Wage Theft – Cause and Effect, AnhPhi Nguyen (Eco 4)

The up-to-date citizen would cringe at the mention of the words ‘wage theft’. This new epidemic sweeping businesses across Australia is a serious one – and it’s only just beginning. The ongoing wages scandal has seen the demise and humiliation of many companies, including the likes of Coles, Woolworths, 7-Eleven, even the dissolution of chef George Calombaris’ restaurant empire, where all of the above companies owe more than $340 million worth of wages to their employees and staff, keeping in mind that those were just four companies listed involved in the wages scandal. The projected amount due is over $1.3 billion, for all companies involved in the scandal. So, given the sheer magnitude of this debacle, this begs the question: what is the cause behind this horrifying under-compensation of  workers, and how does it affect the parties involved?

Woolworths: one of the first implicated in the wages scandal. 

In recent light of these investigations, many corporations are claiming that their reasons behind underpaying employees are ‘unintentional’ and that these shortchanges are attributed to nonsense ‘inadvertent administration errors’, diverting the blame to ‘significant issues across payroll systems in the market’. Thanks to the work from the Fair Work Ombudsman, the regulator in this issue, it was determined that the main reason behind this thievery was due to these companies being ‘lax and lazy’ when it came to their obligations regarding their employees – making it an even more unacceptable reason to rob employees of over millions and millions of dollars worth of remuneration. After all, if companies are unable to give their workers their legal entitlements, maybe they shouldn’t be in business.

Consequently, the results of these wage scandals has very real consequences on the Australian economy, for all parties involved. For example, Woolworths, who was implicated early on during the timeline of this scandal, had a sharp decline in share prices right after the news was released to the media. This negatively impacted the company, who took a hit to the company’s demand in shares, negatively affecting investors’ income along with the company’s revenue.

Furthermore, when big names (like Woolies and Coles) pay sub-par wages, this makes it harder for competitors to compete, as the competitors will have to charge higher to maximise the profits off each sale, an unfair tactic in the market, that will only prompt more and more companies to reduce their wages paid, compromising their workers and integrity, decreasing consumer confidence in the company, and hence, decreasing income. In addition to that, the decrease in the worker’s wages indicates a decrease in disposable income, meaning that workers, and hence, citizens, will have less to spend, and consequently, with less to spend, businesses have less to sell, and consequently, we fall into a negative economic spiral. All in all, the wages scandal is bad.

The wages scandal should not have been an issue in the first place. Not only is it an unfair and completely careless business tactic to undercut the market, it undermines and forgoes a law businesses have to adhere to – and in violating that law, it demonstrates that maybe these business should no longer be in operation. Furthermore, the fact that this is attributed to the sheer negligence of these companies is extremely unacceptable, as this failure in corporate responsibility affects the livelihood of the victims, let alone our economy.