A comprehensive review by PricewaterhouseCoopers of the Australian economy and business challenges for 2020 has found that businesses underpay workers by around $1.35bn each year. It found a major cause is the decline of unionism, which has meant policing wages is now largely left in the hands of Fair Work Australia.
PwC also argues that 2020 is set to be another year of slow growth, with the falling rate of productivity growth a major concern coupled with an inability to shift to a low-emissions economy.
Wage theft seems to be so commonplace in the hospitality industry that it would seem remiss for it not to be included as part of the judging of MasterChef, but the report by PwC details just how large the problem is across the entire economy.
PwC’s Australia Matters report estimates “there is in the order of $1.35bn in underpayments per year”. The industries that see the biggest level of underpayment of worker entitlements are construction ($320m), healthcare and social assistance ($220m), accommodation and food services ($190m) and retail ($180m).
PwC estimates that this accounts for around “21% of the workforce in the selected industries, or 13% of the total Australian workforce”.
Little wonder that PwC suggest worker underpayment is “one of the key risks facing businesses today” and that businesses need to be asking themselves what are they doing to fix it.
While PwC suggests the complexity of the industrial relation system is a factor, it argues “complexity will not be accepted as an excuse for underpayment of entitlements. The onus is on employers to keep track of – and correctly apply – all the rules”.
A large reason it sees for the growth of underpayment is an underinvestment in payroll systems and processes and that “the decline of union presence in Australian workplaces has led to a decline in the policing of employee entitlements specific to particular industries”.
PwC notes that “the interpretation and operation of industry-specific entitlements often carry a long history”.
Who could have guessed removing people who are across the details of the industrial relations system being involved in the oversight of wages payment would see an increase in underpayment?
It’s almost like it was one of the aims of the LNP anti-union policy ...
But while underpayment of workers is seen as a major issues for business on a micro level, on a broader level there are a number of challenges, according to PwC.
Chief among these is that we continue to be in the new normal of slow growth.
Since 1978, Australia GDP has grown each year on a per capita basis by an average of 1.7%, and yet over the past three years we have averaged less than half of that – at 0.8%. And we have now not had a three-year period of above average growth for over a decade.
And we are not unique – the US, UK, Canada and the OECD as a whole have all experienced growth over the past 10 years below what was previously taken as normal:
In Australia a major concern is the massive drop in the growth of productivity. It seems almost impossible, but the past three years have seen worse productivity growth than occurred in 2007-08 under the WorkChoices regime.
In fact the past three years have been the second-worst period of productivity growth ever recorded – only the 1990s recession saw a worse time:
It’s quite astonishing that while this is happening the treasurer could argue less than a week ago that “when it comes to the Australian economy, we have our fundamentals in a pretty good place”.
There is little more fundamental to an economy than productivity. And right now, not only is it not “pretty good”, it is as bad as it has ever been.
One issue PwC highlights is our lack of investment – especially in research and development – the very things that should drive productivity.
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And a major issue in this space is our energy industry and the government’s absolute shmemozzle of a policy on climate change.
PwC argues “to support the future direction of the economy, we need a consistent and strategic approach to Australia’s energy future so we can collectively maximise the opportunity this presents”, and it notes PwC’s Low Carbon Economy Index 2019 shows just how slowly Australia is shifting to a low-emissions economy.
It found that in 2018 “Australia has a decarbonisation rate of 1.8% and comes in at 13th place on the global index [the G20 nations], behind Germany (top performer with a rate of 6.5%), and behind regional powers China (3.9%) and Japan (3%)”.
This accords with the medium-term trend that the fall in Australia’s carbon intensity since 2013 is among the lower half of OECD nations:
The impact of energy-policy intransigence on investment is something former prime minister Malcolm Turnbull highlighted in a recent podcast with Katharine Murphy and Lenore Taylor. He suggested he had been told by foreign CEOs that “companies were avoiding Australia because of the lack of policy and because of political risk”.
The links between climate change policy and investment are only going to grow, and in an economy struggling with low productivity and an outlook for lower growth in the future the problems from the government’s failure to establish a low-emissions framework will only become more acute.
• Greg Jericho writes on economics for Guardian Australia
