Wage underpayment infects the economy – but not manufacturing…

Comment by Peter Roberts

This week the seamier side of Australian business was again in the spotlight as supermarket group Woolworths admitted to underpaying staff by as much as $300 million over a decade.

There were the usual explanations that this was all the fault of our complex industrial relations system.

This is a ridiculous assertion as Woolies is capable of operating far more complex logistics systems, and in fact, was involved in writing the pay rules in their own enterprise agreements that are supposedly so complex.

The revelation followed a succession of companies found underpaying their staff ranging from individual restaurateurs to 7-Eleven and Wesfarmers, Qantas, Commonwealth Bank, Super Retail Group, Michael Hill Jewellers and even the ABC.

The Guardian called this an epidemic of underpayment, and noted that there had been 22 new companies self-disclosing underpayment to the Fair Work Ombudsman since the start of the year.

Former Australian Competition and Consumer Commission chairman Allan Fels was plain: “The cases I’ve seen involved people deliberately underpaying people.

“…There (is) a simple decision by business to underpay.”

This sort of unethical business behaviour is not only bad, it is proving bad for the economy, with low wage growth and underpayment factors behind weak retail spending.

Low spending translates directly into low demand for manufactured products, especially food and beverages which are a large part of Australian manufacturing.

Manufacturers fortunately do not feature in the list of serial underpayers, partly because they tend to employ fewer unskilled and migrant workers on the most basic of wages.

But manufacturers also generally respect the skills of their staff and are prepared to pay a fair day’s pay for a fair day’s work.

Australia’s is a largely SME manufacturing sector and in many case owners are closer to their staff, and to the effect underpayment could have on productivity and quality, than in huge companies such as Woolworths.

This is as it should be as good manufacturers know it is better to retain staff and train them to higher levels of skill rather than relying on the open market for indifferent staff.

While there is no evidence of manufacturers doing the wrong thing – let’s keep it that way.

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