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One in six migrants are paid less than the national minimum wage according to a new report by the Grattan Institute, which says governments have failed to stop exploitation of migrant workers with sexual harassment, bullying, and unsafe working conditions also rife.
The report suggests between 5 per cent and 16 per cent of employed recently arrived migrants – or between 27,000 and 82,000 workers – are paid below the national minimum wage of $21.38 (for adults over the age of 21), compared to up to 9 per cent of all Australian workers.
And between 1.5 per cent and 8 per cent of recent migrants – between 6,500 and 42,000 people – are underpaid by at least three dollars an hour.
"We found this really surprising, and frankly, pretty disturbing," says Grattan Institute economist Brendan Coates.
"We don't want a world where we're not enforcing our workplace laws.
"Underpayment of migrant workers can leave migrants destitute."
It was also a problem for Australian workers and businesses.
"It makes it harder for Australians to bargain for a pay rise, it punishes businesses that try to do the right thing, and it ultimately erodes public confidence in our migration program," Mr Coates said.
The report notes migrants also face other threats such as racism and discrimination, having their passports confiscated, being reported to the Department of Home Affairs, or being forced to pay an employer or middleman for obtaining a job or visa.
It calls for a complete overhaul of visa rules, for workplace and migration laws to be strengthened and better enforcement to deter exploitation, and migrants to be given more help to reclaim lost wages.
It says all these reforms would cost $115 million a year and it should be covered by a levy on select temporary visas set at $30 for each year of work rights the visa offers (raising $45 million a year) and by the larger penalties paid by employers who underpay their workers (at least $70 million a year).
The report comes as federal government is expected to soon announce reforms to tackle migrant worker exploitation.
Immigration Minister Andrew Giles said migrant exploitation "hurts both Australian and migrant workers, and puts a handbrake on wages".
"No worker should be trapped in unsafe work because of their visa," he said.
"The Albanese Government will make it easier for vulnerable migrants to speak out by protecting them if they are exploited."
Underpayment also a big problem for Australian workers, but migrants at higher risk
Grattan's report estimates that between 3 per cent and 9 per cent of all employees are paid below the national minimum wage.
And between 0.5 per cent and 4.5 per cent of all employees are paid at least three dollars an hour below the national minimum wage.
"It is a really big problem amongst younger Australians," Mr Coates said.
"Those aged in between 20 and 29 years old, were nearly six times more likely to be underpaid than workers aged between the ages of 30 and 39."
But the report says recent migrants are 40 per cent more likely to be underpaid than long-term residents with the same skills and experience and who work in the same job.
"Migrants are more vulnerable to exploitation because they've often been here for less time," Mr Coates said.
"Many don't have such strong English skills, but their visa conditions also reduce their bargaining power visa vie employers.
"Migrants are also more likely to work in industries or underpayments higher like agriculture and hospitality."
Grattan's report notes migrants account for a growing share of Australia's workforce. In 2016, one in three workers in Australia were born overseas, with 7 per cent holding a temporary visa.
The report said recent surveys of migrants show that some temporary visa-holders – especially students and working holiday makers – are twice as likely to be underpaid as other visa-holders, such as temporary sponsored workers.
Excluding tourists, who don't have the right to work, there were 2.1 million temporary visa-holders in Australia in March 2023, up from 1.3 million in June 2010.
Call to revamp visa rules
While the report notes that governments have taken some steps to reduce the exploitation of migrant workers, it says these actions don't go far enough, and progress has stalled since the pandemic.
The federal government has recently made some changes including amending the Fair Work Act last year to include a ban on advertising jobs with an illegal pay rate and increasing the maximum claim size for the small claims court from $20,000 to $100,000.
The former coalition government commissioned the Migrant Workers' Taskforce to look into the migrant worker exploitation issue, and that taskforce in 2019 made 22 recommendations.
The Albanese government has pledged to implement the taskforce's recommendations in full.
It intends to amend the Migration Act in 2023 to address worker exploitation, especially migrant worker exploitation and is planning to legislate in the second half of 2023 its election commitments on 'same job, same pay' and criminalising wage theft.
But the report suggests dramatically reforming visa rules to make migrants less vulnerable to exploitation.
Mr Coates says many temporary visa-holders put up with mistreatment out of fear that their visa will be cancelled if they are working in breach of visa rules, or that they will lose their pathway to permanent residency.
100,000 migrants have no work rights, guarantee they have them
Grattan points out in its report there are also an estimated 60,000 to 100,000 migrants without work rights, including 'undocumented workers', working in Australia.
