Wage theft costing workers nearly $850m a year

A fresh analysis of wage theft by the McKell Institute has revealed Australian workers are being underpaid nearly $850 million a year, ripping more than $330 million in economic activity out of the country.

The think tank analysed Fair Work Ombudsman business audit campaigns dating back to 2009, finding an average of five wage victims per business who ended up being repaid $610.83 each. 

More than more than 40 per cent of the businesses audited fell foul of the Fair Work Act, while more than a quarter recorded breaches of monetary obligations such as award rates and agreements. 

Extrapolated across Australia, this equates to 269,728 businesses collectively ripping off more than 1.3 million workers, or roughly 11.5 per cent of the country’s workforce, a collective $847.25 million annually.

McKell Institute CEO Ed Cavanough said the estimates were at the lower end, because the analysis did not account for cases where workers were underpaid against appropriate award rates or the incorrect payment of penalty rates.

“The analysis puts a conservative figure on the cost of wage theft that is rampant across Australia, equivalent to a 0.01 per cent loss in GDP,” McKell Institute CEO Ed Cavanough said.

The FWO generally found that employer non-compliance was due to a lack of awareness and understanding of award provisions, rather than employers acting maliciously. 

“The total amount of actual wage theft is likely much higher. This is an extraordinary amount of money being stolen and it’s unacceptable. Being unaware is not an excuse. The onus is on employers to understand their obligations to their employees,” Mr Cavanough said. 

“It shows why we need strong laws to criminalise wage theft, like the protections being pursued through the federal government’s workplace reforms.”

The McKell Insitute’s findings are based on an International Monetary Fund analysis of economic multipliers that found every $1 increase in Australian workers' pay results in a 39c boost to the economy. Using that formula, the economic cost of unpaid wages is $330 million.

The analysis breaks down wage theft by state and territory - with NSW amounting for nearly a third of lost wages, or $306 million across more than 500,000 workers - as well as by federal electorate. 

The seat of Sydney had the highest average amount owed to workers, based on FWO reimbursements. The analysis estimated 41,106 workers had missed out, with the collective amount owed exceeding $25 million.

In the electorate of Melbourne more than 28,500 workers missed out on nearly $17.5 million. North Sydney was the third-worst electorate for underpayments, totalling $10 million across 16,500 workers. 

“These horrifying figures are another blow for workers who are struggling to meet mortgage repayments, keep up with rising rents and pay their bills,” Mr Cavanough said.

Georgie Moore
0477 779 928