Guest post on Wage Theft by David Leyonhjelm

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.

David Leyonhjelm is a former senator for the Liberal Democrats

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20 Responses to Guest post on Wage Theft by David Leyonhjelm

  1. JC

    I took a look at the wage rates and job classification. It’s an absolute nightmare for anyone to wade through.

  2. RobK

    An IR lawyer I know made this comment to me about the underpayment cases hitting the news: (paraphrasing)“What you don’t hear about is the many times employers actually inadvertently overpay because of the complexity. Many cases of incorrect payment are inadvertent.”

  3. yarpos

    I am still waiting for all the complexity, confusion and glitches to result in over payments.

  4. Linden

    David has made some salient points with this post, yes employing people in todays Australia is a very complication business. I am very happy not to be in a position of looking after employees! In recent years I have been fortunate enough to experience some international travel (late in life I might add); my observations is that there is no shortage of Australians who are more than interested in finding somewhere else to live and enjoy there life in another country; and very eager to join the brigade of the expatriates. If Australia is the lucky country and land of milk and honey, then why are so many keen to be off overseas to live elsewhere, even in places that we consider almost if not third world economies? I believe some of the answers lie here in Leyonhjelm’s post. Thinking back to my earlier years in life, it was oh so easy to get a job find work and make some money, it was not bogged down with all the idiotic red tape, union sanctioned bureaucratic demands that are so evident today. It appears to me for my two bobs worth, that employing people today is a bureaucratic nightmare, and a major reason why the cost of doing business and cost of doing almost anything in todays Australia has become in many cases near crippling expensive. When Australians travel overseas into countries they see that life can be very simple, back to
    basics stuff, wonderfully cheaper and and lot less complicated that life in Australia is today. I think the idea that they can be essentially be free of ‘big brother’ government and you can put your local marxist socialist council into that mix as well, they think ‘yeah’ why not, give me the simple life. Getting back to David’s post, it is no wonder that many companies first priority is to relinquish as many employees as possible; and the proof that is sound thinking is often backed by a rise the company’s share price. Australia today is not like growing up in the 50s’ 60s’ & 70s’ etc,when it was easy to find work get a job and make some money without all the hassle.

  5. a happy little debunker

    In the last 20 years, 2 of my 3 last employers deliberately chose to underpay me.
    The 2nd attempted his best Darth Vader impersonation ‘I am altering the deal. Pray I don’t alter it any further’, 6 months into the working relationship.

    In both cases I exercised my power within the relationship at the most apt time (when I had gotten another job and was moving on).
    The former said ‘Why didn’t you say something earlier?’, when I had.
    The latter queried ” I thought you were a gentleman’ – whatever that meant.

    Without very limited support from the Federal Fair Work Commission I’d have been off to Court to try and get the promised remuneration.

    I can only suggest that people ought to know how the IR system works and what remedies they can pursue and when they should pursue them.
    & I would counsel that you should only burn bridges when you know you will no longer need them.

  6. Pyrmonter

    stuck in the past

    When was this Golden Age (Dystopia) when these rules made sense?

    The reality is they never have: they are an artefact of labour organisation and its inherent tendency to marginalise the minority: the highly productive, who are required to ‘level down’ their productivity; the less productive, who are priced out of jobs; those wanting to work longer hours, as well as those for whom shorter hours and part time work is more suitable (for example, the parents of young children); women (who have traditionally had different labour supply tendencies) and ethnic minorities (the whole trope about ‘sweated’ Asian labour).

  7. Roger

    I am still waiting for all the complexity, confusion and glitches to result in over payments.

    +1

  8. Natural Instinct

    employees being paid less than what the law says they should be paid. 

    .
    That is the problem right there.
    My 32 casuals get paid what i decide to pay them

  9. Linden

    From my experience in small business, employees of such entities have a higher take home pay, come personal taxable income plus all the add ons’ than the person giving them the job.

  10. Nob

    Yep, my techs sent more than me most months.

    Australia, where the racehorse is only allowed to run as fast as the donkey.

  11. Kneel

    “An employer can be labelled a wage thief for getting any of them wrong.”

    While you’re at it, how about tax law? Just have a look at the “books of law” on the house table – >50% is tax law. Thousands of pages of dense, legalistic jargon. No normal person – hell, no lawyer who is not a tax specialist – can possibly have a clue what applies, or how they can claim an exemption, or…
    And yet, “ignorance of the law is no excuse”. Rubbish! If the law is “Thou shalt not kill”, then it’s simple. If it’s “You pay income tax, unless you meet section 23(a) paragraph 37, sub-clause 82 blah blah” and the rules and exemptions amount to 1,000 plus pages of equally dense legalese, can a reasonable person be expected to know and comply? I would argue that it is unreasonable to expect more from an ordinary citizen in terms of obeying the law, than you can expect from a someone trained in the law!
    Once you add rules and regulations plus determinations from the ATO, it’s about 100 times worse.
    Stupid. The only winners are lawyers and those with sufficient cash to pay someone for hours (days? months?) of work to find a loophole they can use. And when that loophole gets widely used, they just add more complexity and we start all over again!
    Put it this way: if you can’t send me a tax return form that is one page long – two tops – and has simple questions like “how much did you receive in income?”, you can put it where the sun don’t shine. Not interested in playing the “what does this comma mean?” game. Happy to pay my fair share, just not prepared to spend unpaid time to make the government more “efficient” at forcibly taking my hard-earned.

    ‘Cause here’s the thing – NO-ONE likes to pay tax. EVERYONE thinks they pay too much and others don’t pay enough. So if you make it simple, if you make it so that everyone knows they will pay the same taxes under reasonably similar circumstances, there will be less reason to look for loopholes and “the man” of tax accountants – just not worth paying someone $5k to get an extra 5c back.

  12. C.L.

    Excellent demolition of another phony panic.

  13. Tezza

    Several note that honest wage mistakes should show up in 50% of cases as overpayment. That is not true. Most of the complex special provisions that qualify basic award determinations are to pay more; few to pay less.
    The ABC has underpaid its temp workers for years suggesting that even being completely woke is no protection against practicing “wage theft”.

  14. Dogsbody

    I am still waiting for all the complexity, confusion and glitches to result in over payments.

    I’m still waiting for someone to complain about it.

  15. yarpos #3202027, posted on November 5, 2019 at 8:11 am
    I am still waiting for all the complexity, confusion and glitches to result in over payments.

    Roger #3202081, posted on November 5, 2019 at 9:37 am
    I am still waiting for all the complexity, confusion and glitches to result in over payments.
    +1

    Tezza #3202331, posted on November 5, 2019 at 3:04 pm
    Several note that honest wage mistakes should show up in 50% of cases as overpayment. That is not true.

    You three will now post the methodology used to determine there are no overpayments.
    GO!………………………

  16. Dogsbody

    I am still waiting for all the complexity, confusion and glitches to result in over payments.

    You’ll hear about it just as soon as someone complains.

  17. John Stankevicius

    David, employees do leave without penalty. I agree the awards are horrendously complicated. I know of an employer whose employees could be covered under 6 different awards. I disagree with the tone of the employer being the baddie in letting employees go. Employers want to keep their productive, polite and average employees. Retraining some is hard. If you have a system some one coming in has to learn it. If the smallest thing goes wrong everyone cracks it because it’s disrupted their routine.

    Further customers suppliers etc get acquainted with employees and if their fave leaves it do affect the relationship with the business.

    No one really understands how hard it’s is and employers do everything they possibly can to keep their competitive ant employees.

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