jump in and say one other thing that we found that the government could be doing to help.

The ombudsman is increasing its funding. So we found that the ombudsman’s funding has fallen in real terms quite a bit since when it was established in 2009. But the other thing is, is the ombudsman’s job’s gotten much larger, right? The Australian workforce has grown 25 percent in the last decade.

That’s, you know, quite a bit more for the ombudsman to do. So we suggest that they should have a 60 million budget boost up to 230 million, and that brings it back in line with the real resources per worker that it had in 2011, 2012. And we think that’s another useful tool because at the end of the day, you might give them bigger penalties, but if they can’t use them, employers aren’t going to be scared.

Trent Wiltshire: Yep. So it’s the combination of. potentially facing much larger penalties, but also having a higher probability of being caught. So within that combination, it will be effective in deterring employers. Just on the, on the the funding. So the ombudsman job, I guess you could say, it is fairly labor intensive.

It’s about They have fair work inspectors go around to employers and check their books and make sure they’re paying their workers correctly. So it’s a labor intensive job. Is there like new technology or other ways they could potentially change their investigations to be more effective at targeting bad employers, but also industry where we know exploitation is more problematic?

Tyler Reysenbach: Yeah, absolutely. I mean. You can always use more data. You can be more targeted. You know, I’m a data wonk. I love it. So I mean, one of the big things we see is, you know, they could make use of tax data. It’s not perfect. So one of the key failings of the tax data currently is you, when you do your pay YG summary, every pay slip, you don’t record the hours worked or send the hours work to the ATO.

So we think that needs to change. And if that’s, once that’s fixed, you can have. You know, look at the hourly wage, but, you know, what we can say as well is that the ombudsman does do a fairly good job of targeting its investigations. I think of its, you know, independent investigations, 80 percent of them do find noncompliance with the law.

Trent Wiltshire: So I’ll jump now to the second set of reforms. And that involves reforming visa rules to make migrants less vulnerable to exploitation. So Brendan, what are some of these visa rules and how should they change to reduce exploitation?

Brendan Coates: So when we’re talking about recent migrants being underpaid, we’re largely talking about temporary visa holders.

Okay. Two thirds of recent migrants are temporary visa holders and those. Temporary visas have an important role to play in Australia’s migration system. They allow us to try before we buy when we issue a permanent visa for skills, for skilled visa holders. It allows us to have international students come to Australia and study, and we get the export income from that as well.

But they do make Visas or migrants more vulnerable to exploitation in various ways because you’re more like a put up with mistreatment out of fear that your visa is going to be canceled or you’ll lose your path to permanent residency. So the best example of that is that if you’re a sponsored worker, I’ve been sponsored by my employer.

Then if I lose my job, then I’ve only got 60 days to leave the country unless I can find another employer that will sponsor me. And that’s quite an onerous process. And so when. You know, speaking out about being underpaid risks being deported, then temporary visa holders aren’t going to do that. And so we should make those visibles portable so people can more easily switch employers, in part to improve to protect against the risk of exploitation.

But in part, just so that if they find a better job in Australia they can make better use of their school, their skills and experience. That’s better for everyone. We should. Reform the way that the working holiday maker visa works. So at the moment, that visa has basically become a de facto low skilled work visa, particularly in the agricultural sector, we’re offering people the chance to stay in Australia for a 2nd or 3rd year.

If they go and do work specified work. Historically, that’s been in regional areas. Historically, that’s been in agriculture. It’s currently been expended to areas like aged care. We should replace that visa with a single one year Working on a make a visa without the prospect of extension and in line with the original purpose of that visa, we should match what Australians have the right to do abroad with the hope with the paired country.

So, you know, the UK free trade agreement is going to allow people to come to Australia for 3 years. We will allow we’ll be able to, Australians will be able to go abroad and to the UK for three years. So when there’s a reciprocal arrangement for a longer visa, we can have one, but that would certainly help.

Trent Wiltshire: That one really stood out the working holiday maker. We saw some of the Fair Work Ombudsman investigations that’s into the agricultural sector found a really rampant exploitation of working holiday makers. And it really goes to that specified work requirement that people are desperate to stay here.

They’re in isolated areas often requiring sign off by their employer to get three months, three months work done to be able to get their second year visa and that really contributes to exploitation. The other thing is that from as far as we can tell, no other country that we have a reciprocal relationship with, because these visas are all about reciprocal relationships.

We offer the chance for young people to come here and vice versa. No other country has that requirement as well. So we’re really the global outlier in terms of. Requiring that. So we’re using, you know, backpackers to, you know, man our farms when you know, we shouldn’t be using that sort of labor force to do that sort of work.

I’m sorry, interrupt you continue on with the, the other reform to the temporary visas.

Brendan Coates: No worries, Trent. So, you know, you mentioned where an outline working holidaymaker visas for a long time. We’ve done what other countries have done with respect to student visas. So we know from the 7 Eleven scandal that, you know, a lot of those people who were being underpaid, they were being paid half the, you know, the minimum wage working for 7 Eleven stores.

They were doing it As international students, and the problem is that you have a cap on work rights for international students while they’re studying, which is reasonable. It’s in line with what other countries do. Historically, that was 40 hours a fortnight, 20 hours a week. It was uncapped during the pandemic, and we’ve had unlimited work rights, and we’re looking at capping it again.

The government’s going to cap it again at 48 hours a fortnight from 1 July. And the issue with that fortnightly cap is that it creates 26 times a year where you’re at risk of having breached your visa rules. If your employer asks you to work. 45 hours in it or in the new system, 50 hours in a fortnight, then the implicit threat is the employer can report you to home affairs.

