Three-quarters of cafes in on migrant wages scam

Via The Guardian:

Businesses have been forced to pay back almost half a million dollars to 616 workers following Fair Work ombudsman audits of the hospitality industry in Melbourne, Sydney and Brisbane that found 72% of businesses had breached workplace laws.

Fair Work inspectors visited 243 businesses on Victoria Street in Melbourne’s Richmond, Glebe Point Road in Sydney’s Glebe and at Fortitude Valley in Brisbane. They interviewed staff and checked employment records, issuing 71 on-the-spot fines and 63 formal cautions, and finding workers were owed $471,904.

Of the businesses found in breach of workplace laws, 38% underpaid their staff, while 28% failed to keep adequate employment records and pay slips. Failure to pay overtime or to give staff adequate meal breaks were other common issues.

The ombudsman began legal action against several of the businesses, including the Meatball & Wine Bar, where 26 employees at its three Melbourne restaurants were allegedly underpaid. Employees of the franchise, who worked as wait staff or kitchen hands, were paid flat rates of between $17.31 and $21.69 per hour.

The Fair Work ombudsman, Natalie James, said she was disappointed by the high level of non-compliance, but not surprised. One in 10 disputes resolved by the ombudsman last financial year involved a restaurant, a cafe or a takeaway food outlet, and nearly one-third of the most serious cases the ombudsman takes to court involves the sector.

“Our experience is that addressing entrenched, cultural non-compliance requires a combination of regulatory intervention, public awareness and industry leadership,” James said.

“This is an industry-wide problem and it needs an industry-wide response. There are over 50,000 cafes, restaurants and takeaway outlets in Australia, and the Fair Work ombudsman cannot fix this one cafe at a time.”

The audits found the non-compliance rate was the highest on Victoria Street, with breaches identified at 81% of businesses, compared with 70% (47 of 67) on Glebe Point Road and 60% (44 of 73) at Fortitude Valley.

I already can’t eat. Now I can drink coffee, either.

Yes folks, mass immigration is ungovernable for the labour market:

  • 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 reportrevealed 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.

Back in November, Robert Skidelsky, Professor Emeritus of Political Economy at Warwick University, penned an excellent article in Project Syndicate which, among other things, explained why never-ending mass immigration pushes down wages growth:

Standard economic theory tells us that net inward migration, like free trade, benefits the native population only after a lag. The argument here is that if you increase the quantity of labor, its price (wages) falls. This will increase profits. The increase in profits leads to more investment, which will increase demand for labor, thereby reversing the initial fall in wages. Immigration thus enables a larger population to enjoy the same standard of living as the smaller population did before – a clear improvement in total welfare.

recent study by Cambridge University economist Robert Rowthorn, however, has shown that this argument is full of holes. The so-called temporary effects in terms of displaced native workers and lower wages may last five or ten years, while the beneficial effects assume an absence of recession. And, even with no recession, if there is a continuing inflow of migrants, rather than a one-off increase in the size of the labor force, demand for labor may constantly lag behind growth in supply.

This analysis followed an empirical study by the Bank of England, which found that immigration into the UK had pulled down average wages:

This paper asks whether immigration to Britain has had any impact on average wages. There seems to be a broad consensus among academics that the share of immigrants in the workforce has little or no effect on native wages…

We find that the immigrant to native ratio has a small negative impact on average British wages. This finding is important for monetary policy makers, who are interested in the impact that supply shocks, such as immigration, have on average wages and overall inflation. Our results also reveal that the biggest impact of immigration on wages is within the semi/unskilled services occupational group… where a 10 percentage point rise in the proportion of immigrants is associated with a 2 percent reduction in pay.

…the impact of immigration on wages in semi/unskilled services is much larger than can be accounted for by purely compositional effects, suggesting that the vast majority of this effect refers to the impact on native workers.

Or try UBS:

Q3-17 population strong at 1.6% y/y; migration surges 250k, most since 2009

Population growth lifted 0.4% q/q & 1.6% y/y in Q3-17, the equal fastest annual pace since 2013. The larger driver of the total rise of 396k was a surge in migration to 250k.

