From the Summoner’s Tale by Geoffrey Chaucer, one of the Canterbury Tales written between 1387 and 1400 [lines 307–309]:
“You wished you had our labour all for naught.
But the High God, Who all this world has wrought,
Says that the workman’s worthy of his hire.”
Chaucer was, of course, quoting the Gospels of Luke [10:7] and Matthew [10:10]: “the labourer is worthy of his hire” as well as other verses of the Bible. Modern day policy makers would do well to reflect on these ancient texts in the face of stagnating wages, outright wage theft and the rise of so-called independent contractors struggling in the ‘gig economy’.
Below is a piece I wrote recently for the Australian Institute of Employment Rights, dealing with recent developments in wages policy and practice in Australia.
Wither wages?
Wages — or the lack of them — remain at the heart of Australia’s industrial, economic and social concerns in the first quarter of 2018.
The Fair Work Commission’s Annual Wage case submissions were filed by interested parties in the second week of March. The ACTU’s claim — part of its ‘living wage’ claim which harks back to the Harvester decision of 1907 — is for a rise $50 pw in the Federal Minimum Wage. This is a rise of 7.2% and the claim seeks an increase of this percentage amount in all Federal Award rates of pay.
The ACTU’s submission notes that:
In previous hearings before the [Minimum Wage] Panel, we have supported the adoption of a medium term target for the minimum wage, of 60% of the median wage for full time employees. We believe that reaching such a target will deliver a “living wage” in the sense referred to in the ILO Constitution and respect the Australian tradition set by the Harvester decision of meeting “normal needs of the average employee, regarded as a human being living in a civilised community”. We note that a target of 60% of the median has been explicitly adopted in United Kingdom and has been recommended or discussed among a number of EU institutions11, having its origins in efforts to define the concept of a wage that will deliver a “decent standard of living” as referred to in the European Social Charter.
In response, employers made a range of submissions generally seeking low increases in Minimum wages — Restaurant and Catering Industrial being the outlier, arguing for no increase at all:
RCI argues that the prevailing economic conditions do not warrant any increase in the minimum wage.
Award wages remain important for many Australian workers. The Commonwealth Government’s submission to the Minimum Wage panel noted that about 22% of all employees had their wages determined solely by an award [under the ABS definition, if an employee is paid over the award but is not covered by an agreement, this is classified as an ‘individual arrangement’, even if the award is the predominant instrument].
Of these 22% of employees, nearly 30% of award reliant workers are low-paid employees, that is earning less than $19.33 per hour [as at May 2016].
About one-third of employees are covered by agreements rather than awards, but the rate of agreement-making and the number of employees covered by them has sharply decreased in recent years. According the he Federal Department’s Trends in Enterprise Bargaining for September 2017 [released in January last]:
There were 12,915 current agreements (not yet expired or terminated) as at 30 September 2017, covering around 1.8 million employees. This is down by 1,580 agreements from 14,495 current agreements, covering around 1.9 million employees as at 30 June 2017
Some agreements do not provide for regular wage increases and an increasing number may have passed their nominal expiry date and not been replaced. Indeed, employers are more frequently threatening employees with the cancellation of existing agreements and a return to award wages and conditions.
The average level of wage increases delivered by agreements is also declining as the bargaining power of employees declines along with unionisation rates. According to the Department in the September quarter 2017:
The average annualised wage increase (AAWI) for federal enterprise agreements approved in the September quarter 2017 was 2.2 per cent, down from 2.6 per cent in the June quarter 2017 and down from 3.4 per cent in the September quarter 2016
At these levels, bargaining — such as it is as many ‘agreements’ are essentially ‘take it or leave it’ offers by employers without any real collective bargaining with their employees — is barely delivering a real wage increase.
The ACTU’s $50 or 7.2% claim stands in stark contrast to the rate of wage increases being delivered by bargaining but the claim is nevertheless very important to low paid and award dependent workers.
Is anyone out there actually paying award wages?
Some employers complain bitterly about rises in award wages. But a persistent fact of employment in Australia has been the shocking level of non-compliance with legal award minimums. Two reports released by the Fair Work Ombudsman in March confirmed the widespread existence of ‘non-compliance’.
The FWO audited the Caltex service station network in response to claims of underpayment and found that a staggering 76% of sites were not complying with industrial laws. Caltex subsequently decided to end franchising of its network of service stations and bring all employees under the direct Caltex banner. The Ombudsman noted:
“In light of this alarmingly high level of non-compliance across its retail fuel outlets, I am not surprised by Caltex’s announcement to the ASX last week that it will transition franchise sites to company operations,” Fair Work Ombudsman Natalie James said.
