Wage theft

Almost every day there are reports of employees being paid less than what the law says they should be paid. Company after company is either making a public confession or the Fair Work Commission is outing them, with backpay and fines in the millions of dollars.

In fact, there are so many cases that it has been described as a crisis and the government is talking about “doing something”, such as making it a criminal offence with imprisonment as a penalty. With paedophile priests and cyber bullying now last year’s news, it is fast becoming the new moral panic.

The terminology certainly makes it sound like a crisis. Employers are engaging in wage theft, brazenly exploiting their employees and stealing their wages. Going to jail with the priests and cyber bullies sounds exactly what they deserve.

The reality is quite different; it is not a crisis, nothing has been stolen, and if the government does indeed make it a criminal offence the price will mainly be paid by the most disadvantaged people in society.

The issue originates in Australia’s absurdly complex industrial relation system, with its mess of awards and agreements barely changed from the middle of the last century. The Fair Work Commission, which oversees the creaking shambles, prescribes minimum rates of pay for most non-management positions, industry by industry and job by job. An employer which pays less than what it has ordained is breaking the law.

This is not about paying workers starvation wages, or even paying them below the national minimum wage (at $18.93 per hour for adult workers, almost the highest in the world). There is a minimum rate for every job covered by an award as well as for things like additional skills, overtime, penalties, superannuation, allowances and holidays.

An employer can be labelled a wage thief for getting any of them wrong. It makes no difference if the affected employees are quite happy with what they are paid, don’t feel at all exploited and believe nothing has been stolen from them. They and their employer are not allowed to agree on anything less than the prescribed minimums. It also makes no difference if it was totally unintentional, not unusual given that navigating awards and agreements can require at least two degrees, very strong coffee and an executive assistant.

Of course, most employees are happy to receive a healthy lump sum in backpay; it’s like winning a prize in Lotto. But most are also well aware that their employer does not have a money tree, that wages are a cost to the business, and that if profits are unacceptably low, jobs will be lost.

Further, before jobs are lost, hiring ceases. This can be almost as personal as losing your own job, with employers unwilling to hire friends, relatives or children. Being vilified as a wage thief is not a recipe for more jobs and growth. 

What this “crisis” reveals is an industrial relations system stuck in the past, lacking flexibility, and substantially contributing to our stagnant productivity and lack of wages growth. Australia badly needs an industrial relations revolution.

We need a system in which employees of all kinds can negotiate their salary and benefits, individually or collectively, without interference by the government. A system in which people can easily change employers without penalty, employers can change people without penalty, and employers can compete for people without restraints such as no-poaching clauses.  

Like goods and services generally, labour is differentiated by price and quality. Its price should be determined by its value to prospective buyers, not controlled by the dead hand of government. Setting a minimum price, rather than allowing it to be determined by the market, simply means some labour is not worth buying.

Claims that people will be exploited by unscrupulous employers are just as irrational as suggesting it is exploitative to buy discounted goods and services. Nobody believes a cut-price plumber is being exploited but, unless paid at least what the government dictates, we are supposed to believe his employee is.

If a low wage is a sign of exploitation, doesn’t that indicate those on Newstart are more exploited than anyone with a job?   

There is always an element of absurdity in moral panics. When it comes to wage theft, the absurdity is that the real thief is the government with its excessive taxes. Joining the other villains in jail is just what it deserves.