Implications: labour market spare capacity still too high for a large lift in wages

The labour market is strangely mixed. Jobs – especially full-time – are around as strong as possibly could be expected at this stage of the cycle. This is supporting housing activity. However, booming population (especially migration) & a spike in participation is a massive ‘positive labour supply shock’, seeing unemployment ~steady for 2 years now. There is still likely more spare capacity in Australia’s labour market compared with other major economies which are at or below NAIRU – and hence we still don’t see a large lift in wages in the near-term. Overall, we still see the RBA on hold in 2018.

It is basic economics that if you flood an already oversupplied labour market with cheap foreign workers then prices will fall. This was explained beautifully by The Australia Institute’s chief economist, Richard Denniss, last year when he noted that the very purpose of foreign worker visas is to “suppress wage growth by allowing employers to recruit from a global pool of labour to compete with Australian workers”.  That is, in a normal functioning labour market, “when demand for workers rises, employers would need to bid against each other for the available scarce talent”. But this mechanism has been bypassed by enabling employers to recruit labour globally. “It is only in recent years that the wage rises that accompany the normal functioning of the labour market have been rebranded as a ‘skills shortage’”.

Comments

      • Why would we import chemical engineers when we can just import petrol (which we do, seeing as we got rid of pretty ,much all refining capability)?
        Easy enough to get a local unemployed chemical engineer if you want to fancy up your coffee, and make sure the guy pumping steam through coffee grounds knows their steam tables off by heart, and can lecture anyone who passes by on the intricacies of extraction via gas-solid adsorption.

      • Mass transfer is what you need for getting the caffeine and coffee flavour components out of beans into water – but I don’t think it was many people’s favourite subject, even with Professor Treybal’s scintillating text.

      • Heat and mass transfer? Maybe heat. But I thought it was perfecting suspension of solids that made my latte special.

      • ErmingtonPlumbingMEMBER

        The whole Latent heat, Sencible heat thing and those steam tables used to confuse me at tech in my mechanical services module,…but never once worked on a boiler or stesm lines as a plumber.
        A talkative and competent engineer/barista would have been cool in my Nth Sydney TAFE days.
        We did do an excursion to Royal Nth Shore Hospital to look at the Swimming pool sized open Greas arrestor in a fully enclised vented room (yuck!), A/C and Hot water plantrooms, fire pump rooms, Kitchens and best of all the Coal fired boilers,…km of heavily insulated steam pipes ran up through the hospital buildings.
        At the time (1988 I think) they recieved 2 large semi trailer tippers per week next to the boiler house near st Leonards station.
        They were getting ready to go to gas I remember, with the steam stuff to become redundant.
        At around the same time I spent just over a year with a specialist Gas contractor who specialized in small to medium sized Instutional boiler change overs, from mostly oil injection boilers to Gas,….nursing homes, small hospitals, boarding schools,…did St Ignatius while I was with them.

        Anyway,…if I became a barista I could jetblast out the common coffee ground chokes that always afflict coffee shops,…the smell of the sometimes years old rancid coffee grounds that silt up the pipes is surprisingly offensive and yet clearly a “coffee smell” at the same time.

    • Or you hire them for 3 days on the books, 2 days cash. Everyone wins, except the tax office as per usual. We need to bring on the US system re tax evasion

  1. “Fair Work inspectors visited 243 businesses on Victoria Street in Melbourne’s Richmond, Glebe Point Road in Sydney’s Glebe and at Fortitude Valley in Brisbane. They interviewed staff and checked employment records, issuing 71 on-the-spot fines and 63 formal cautions, and finding workers were owed $471,904.”

    Would be interesting to see how many employees were fired after this event.

    • Workers left high and dry by the sudden closure of a popular Melbourne cafe may need to be bailed out by the federal government as they chase more than $160,000 in outstanding payments.
      Matthew Forbes’s Cobb Lane bakery-cafe, which opened with great fanfare in 2013, shut up shop in May this year after racking up a $1 million debt.

      • Used to have a coffee there from time to time
        Not many workers without Australian accents, if any, leastaways front of house. Might be why it went under.

    • They will be kept “off the books” and paid in cash. If both the exploiters and the exploited have a symbiotic relationship then it will continue. Makes life much easier not worrying about payroll tax, workcover policies, etc.

      Minimum wage is merely lip service and does not actually exist in the real world.

    • A more sensible way is to legalise paying migrants half what locals earn.