“FWO’s report shows Caltex Australia has been presiding over a non-compliant and unsustainable operating model.
“There’s no question that if these findings indicate the norm in this network, and if these underpayments are replicated throughout the business month after month, we are quickly looking at millions of dollars of underpayments over the course of a few years.
“A large number of employees at the audited sites are young and migrant workers, cohorts that we know to be particularly vulnerable to workplace exploitation and reluctant to complain about mistreatment.
“Sixty per cent of the 194 employees the Fair Work Ombudsman obtained records for were visa holders and nearly 26 per cent under the age of 24,” Ms James said.[emphasis added]
The investigation also found that a contributing factor to the high rates of non-compliance was that 17 of the 23 franchise operators were from non-English speaking backgrounds with minimal knowledge or experience of Commonwealth workplace laws.
“Caltex should have recognised this in its business model by ensuring franchisors properly understood their obligations and conducted monitoring to assure itself that obligations were being met,” Ms James said.
“While Caltex claims it had a practice of carrying out annual reviews and audit processes to ensure compliance with the law, it is clear these checks were inadequate and failed to properly consider the dynamics at play in its business.”
The FWO also released its findings of an audit of employers in Western Sydney in March. The report found that:
Almost two-thirds (64 per cent) of the 197 businesses audited by the Fair Work Ombudsman during the campaign were found to be non-compliant with workplace laws.
Sixty-four per cent of businesses were compliant with record-keeping and payslip requirements, while just 58 per cent were paying their employees correctly [emphasis added].
The Ombudsman’s media release further noted:
As part of the campaign, Fair Work inspectors conducted site visits with a particular focus on Harris Park and Parramatta in response to intelligence received by the agency indicating potential non-compliance amongst restaurants in the area.
The suburbs are also home to a higher than average proportion of migrants, with both Harris Park (85 per cent) and Parramatta (74 per cent) at more than twice the national average of 30.2 per cent.
Acknowledging that new arrivals to Australia may have a limited awareness of Australian workplace laws, it was considered that businesses in the region would benefit from tailored support and education from the Fair Work Ombudsman.
Only two of the 23 businesses visited in these suburbs were found to be fully compliant — a non-compliance rate of 91 per cent. [emphasis added]
While these rates of non-compliance are particularly high, they are consistent with other audits conducted by the FWO in the restaurant and hospitality sectors. Restaurant and Catering Industrial may not have needed to worry so much about the impact of any increase in minimum award wages in its sector.
Unpaid interns? No, we’re paying to work!
Meanwhile, concern about unpaid internships — which has been of concern to the AIER for some time — has been heightened by revelations that some interns are actually paying to get their foot in the employment door. Reports in the Fairfax press indicate that some workers are paying nearly $1000 to intermediaries to gain access to unpaid internships:
Students and graduates are forking out $1000 to undertake unpaid internships with a one in 64 success rate of picking up a full-time job and which don’t even take place at the company’s office.
But the firms involved insist they are simply providing the training universities have failed to deliver to prepare technology, business and engineering graduates for the real working world. The firms involved say universities aren’t adequately preparing graduates for the workplace.
Melbourne software design firm Future Squared takes up to 60 interns a year for a three-month unpaid program arranged by recruitment firm Industry Placements Australia. The internships do not take place at Future Squared’s city offices but at IPA’s so-called “student experience centre” at the Dream Factory in Maribyrnong, a former woolshed that has been converted into a co-working hub for start-ups and entrepreneurs.
Many places are filled by students who must complete an internship as part of their university course, but the program also accepts direct applicants. An ad run by IPA last week advertised an eight-week unpaid web development internship that cost successful applicants $990.
Of further concern is that the money does not appear to be well spent, inasmuch as the success rate of obtaining ongoing employment is very low. Fairfax reported that:
Zakk Goodsell, a director of Future Squared, said the company usually has about 10 interns at any one time — the same as its number of paid staff. He said the internship was really a “recruitment process” designed to weed out non-performers, because graduates are “not ready” and are “taught a whole bunch of crap by the universities”.
However, Mr Goodsell conceded that of 64 interns to come through the firm’s doors in the past two years, just one person “passed” and remains employed by the company. Almost half the interns “disappear” after just one week, he said.
Unpaid internships outside of a recognised vocational training course placement are very likely to be unlawful. Employees doing work for an employer must be paid wages and conditions in accordance with awards and the National Employment Standards, according to the FWO and labor law experts.
