The Australian Council of Trade Unions has criticised a parliamentary report on the black economy, saying it fails to understand how serious wage theft is in Australia.
It has called for an overhaul of the industrial relations framework, saying the government needs to make it easier for workers to recover stolen wages from their bosses.
It says the so-called “black economy” – which includes businesses and individuals operating outside the tax and regulatory system, that deal with cash and often avoid taxes – is contributing to gross inequality in Australia and works in favour of employers.
It has rejected the parliamentary report’s assertion that a key cause of Australia’s black economy is an overly burdensome high tax and regulatory regime, saying the assertion is not supported by any evidence “and is clearly ideologically driven”.
“The mechanisms offered to exploited workers to fight back through the current Australian industrial relations system are too complicated and are financially out of reach for most working people,” the ACTU president, Ged Kearney, said.
“To claw back stolen wages and superannuation, and fight exploitation, workers must spend hundreds of dollars as a starting figure and endure lengthy court proceedings.
“This is a barrier for workers and it creates a perverse incentive to underpay workers and deny them access to their entitlements, safe in the knowledge that the likelihood of being caught and punished is much lower than the potential rewards.
“The use and abuse of the shadow economy as a business model is a clear example of how the rules at work are broken.”
The black economy taskforce released its interim report in March, which found the most important determinants of the size of Australia’s black economy were “high tax and regulatory burdens, and low profit margins, which place pressure on supply chain practices”.
It said social norms were the next important factor, with other factors including gaps in the “regulatory perimeter”, the availability of cash (and other non-traceable payment methods) and the risk of detection and penalties.
But the ACTU has dismissed the assertion that high tax and regulatory burdens are to blame for Australia’s cash economy. It says the real driver is the fact that the system is too hard for workers and their representatives to enforce laws and recover stolen wages.
It says the Fair Work Act requires a lengthy and expensive process just to enforce employees’ rights via legalistic court proceedings.
“This creates a perverse incentive to underpay workers and denies them access to their entitlements, safe in the knowledge that the likelihood of being caught and punished is much lower than the potential rewards,” the ACTU submission says.
The ACTU submission to the black economy taskforce will be released on Tuesday.
It says businesses should be heavily penalised for stealing from employees; businesses must be forced to pay payroll tax; sham contracting must be stopped; and multinational companies who pay no tax and underpay workers should never get government procurement contracts.
“The ACTU is concerned that the interim report of the ‘black economy taskforce’ simply does not address exploitation and wage theft in detail,” the submission says. “A total of five lines were devoted to exploitation of workers in the interim black economy report and the taskforce to date has been found to be wanting in its understanding of the importance of this issue.
“It needs to be much easier for workers and their representatives to enforce laws and recover stolen wages. The Fair Work Act currently requires a lengthy and expensive process just to enforce your rights via court proceedings.”
In 2012 the Australian Bureau of Statistics estimated the black economy was around 1.5% of gross domestic product in Australia (roughly $25bn a year today), up from 1.3 % in 2001.
