Unions attack the wrong wages crush

Via The Australian:

Unions will use a seven-day strike next week to intensify pressure on the Coalition and business over the “exploitation” of labour-hire workers, declaring public unrest at employer conduct will be a “vote-shifter” at the federal ­election.

The Construction Forestry Maritime Mining and Energy Union yesterday revealed workers at the Wollongong Coal-owned Wongawilli Colliery would strike for a week in a bid to pressure labour-hire firm CAS Mine Services to bring the pay of its workers into line with union members in nearby mines.

CAS, which the union ­accused of unlawfully employing its entire 100-strong workforce as casuals, said it would “go broke” if it had to fund a 10 per cent pay-rise claim that it said would wipe out its ­current operating margins.

Labour hire is a worker rort pure and simple but it is NOT the key underpinning to wage theft and changing the rules will not fix the problem. Here’s what the senate inquiry into Labour hire concluded:

Labour hire licensing

9.122 As noted above, submitters highlighted that exploitation is particularly prevalent in the labour hire sector.

Support for a national labour hire licensing regime

9.132 A number of submitters recommended introducing a sector-specific scheme for the labour hire industry to minimise the exploitation of workers.

9.133 The ACTU suggested that a licensing and regulation scheme would ‘compel labour hire agencies to stop exploiting workers and create the threat of losing their right to operate if they do’.

9.134 Submitters emphasised the importance of establishing a national scheme, rather than individual state-based schemes. Mr Peter Crisp MLC, the local member for the Mildura region, provided the Committee with his submission to the Victorian Inquiry into the Labour Hire Industry and Insecure Work that recommended the establishment of national labour hire licensing scheme. Mr Crisp noted that:
… a response from Victoria will only apply in Victoria and for those horticultural regions like Sunraysia which are on a state border a single state solution may well only encourage border hopping.
For the measures recommended in the Victoria report to be effective there really needs to be a Commonwealth response to this issue.

9.135 Similarly, Mr Dixon from the GLAA warned about the ‘displacement effect where exploitation drifts towards where there is little and a lot lower oversight’. In a state-based system, Mr Dixon noted:
What you might then have is a situation where a company provides workers into the Victorian state area from a less regulated area where the Victorian state government might not be able to regulate it in precisely the same way. There would be what we call differential enforcement and, consequently, there’ll be a greater exploitation of workers in those areas where there is less regulation. It creates an uneven playing field for business.

9.136 The NFF recommended supporting industry-led certification schemes, rather than a state-based licensing scheme. Mr Ben Rogers from the NFF told the Committee that they are encouraging the introduction of a voluntary certification scheme called StaffSure administered by the Recruitment and Consulting Services Association Australia & New Zealand (RCSA):
It is a voluntary certification scheme which audits the whole range of practices and systems which these labour hire agencies have to use to make sure they’re using best practice—that they are not taking advantage of anyone and they’re not breaking any laws. It provides them with certification which farmers then look for to ensure that they are engaging with the people who are doing the right thing rather than these dodgy operators. They will then only use those people who can demonstrate that they have these best practices and that they’re not going to be engaging in those sorts of behaviours and conduct you just described there.

9.137 Mr Rogers also highlighted the example of the Fair Farms Initiative (as discussed in Chapter 5), an industry-led scheme to educate employers and growers about their responsibilities and provide third-party certification of labour systems.

9.138 Some witnesses expressed concerns about the efficacy of a labour hire scheme. Mr John George, who owns and operates two backpacker hostels in Mildura and assists backpackers in finding work, told the Committee that the key problem is that existing laws against exploitation are not being adequately enforced:

We would say increased regulation of labour hire contractors, as is being talked about, if implemented will lead to increased regulation of labour hire contractors and, using the British example, presumably increased cost for labour hire contractors to operate, which obviously will be passed on to prospective host employers. We say all the regulation there needs to be to fix almost 100 per cent of problems already exists; it is just not complied with or can’t be policed adequately.

9.139 Submitters and witnesses also warned that a labour hire licensing scheme is only one part of the broader response, as outlined in this report, and should not be seen as a ‘silver bullet’. Ms Germano from the VFF noted that a survey of its growers by the VFF found that ‘only 50 per cent of them are actually using labour hire contractors’. Ms Germano explained:

… a licence doesn’t stop someone from speeding when they’re driving down a highway. There has to be a cultural change. The licence, in itself, is a good step because it’s saying that we’re going to address this part of the supply chain or the labour chain, but it is certainly not going to be the silver bullet that I think many people claim it will be.

