Around one in four Australian workers are experiencing some form of 'wage suppression'
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Around three million employees stand to lose $100bn in retirement savings because of wage theft, wage freezes, reduced penalty rates and cancelled enterprise agreements, according to a new study.
The report identifies eight wage suppression strategies and models the impact on long-run superannuation contributions and retirement incomes.
It estimates that for a 40-year-old worker experiencing one of the simulated wage-suppressing measures, superannuation balances would be cut by between $30,000 and $270,000 by the time they retire.
It references high-profile cases of employers suppressing wages, including the cancelling of enterprise agreements by Streets Ice Cream, Griffin Coal, Aurizon and Murdoch University, and wage theft scandals at Dominos, 7-Eleven and Caltex.
The report argued that the best superannuation investments are in companies that are growing the economy, investing in people and thinking for the longer term.
It referenced research from Macquarie Bank that showed employee-friendly companies outperformed hostile employers by 6.6% annually.
The report’s major findings include:
• Around three million people or a quarter of the workforce have experienced some form of wage suppression and will stand to lose out in their retirement savings because of lower superannuation payments compounded over time
• There will be a black hole of up to $37 billion (in real 2017 dollars) for the government through lost taxes on lower superannuation contributions and the consequent higher age pension payouts.
• In the worst cases, where employers cancel enterprise agreements and force employees onto the minimum award, superannuation savings can be reduced by as much as $270,000 by the time an individual retires.
• In cases where employees are illegally underpaid, retirement savings can be reduced by over $50,000.
• Where enterprise agreements allow for below-award payments, retirement savings can suffer by over $40,000.
• When employers enforce even a temporary wage freeze, retirement savings can be reduced by over $30,000 over an individuals’ retirement period.
Transport Workers Union national secretary, Tony Sheldon, said slashed wages are affecting a quarter of the workforce – and this impacts on people day to day and also affects their retirement.
“The Superannuation Investment Act’s sole purpose test is clear on the obligations of super funds: for the 'provision of benefits on or after a member’s retirement’," said Sheldon.
"The Federal Government is standing by and allowing this to happen, even supporting companies which rip their workers off.
“The best superannuation investments are in companies that are growing our economy, investing in people and thinking for the longer term. Research by Macquarie Bank shows that employee-friendly companies outperform hostile employers by 6.6% annually.”
The report was conducted by the Centre for Future Work at the Australia Institute and commissioned by the TWU.
HRD contacted the minister for employment’s office for comment.