The internships reported by Fairfax and their cost have been criticised by Interns Australia, an advocacy group which supports proper remuneration for interns. Fairfax reported that:
The internships were criticised by advocacy group Interns Australia, which argues all internships should be paid. The practice of asking applicants to pay to undertake internships — either directly or through a broker — was “very concerning”, said director and unionist Jack Kenchington-Evans.
The FWO is reportedly investigating the practice of paying for internships.
“Subsidising billionaires”
The ‘gig economy’ also has an impact on the proper payment of workers. According to a recent report by the Australia Institute’s Centre for Future Work, UberX drivers are underpaid compared to both the Australian Federal Minimum wage and the award established by the Fair Work Commission for the Passenger Vehicle Transportation industry:
UberX services are provided at significantly lower prices than traditional taxi services in all major Australian cities; on average, traditional taxis are about 40 percent more expensive than UberX, based on a representative benchmark trip.
Under normal pricing schedules, it is very unlikely that UberX drivers earn net income (after all expenses) equivalent to Australia’s statutory minimum wages for workers in this industry.
We estimate the net income of Uber drivers (on average across the six cities considered in the report) under plausible assumptions to be $14.62 per hour. The highest simulated net incomes are generated in Canberra and Sydney (over $18 per hour); the lowest are in Perth (under $11 per hour).
The simulated average hourly net income for Uber drivers is well below Australia’s basic statutory minimum wage, of $18.29 per hour. And it equals less than half the statutory minimum payments required under the relevant Modern Award that would apply to waged workers in this sector (taking into account casual loading increments and penalty rates for evening and weekend work).
The implicit wage subsidy paid to Uber by its drivers, in the form of below-minimum wage labour, is large relative to the overall fares and margins generated in this business. It is equivalent to a subsidy paid to Uber (and ultimately its owners) by its Australian drivers, that is worth hundreds of millions of dollars per year. And if UberX prices were increased enough to pay minimum statutory wages to its drivers, almost all of UberX’s price advantage relative to traditional taxis would disappear.[emphasis added].
UberX does not consider its drivers to be employees. Rather, it is claimed that the drivers are independent contractors. The drivers supply the labour, the vehicle and meet all vehicle running costs. Uber provides the App and the information technology that runs the booking service and the payments system — that is the payment made by the customer to Uber and the payment made by Uber to the drivers. Uber retains about 28% of the revenue and the rest is paid to the operator who must meet all capital and running expenses. After expenses, the driver gets about 35% of the revenue as net income or ‘wages’.
In an unfair dismissal decision handed down late in 2017, a single member of the Fair Work Commission has ruled that an Uber driver — who represented himself in the case — was not an employee and therefore could not be protected against unfair dismissal. Deputy President Gostencnik noted however that the law might eventually evolve to capture the circumstances apparent in the ‘gig or ‘sharing’ economy:
[66] The notion that the work-wages bargain is the minimum mutual obligation necessary for an employment relationship to exist, as well as the multi-factorial approach to distinguishing an employee from an independent contractor, developed and evolved at a time before the new “gig” or “sharing” economy. It may be that these notions are outmoded in some senses and are no longer reflective of our current economic circumstances. These notions take little or no account of revenue generation and revenue sharing as between participants, relative bargaining power, or the extent to which parties are captive of each other, in the sense of possessing realistic alternative pursuits or engaging in competition. Perhaps the law of employment will evolve to catch pace with the evolving nature of the digital economy. Perhaps the legislature will develop laws to refine traditional notions of employment or broaden protection to participants in the digital economy. But until then, the traditional available tests of employment will continue to be applied.
[67] It seems to me plainly to be the case that the relevant indicators of an employment relationship are absent in this case. The overwhelming weight of the relevant indicia point the other way. In my view and for the reasons given earlier, the Applicant was not an employee for the purposes of s.382 of the Act at the time of the ending of the relationship between the Applicant and the Respondent. He is therefore not a person protected from unfair dismissal. The application must be dismissed. .[emphasis added].
AIER supports decent work for all employees. A key element of decent work is decent wages which support the costs of living needs of employees and appropriately recognises the skills and contributions workers bring to their workplaces.
Wage exploitation of any form — and particularly the exploitation of vulnerable workers — must be stamped out. Unions, responsible employers and governments must all work to ensure that workers receive a proper reward for their labour.
The ACTU has embarked on a campaign to ‘Change the Rules’ to ensure that this happens. AIER last year embarked on a project to investigate what the framework of a new, fairer workplace relations system will look like.