And therein lies the problem. The flourishing wage theft industry, promulgated in part via labour hire, is fundamentally driven by the mass immigration economic model. So long as it continues Labor will struggle to inject the necessary cultural change.

Recent academic research concluded exactly the same. Below are key excepts from Chapter 13 entitled Temporary migrant workers (TMWs), underpayment and predatory business models, written by Iain Campbell:

This chapter argues that the expansion of temporary labour migration is a significant development in Australia and that it has implications for wage stagnation…

Three main facts about their presence in Australia are relevant to the discussion of wage stagnation. First, there are large numbers of TMWs in Australia, currently around 1.2 million persons. Second, those numbers have increased strongly over the past 15 years. Third, when employed, many TMWs are subject to exploitation, including wage payments that fall below — sometimes well below — the minimum levels specified in employment regulation…

One link to slow wages growth, as highlighted by orthodox economics, stems from the simple fact of increased numbers, which add to labour supply and thereby help to moderate wages growth. This chapter argues, however, that the more salient point concerns the way many TMWs are mistreated within the workplace in industry sectors such as food services, horticulture, construction, personal services and cleaning. TMW underpayments, which appear both widespread in these sectors and systemic, offer insights into labour market dynamics that are also relevant to the general problem of slow wages growth…

Official stock data indicate that the visa programmes for international students, temporary skilled workers and working holiday makers have tripled in numbers since the late 1990s… In all, the total number of TMWs in Australia is around 1.2 million persons. If we include New Zealand citizens and permanent residents, who can enter Australia under a special subclass 444 visa, without time limits on their stay and with unrestricted work rights (though without access to most social security payments), then the total is close to 2 million persons… TMWs now make up around 6% of the total Australian workforce…

Decisions by the federal Coalition government under John Howard to introduce easier pathways to permanent residency for temporary visa holders, especially international students and temporary skilled workers, gave a major impetus to TMW visa programmes.

Most international students and temporary skilled workers, together with many working holiday makers, see themselves as involved in a project of ‘staggered’ or ‘multi-step’ migration, whereby they hope to leap from their present status into a more long-term visa status, ideally permanent residency. One result, as temporary migration expands while the permanent stream remains effectively capped, is a lengthening queue of onshore applicants for permanent residency…

Though standard accounts describe Australian immigration as oriented to skilled labour, this characterisation stands at odds with the abundant evidence on expanding temporary migration and the character of TMW jobs. It is true that many TMWs, like their counterparts in the permanent stream, are highly qualified and in this sense skilled. However, the fact that their work is primarily in lower-skilled jobs suggests that it is more accurate, as several scholars point out, to speak of a shift in Australia towards a de facto low-skilled migration programme…

A focus on raw numbers of TMWs may miss the main link to slow wages growth. It is the third point concerning underpayments and predatory business models that seems richest in implications. This point suggests, first and most obviously, added drag on wages growth in sectors where such underpayments and predatory business models have become embedded. If they become more widely practised, underpayments pull down average hourly wages. If a substantial number of firms in a specific labour market intensify strategies of labour cost minimisation by pushing wage rates below the legal floor, it can unleash a dynamic of competition around wage rates that foreshadows wage decline rather than wage growth for employees…

Increases in labour supply allow employers in sectors already oriented to flexible and low-wage employment, such as horticulture and food services, to sustain and extend strategies of labour cost minimisation… The arguments and evidence cited above suggest a spread of predatory business models within low-wage industries.37 They suggest an unfolding process of degradation in these labour markets…

And below are extracts from Chapter 14, entitled Is there a wages crisis facing skilled temporary migrants?, by Joanna Howe:

Scarcely a day goes by without another headline of wage theft involving temporary migrant workers…

In this chapter we explore a largely untold story in relation to temporary migrant workers… it exposes a very real wages crisis facing workers on the Temporary Skill Shortage (TSS) visa (formerly the 457 visa) in Australia. This crisis has been precipitated by the federal government’s decision to freeze the salary floor for temporary skilled migrant workers since 2013… the government has chosen to put downward pressure on real wages for temporary skilled migrants, thereby surreptitiously allowing the TSS visa to be used in lower-paid jobs…