      Gerry Harvey and Scott Farquar are already lobbying for it:

      “Many overseas workers would be prepared to move here for a much better life and half the money Australians earn,” Mr Harvey said.
      “I’ve got horse studs and it’s difficult to get staff.”

      • They better do that, quickly or people will stop employing migrants and they might go home.

      • Would that not mean every single Aussie is sacked and replaced by a foreigner?

        If you look at IT, Aussies on $50k/year are replaced by immigrants on $2000/month. The vast majority of IT jobs here are given to 3rd world passport holders – even in the government-funded NBN!

      • No quite the opposite. It would be like UAE. The local population benefits greatly from slave labor working in their country. You are making the mistake that assumes we have to work.

  2. 7.25 say AUD 10 there is your benchmark
    [Gold rush’:Like most everyone else here, Pando was lured to the sand mines by the prospect of big pay. Even unskilled newbies can pull down $US19 an hour, almost triple the state’s $US7.25-per-hour minimum wage.
    A student at Texas Tech University, Pando took off the spring semester to start working at Black Mountain. Six months into the job, he’s making $US28 an hour.]

  3. Should things get really bad, I plan on posting flyers on electricity poles in my area with:

    Dear potential thieves, criminals, and assorted undesirables.
    All the good, expensive stuff that you can steal is over in the quiet, leafy inner Eastern suburbs (Melbourne).
    Make your way over there. It’s more profitable.
    Cheers

    • If you paid more than $9 for a bowl of pho on Victoria St you were completely done over.
      Of course you may still wonder how a cafe can pay their staff the award wage after paying rent when their cashflow is basically 20 x $9 each day.
      In the mean time, I guess they’ve shot all the fish in that particular barrel, so next stop Footscray.

      • @Mow Y,

        In the unlikely event you were able to find a place selling $25 pho in Victoria St Richmond you’d have to conclude they were trying to avoid the bother of customers for some reason.

    • The kids filed into class Monday morning. They were all very excited.
      Their weekend assignment was to sell something, then give a talk on salesmanship.
      Little Sally led off. “I sold SES cookies and I made $30” she said proudly. “My sales approach was to appeal to the customer’s civic spirit and I credit that approach for my obvious success.”
      “Very good”, said the teacher.
      Little Debbie was next. “I sold magazines” she said, “I made $45 and I explained to everyone that magazines would keep them up on current events.”
      “Very good, Debbie”, said the teacher.
      Eventually, it was Little Johnny’s turn. The teacher held her breath. Little Johnny walked to the front of the classroom and dumped a box full of cash on the teacher’s desk. “$2,467”, he said.
      “$2,467!” cried the teacher, “What in the world were you selling?”
      Toothbrushes”, said Little Johnny.
      “Toothbrushes”, echoed the teacher, “How could you possibly sell enough tooth brushes to make that much money?”
      “I found the busiest corner in town”, said Little Johnny, “I set up a Chip & Dip stand and I gave everybody who walked by a free sample.” They all said the same thing, “Hey, this tastes like dog poo!”
      Then I would say, “It is dog poo, you wanna buy a toothbrush?”
      I used the Bill Shorten method of giving you some crap, dressing it up so it looks good, telling you it’s free, and then making you pay to get the bad taste out of your mouth.”
      Little Johnny got an A+ for his assignment. Bless his heart.

  4. It is a long time since any business felt the pressure to actually train anyone (other than than in middle management neomarxist feminist survival skills). I’m not sure Australian businesses would even know where to begin lol.

  5. Which employer does pay its staff properly?
    My almost 16 year old child needs a part-time job. (Or are those jobs no longer available to Australian citizens?)

    • GG, the skin colour of your child should not matter but we are living in the opposite world to the one Rosa Parks lived in. So here are some facts about Vic:

      Do not apply in Subway, I have walked past many of them and never see a white person working in it.

      Whenever I walked past a Grill’d outlet, I never saw a non-white, non-Asian working there.

      Frozen yogurt outlets hire young Aussies.

      And whenever I see a Bakers Delight outlet, I see no male working in it.

      So it depends on the gender of your child as well. I can not believe the Australia that I am living in.

    • Maccas is the goto, maybe Hungry Jack’s, both get by employing really young kids on very low rates to do very boring work but the pay is legal and the conditions are relatively safe. Places like local bakeries are a chance but my impression is that they all tend to underpay. I made an enquiry at a local supermarket for one of my kids and was told the waiting list just to be interviewed was over a year. Same with Coles, very long wait and very little chance.