These migrants have either entered Australia illegally, overstayed their visa, or have a visa without work rights, for example a tourist visa.
It says a growing number of migrants whose claim for asylum was rejected remain in Australia illegally or on bridging visa E, a visa which doesn't always have work rights.
In March, the government introduced a Bill that, if passed, will extend protections under the Fair Work Act to all migrants without work rights, including people who have overstayed their visa.
But Grattan's report suggests that even if this change passes parliament, few migrants without work rights would report exploitation or claim underpayment due to a fear of being deported.
The report suggests temporary skill-shortage visas should be made portable, so migrants can flee from an exploitative employer and suggests sponsored workers should be able to apply for permanent residency after two years with any sponsoring employer, while working holiday makers should be limited to a single one-year visa.
"We should remove the requirement that working holiday-makers have to work in regional areas or in agriculture, if they want to extend their visa and instead have a one-year visa for working holiday-makers," Mr Coates said.
"We should allow temporary sponsored workers to switch employers more easily so they can flee from an employer that's treating them badly.
"And we should look at reforming student work rights and potentially move to a model where students work rights are restricted on an annual basis, rather than a fortnightly basis, reducing the number of times where they risk breaching their visa conditions."
Grattan's report says "The Assurance Protocol" – under which Home Affairs won't cancel a migrant's visa if they have breached their work-related visa conditions because of workplace exploitation — has failed to encourage migrants working in breach of their visa conditions to report exploitation.
The report suggests it be replaced with a strengthened Exploited Worker Visa Guarantee.
It also suggests a new Workplace Justice visa be created, to let migrants remain in Australia while they pursue claims for unpaid wages.
Strengthen workplace laws, crackdown on dodgy employers
The report also suggests workplace and migration laws be strengthened and better enforced to deter exploitation.
It says few employers who underpay their workers get caught, and the penalties are far too small when they are caught.
Employers who underpaid their workers were hit with penalties of just $4 million in 2021-22, compared to $3 billion collected by the ATO and $232 million imposed for breaches of competition and consumer law.
"We will not fix this problem until we take that underpayment much more seriously," Mr Coates said.
"We need to give the ombudsman greater powers in order to go after employers that do the wrong thing, including stronger penalties."
The report suggests The Fair Work Ombudsman (FWO) Sarah Parker should be renamed the Workplace Rights Authority and get greater powers and an extra $60 million a year to step up its enforcement of workplace laws.
"That new authority should be given stronger powers and penalties available to punish employers that willingly underpay their workers, including criminal penalties where employers knowingly and deliberately underpaid their workers," Mr Coates said.
The Grattan report also suggests that maximum court-ordered penalties should be increased, and criminal penalties should apply where employers knowingly underpay their workers.
The government should commission an independent review to ensure that the Authority has the right strategy, structure, skills, and culture to enforce the law.
The Australian Border Force has failed to sufficiently use its powers, including criminal sanctions, to punish employers of migrants working in breach of visa rules. These laws should be enforced and strengthened.
Help workers reclaim lost wages
The report also suggests helping migrants reclaim their lost wages.
A 2017 survey of temporary migrant workers found that of the 2,258 participants who stated that they had been underpaid while working on a temporary visa, only 9 per cent tried to recover unpaid wages.
Mr Coates says Migrant Workers Centres should be established in each state, funding for community legal centres should be boosted, and the Fair Entitlement Guarantee should be extended to migrant workers.
"We need to give greater support to migrants and Australian workers alike in order for them to seek to repay their unpaid wages," Mr Coates said.
"It means boosting the resources of community legal centres, so they can support migrant workers and Australian workers alike.
"And we should include temporary visa holders in the fair entitlements guarantee to make sure that they're paid their wages in the event that firms fall over."
He said the government was already consulting on improvements in the penalties regime for underpayment, but "we think the regime should go further and Clare O'Neil has already signalled that they're going to look at a package of reforms to fix the issue of exploitation of migrant workers".
"We hope to see them go a long way towards the recommendations that we've put forward."
A spokeswoman for Fair Work Ombudsman Sandra Parker told ABC News said they are reviewing the report and will consider the recommendations.
"The FWO does not tolerate the exploitation of migrant workers, and this is why protecting vulnerable workers, including migrant workers, remains an enduring priority for the Fair Work Ombudsman," she said.
"While we recognise there is more work to do, the FWO continues to use the full range of our education and enforcement tools."
She said the FWO has filed 126 litigations involving visa holder workers and secured more than $13.4 million in court-ordered penalties in visa holder litigations, in the past five financial years.