In Australia, these workers are employed via the TSS visa and they must be paid no less than a salary floor. This salary floor is called the Temporary Skilled Migration Income Threshold (TSMIT). TSMIT was introduced in 2009 in response to widespread concerns during the Howard Government years of migrant worker exploitation. This protection was considered important because an independent review found that many 457 visa workers were not receiving wages equivalent to those received by Australian workers…

In effect, TSMIT is intended to act as a proxy for the skill level of a particular occupation. It prevents unscrupulous employers misclassifying an occupation at a higher skill level in order to employ a TSS visa holder at a lower level…

TSMIT’s protective ability is only as strong as the level at which it is set. In its original iteration back in 2009, it was set at A$45 220. This level was determined by reference to average weekly earnings for Australians, with the intention that TSMIT would be pegged to this because the Australian government considered it ‘important that TSMIT keep pace with wage growth across the Australian labour market’. This indexation occurred like clockwork for five years. But since 1 July 2013, TSMIT has been frozen at a level of A$53 900. ..

There is now a gap of more than A$26 000 between the salary floor for temporary skilled migrant workers and annual average salaries for Australian workers. This means that the TSS visa can increasingly be used to employ temporary migrant workers in occupations that attract a far lower salary than that earned by the average Australian worker. This begs the question — is the erosion of TSMIT allowing the TSS visa to morph into a general labour supply visa rather than a visa restricted to filling labour market gaps in skilled, high-wage occupations?..

But why would employers go to all the effort of hiring a temporary migrant worker on a TSS visa over an Australian worker?

Renowned Australian demographer Graeme Hugo observed that employers ‘will always have a “demand” for foreign workers if it results in a lowering of their costs’. The simplistic notion that employers will only go to the trouble and expense of making a TSS visa application when they want to meet a skill shortage skims over a range of motives an employer may have for using the TSS visa. These could be a reluctance to invest in training for existing or prospective staff, or a desire to move towards a deunionised workforce. Additionally, for some employers, there could be a belief that, despite the requirement that TSS visa workers be employed on equivalent terms to locals, it is easier to avoid paying market salary rates and conditions for temporary migrant workers who have been recognised as being in a vulnerable labour market position. A recent example of this is the massive underpayments of chefs and cooks employed by Australia’s largest high-end restaurant business, Rockpool Dining Group, which found that visa holders were being paid at levels just above TSMIT but well below the award when taking into account the amount of overtime being done…

Put simply, temporary demand for migrant workers often creates a permanent need for them in the labour market. Research shows that in industries where employers have turned to temporary migrants en masse, it erodes wages and conditions in these industries over time, making them less attractive to locals…

A national survey of temporary migrant workers found that 24% of 457 visa holders who responded to the survey were paid less than A$18 an hour. Not only are these workers not being paid in according with TSMIT, but they are also receiving less than the minimum wage. A number of cases also expose creative attempts by employers to subvert TSMIT. Given the challenges many temporary migrants face in accessing legal remedies, these cases are likely only scratching the surface in terms of employer non-compliance with TSMIT…

Combined, then, with the problems with enforcement and compliance, it is not hard to conclude that the failure to index TSMIT is contributing to a wages crisis for skilled temporary migrant workers… So the failure to index the salary floor for skilled migrant workers is likely to affect wages growth for these workers, as well as to have broader implications for all workers in the Australian labour market.

The evidence is overwhelming:

• For years we have seen Dominos, Caltex, 7-Eleven, Woolworths and many other fast food franchises busted for rorting migrant labour.
• The issue culminated in 2016 when the Senate Education and Employment References Committee released a scathing report entitled A National Disgrace: The Exploitation of Temporary Work Visa Holders, which documented systemic abuses of Australia’s temporary visa system for foreign workers.
• Mid last year, ABC’s 7.30 Report ran a disturbing expose on the modern day slavery occurring across Australia.
• Meanwhile, Fair Work Ombudsman (FWO), Natalie James, told Fairfax in August last year that people on visas continue to be exploited at an alarming rate, particularly those with limited English-language skills. It was also revealed that foreign workers are involved in more than three-quarters of legal cases initiated by the FWO against unscrupulous employers.
• Then The ABC reported that Australia’s horticulture industry is at the centre of yet another migrant slave scandal, according to an Australian Parliamentary Inquiry into the issue.
• The same Parliamentary Inquiry was told by an undercover Malaysian journalist that foreign workers in Victoria were “brainwashed” and trapped in debt to keep them on farms.
• A recent UNSW Sydney and UTS survey painted the most damning picture of all, reporting that wages theft is endemic among international students, backpackers and other temporary migrants.
• A few months ago, Fair Work warned that most of Western Sydney had become a virtual special economic zone in which two-thirds of businesses were underpaying workers, with the worst offenders being high-migrant areas.
• Dr Bob Birrell from the Australian Population Research Institute latest report, based on 2016 Census data, revealed that most recently arrived skilled migrants (i.e. arrived between 2011 and 2016) cannot find professional jobs, with only 24% of skilled migrants from Non-English-Speaking-Countries (who comprise 84% of the total skilled migrant intake) employed as professionals as of 2016, compared with 50% of skilled migrants from Main English-Speaking-Countries and 58% of the same aged Australian-born graduates. These results accord with a recent survey from the Bankwest Curtin Economics Centre, which found that 53% of skilled migrants in Western Australia said they are working in lower skilled jobs than before they arrived, with underemployment also rife.
• The Australian Bureau of Statistics (ABS) latest Characteristics of Recent Migrants report, revealed that migrants have generally worse labour market outcomes than the Australian born population, with recent migrants and temporary residents having an unemployment rate of 7.4% versus 5.4% for the Australian born population, and lower labour force participation (69.8%) than the Australian born population (70.2%).
• ABC Radio recently highlighted the absurdity of Australia’s ‘skilled’ migration program in which skilled migrants have grown increasingly frustrated at not being able to gain work in Australia despite leaving their homelands to fill so-called ‘skills shortages’. As a result, they are now demanding that taxpayers provide government-sponsored internships to help skilled migrants gain local experience, and a chance to work in their chosen field.
• In early 2018 the senate launched the”The operation and effectiveness of the Franchising Code of Conduct” owing in part to systematic abuse of migrant labour.
• Then there is new research from the University of Sydney documenting the complete corruption of the temporary visas system, and arguing that Australia running a “de-facto low-skilled immigration policy” (also discussed here at the ABC).
• In late June the government released new laws to combat modern slavery which, bizarrely, imposed zero punishment for enslaving coolies.
• Over the past few months we’ve witnessed widespread visa rorting across cafes and restaurants, including among high end establishments like the Rockpool Group.
• Alan Fels, head of the Migrant Workers Taskforce, revealed that international students are systematically exploited particularly by bosses of the same ethnicity.

Labour hire regulation might help at the margins but it won’t reverse the great immigration wages smash. Only reducing the supply of cheap foreign labour will do that. And as the economy weakens ahead it will get worse not better.

But the CFMEU loves mass immigration because it triggers building activity and it has all but taken over the ACTU, led by chief wowser, Sally McManus. Last year:

CASSIDY: Can I ask you about immigration just before we wrap up because it’s become quite an issue this week. The level is at 190,000 now. It looks as if that not going to be reached for various reasons, really around tighter control of visas and so on. What do you think about the level of immigration? Is 190,000 about right?

McMANUS: Yeah so Peter Dutton is the one that has brought it up all of a sudden and I think of it this way: Whenever they are in trouble, it’s as if they want to break the glass and get the emergency hammer out and ‘let’s start talking about immigration,’ and I really feel as though what they do is try and blame immigrants for things that are actually – things that are wrong with the economy, and a lot of things that I’ve talked about, it’s not the fault of immigrants that jobs are being casualised or we can’t get pay increases.

CASSIDY: No, but they take about overcrowding as well.

McMANUS: With immigration, we’ve got permanent immigration and this new issue of temporary visas that are operating in Australia that were only tiny 20 years ago. Now there is around a million people with work visas, temporary work visas. What’s happening is that we are shipping in exploitation and it is taking away jobs for local people, so if we wanted to do something about this issue, Peter Dutton could do something about that now and we should move away from this temporary idea of having guest workers and instead move to ensure we maintain a proper permanent migration system.

CASSIDY: What do you say about overall numbers then? If you were to reduce the temporaries, are you happy with the overall number?

McMANUS: We wouldn’t put a number on it, we think at the moment we have far too many people on temporary work visas, though.

Cutting temporaries is a good first step and Labor appears determined to do it. But the temporaries and permanents feed on one another and until the overall intake is cut wages are going to be under pressure.

This is going to be Labor’s Achilles heal in government.