      Does your kid’s school have a work experience program? If they pick their placement right then it’s a chance to get a foot in the door.

      ps I suspect most employers do not discriminate as long as your kid is willing to be underpaid.

      • Coles / Woolworhts long list, really? I think that might be a spin story.

        In recruitment, they would have a database of candidates, including a list of recently expressed interest in certain stores and or jobs – not a waiting list.

        A store manager would go through a list of potential recently applied candidates – they would pick who they would want, rather than going through a ‘waiting list’.

        The long list doesn’t seem to apply if you are Indian. Indians seems to do well in frontline jobs at Woolworths – perhaps because the Assistant Store Managers and Store Managers are Indian.

        Might be some ethnic nepotism at Woolworths.

        If you feel you are being discriminated but on the race, I would look into it.

        Class action, here we come!

    • I suggest getting qualified for a pool life guard position. If you are in Vic you need your working with children, first aid and a life guard qualification but they are relatively easy to get. At least at a pool they should be legally employed, and it is a good job to get you through all your studying years. They should also be paid super, most likely into Hostplus, so getting an industry account early is a plus. There are better and worse employers in the industry but if they are lucky enough to be employed by a council run’/owned facility this would be great. The fact that there are a couple of hoops to jump through to be able to do this work, but the hoops are not too difficult means that you are shielded from competing with migrant labour. Plus the seasonal aspect works well in that when you are on holidays, there is more work available. Ideally look into getting booked in for the courses over the next couple of months because you want to be employed in the before summer intake.

  6. It looks like work choices was killed off, but something better for employers was put in place, a whole bunch of young kids from OS willing to work for whatever was offered.
    Why are these type of stories not making headlines?
    If there a union which represents these type of staff?

    • Don’t be absurd, helping poor workers is so yesterday. Taking a cut of major taxpayer funded infrastructure, and skimming off white-collar government unions with an endless tap of financing is so much more profitable.

    • I want to start a cafe named ‘FRO’, staff it with international students and charge a flat $20 for toast, avocado or anything with chia or quinoa in it.

      • No doubt. The beautiful thing about the business model is that it’s a race to the bottom with plenty of room for ever less ethical practices!

  7. These findings don’t go far enough. The business model for many Cafe’s is not underpayment, it is non-payment. Those seeking a Visa pay two-years worth of salary up front in return for sponsorship, which is paid back two them as salary. Then also consider that salary is a tax deduction for the Cafe.

    You end up with Cafe’s operating as a money-laundering front for Visa fraud.

  8. $500,000 / 616 = $811.
    $811 / ~$10 (ph) (approx underpayment amt) = ~80 hrs

    So the mean tenure of these workers (in terms of underpayment) is 80 hours, or two weeks full time, or 4 weeks at half-time.

    These numbers look dubious to me – and it makes me think we’re only just scratching the surface in terms of the full extent of the underpayment scam that pervades our economy.

    • Note from the Meatball and Winebar example it specifically mentions ‘flat rate’ – the breach was maybe not paying penalty rates, which might only apply to a fraction of all the hours worked.
      Superficially, it looks like if the Commonwealth award was applied, a kitchen hand should be paid $19/ hr ordinary time, $24/ hr Saturdays and $29/ hr on Sundays (assuming a ‘kitchen attendant grade 1’ is a kitchen hand) – i.e. they’re out $2/hr sometimes, and $12 / hr or more at other times.

      https://www.fairwork.gov.au/ArticleDocuments/872/restaurant-industry-award-ma000119-pay-guide.pdf.aspx

      Also, a casual kitchen hand working or waiter two or three shifts per week might be working as little as 10 hours per week (e.g. around studies).

  9. Jumping jack flash

    But consider that without slave labour the cafe owners wouldn’t be able to afford their mortgages and/or keep up with living costs.

    “Standard economic theory tells us that net inward migration, like free trade, benefits the native population only after a lag.”

    Indeed. And that lag is proportional with how much debt those who benefit first from the immigration/free trade have.
    More debt = more lag.
    At the moment we’re looking at about 30 years of lag.
    And that lag duration depends of course on how long the country can hold onto the money once the debt stops being pumped in… in our case not all that long before it is all whisked away to China.

    Interesting times ahead.

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