How wage fraud, cuts to penalty rates can affect Aussie workers: report

A new report has found that millions of workers could see their retirement savings reduced by $100 billion during their retirement due to salary freezes, wage fraud, companies scrapping enterprise agreements and cuts to penalty rates. It estimates that one in four workers or three million people have experienced some form of wage suppression, which could negatively affect their super payout.

The report by the Australia Institute's Centre for Future Work, titled “Consequences of Wage Suppression for Australia's Superannuation System,” states that the government will pick up over a third of the cost, equivalent to $37 billion in lost taxes, because of lower super contributions as well as higher age pension payouts, according to the Sydney Morning Herald. In the report, wage suppression is described as an economic "time bomb.”

Its author, Jim Stanford, said that while families grapple with the immediate effects of wage cuts, the long-term impact when they retire is yet to play out. He believes that the estimated overall losses will be lower if some of the wage suppression damage is fixed.

Stanford believes that the long-term effect of wage suppression strategies must raise issues for super trustees in terms of the companies they invest in. "Fulfilling their responsibility to maximise the post-retirement benefits of fund members would seem to imply that superannuation funds and their directors have a responsibility to oppose aggressive and even illegal wage suppression strategies, using whatever levers and influences are at their disposal," the report reads.

It also identifies eight wage suppression strategies and models as well as the effect on long-run superannuation contributions and retirement incomes. It says the aggregate loss of super balances on retirement could exceed $100 billion in real 2017 dollars by the time of affected workers’ retirement. That is, if the pattern of wage suppression is maintained.

In cases where employers force employees onto the minimum award and cancel enterprise agreements, the cost per worker is calculated at $270,000 in reduced retirement savings. The Transport Workers Union says the motivation is to try to quantify the long-term effects on workers and their retirement savings when companies pay below the award.

Tony Sheldon, the TWU national secretary, said the union will work to put environmental and social governance (ESG) at the centre of the debate about investment behaviour."If a company has high labour standards and appropriate governance you have a more profitable company," the Sydney Morning Herald quotes him as saying.

RT/YouTube