The economic impact of wage theft in South Australia

Work insecurity Seasonal labour Wages Employee protection Wage theft South Australia

Part 1 of this report defines wage theft, drawing distinctions between wage theft - the unlawful non-compliance of wage laws by employers – and wage suppression which, while impactful in its own right, is not technically illegal, before Part 2 looks at the victims of wage theft. While workers in certain industries are more susceptible to wage theft than others, this report reiterates the growing evidence that wage theft occurs in a wide range of industries throughout the economy. It affects workers directly, but also the economy more broadly, with wage thefts significantly impacting workers’ ability to consumer, and therefore constraining aggregate demand.

Part 3 explores the abrogation of oversight of wage laws by the Federal Government in recent years. Since 2013, the Fair Work Ombudsman (FWO) has seen a dramatic decline in its resources, constraining its capacity to conduct its work. The FWO is the national entity through which wage laws are enforced, and where workers can report incidents of lost and stolen wages. That the FWO has been so dramatically under resourced has meant that most perpetrators of wage theft are unlikely to ever be identified. In each of FWO’s audits, however, consistently high levels of noncompliance have been unearthed.

Parts 4 and 5 assess the economic impact of wage theft and the underpayment and non-payment of superannuation in South Australia. It is likely that up to 170,000 South Australian workers are victims of wage theft to varying degrees. Around 1/3 workers entitled to superannuation are not being paid their full entitlements.

Such high rates of non-compliance have enormous economic impacts: this report’s most conservative estimate of the combined loss of superannuation and income in South Australia due to wage theft is around $360 million. Medium estimates in this report see this figure rise to $560 million. This constrains consumer spending and likely costs the State Government between $31-60 million in forgone GST revenue each year, as noted in Part 6.

Part 7 then contextualises these findings, noting that wage theft costs considerably more than the theft of material goods in South Australia, before Part 8 offers a series of reform recommendations for the State Government. While many of the levers for addressing wage theft are available to the Federal Government, State Governments have options available to them, too.

This report puts forward 6 recommendations: ensuring best-practice labour-hire licensing within the state, tightening State procurement policy to ensure wage theft is eradicated from supply chains, actively collaborate on wage theft responses with other jurisdictions, consider ways to reform how superannuation is paid by the State government to set an example of best practice, invest in more education and training programs, and criminalising wage theft in the state while implementing strict financial penalties for noncompliance within SA.

Wage theft is one of the most significant public policy issues of our time – but there are tools available to governments, both Federal and State, to help eradicate the costly scourge of wage theft from the workplace.

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