And then you potentially have your visa being being revoked and you get deported. We think we should be looking at ways of softening that now we can’t. Uncap it. I think what we’ve seen during covert is the uncapping of those work rights, you know, saw huge numbers of of of applications, explosion of applications from particular countries with heart, much higher rates of rejection because people, some people do use.

The student visas is a de facto low skill work visa in Australia. So instead we would look at reforming the higher education system so that we reduce the risk of international higher education system, reduce the risk of exploitation by looking at those work rights. Maybe we can move to an annual average cap like Finland of they have a cap of 30 hours a week on average over the course of the year, but also lopping off that that tale of poor, poor quality providers that we does seem to exist in Minister Clear O’Neill.

Home Affairs Minister noted at the Press Club the other week that does appear to increase the risk that migrants are underpaid and exploited because people are using student visas for other purposes.

Trent Wiltshire: One thing that’s jumped out in the news the last few days has been students facing really high living costs when they get here.

So obviously, you know, a rental crisis throughout most of Australia. Rents are rising students have to have a certain amount of savings to show they can support themselves while they’re in Australia. But it does seem like the Department of Home Affairs. It’s sort of underestimates how much it costs to live in Australia.

So based on news reports, seems like students are coming here thinking they can survive, you know, only being allowed to work potentially 24 hours a week from, from July one and then facing much higher living costs, particularly housing costs. So I think that’s something they’ll have to look into as well.

Tyler Reysenbach: Yeah, absolutely. I think, I think it’s currently Home Affairs budgets like 21, 000 a year.

Which including all your food your rents everything and not updated. I think since yeah

Yeah does seem quite low and it seems It seems like a kind of tough draw for students, right?

Trent Wiltshire: And it probably goes to that recommendation we’ve got about review of international higher education.

That probably should be included in there as well to think about, you know, are genuine students coming here? Can they, have they got enough savings to support themselves while genuinely studying full time? The third set of reforms we recommend are about helping workers workers claim unpaid wages.

Tyler, can you explain what some of these are?

Tyler Reysenbach: As we know, it’s hard for anyone to claim their wages back. It’s, it’s a really tough gig. So we suggest that you should have, you know, additional supports for migrants so that they can to make it a bit easier for them to come forward. So we recommend two things.

We recommend establishing a migrant worker center in each state. So currently in Victoria, there is one. And it kind of had its roots in the union movement, but it isn’t actually union kind of associated.

Trent Wiltshire: And it offers things like education to migrants has lots of different language capabilities as well to try and reach out to different migrant communities and educate them about their work rights you know, provide links with

and community legal centers where appropriate. So it’s about supporting those market workers.

Tyler Reysenbach: Yeah. I think they also help migrants like write the letter saying, Hey, employer, I think you’ve underpaid me. Can you please pay me properly? So very useful kind of organization. And we also suggest boosting funding for community legal centers to help migrants pursue court cases.

But we also think it should be easier to pursue a small court case or claim in the Small Claims Court and so we suggest making that a bit simpler and easier to use, allowing for virtual hearings, making serving of documents electronic so that makes it a bit easier to do from overseas but also maybe even potentially considering a tribunal in the Fair Work Commission to kind of consider underpayment cases.

Trent Wiltshire: Yeah, so a whole range of things to try and basically support migrants. When they’re pursuing wages, another one, another major reform we recommend in the report is the workplace justice visa. So this is a situation where a temporary migrant is owed wages but their visas come into an end. So they think it’s not worth the effort or it’s just going to be too hard to try and claim my unpaid wages.

When I, if I return home, so basically they give up on their amount of money, their own potential. It’s a bargaining tactic by employers as well, knowing that their visa is ending, they can hopefully time them out and that person will leave and they won’t have to you know, cough up for the, the money they’re owed to.

So this new visa was actually, we’re sort of supporting a recommendation or a lot of good work done by the migrant, Migrant Justice Institute and the Human Rights. Law center who have proposed this workplace justice visa which will allow a migrant worker who’s been exploited Claim their claim this visa and be able to stay beyond the end of their temporary visa as long as they’ve got a, a non-trivial claim.

And, and a key part of the, the proposal is to, because we know migrants are often wary of going to government agencies because they fear deportation, the con consequence about that. So they can go to a lawyer, get them to sign off on their claim that there’s been, you know, legitimate Mm-hmm . And then that will go to the Home Department of Home Affairs who will, issue this visa for a limited amount of time. Potentially it can be rolled over if the court case drags on. But I think it’s a good way to one, help the migrants get their wages back, but also increases the amount of intelligence the agencies have because it’ll also require the person to be cooperating with authorities so that they, you know, report the dodgy employer that’s underpaying them.

Brendan Coates: Yeah, that’s all part of the deterrence regime. Basically making sure that employers, if they do underpay workers. That they’re actually going to get caught if they’re doing it systematically. And that’s a huge part of why they’re getting away with employers that are doing this, are getting away with it right now.

Trent Wiltshire: Thank you very much, Tyler. And thank you, Brendan, for your contributions. We’d like to thank the Scanlan foundation for their generous support of the migration program here. Grattan Institute. It’s really enabled us to do a whole bunch of good work. If you’d like to read our report, it’s available for free online at grattan.

edu. au. To discuss the report further, find us on Twitter at Grattan Inst and all other social media networks at Grattan Institute. And thank you for listening.