Migrant Labour, exploitation and free markets

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Once more we read about a horror story of virtual slavery for a migrant worker in a restaurant in Christchurch. The silver lining that in this case compensation should be paid is not assured. Often in situations like this the employer winds up their business, the worker gets nothing and they reopen with “new” owner on the books.

This example may be extreme but the just this month the Ministry of Business Innovation and Employment found sixteen Christchurch labour hire and construction companies to be in breach of employment laws through a series of proactive audits they carried out. 40 audits were carried out, 23 completed and 16 – that is 70% of the completed audits – to be operating illegal exploitative practices. Many of these involved migrant labour brought in for the post-earthquake rebuild. This is the only time I know of where MBIE has done a pro-active audit of companies – that is they haven’t waited for a complaint before acting.

This week we have been desperately working to ensure that around 40 staff on temporary visas tied to the seven Forsgren Ltd-owned Carl’s Jr stores being bought by Restaurant Brands aren’t left in the ditch as a consequence. Because their visas are tied to their employer they lose the visa even though the job stays the same!

We are talking to all sides to see if we can make sure they all make the transition to new visas with Restaurant Brands as quickly as possible but there is likely to be a minimum of four weeks when they can’t legally work. We are pressing Forsgren Ltd to continue to employ and pay these workers until the visa can be changed but they haven’t agreed to that yet.

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In the last six years there have been 166,000 temporary work visas issued each year. These can be students, those on working holidays, seasonal workers, essential skills workers and migrant family members. In 2011 almost one in every 20months worked in the economy are performed by temporary migrants. This is an increase from one in 100 a decade before in 2001. For hospitality, horticulture and viticulture it is more like one in 10 months worked. The calculation of “months worked” is based on a person working for wages and salaries in that month for which IRD have records. Hours worked could not be calculated. In 2011 those on temporary visas worked 4.3% of the 23 million months worked. International students worked about 150,000 months a year, essentials skills workers about 230,000 months, working holidays visa workers 200,000 months, and seasonal workers 30,000 months. Indian temporary migrants are now the largest group with 180,000 months a year.

“Accommodation” and “Food and Beverage Services” have 14% of all months worked performed by temporary migrant labour.

There are over 200,000 migrant workers in New Zealand on temporary work visas (this is a bit of a guesstimate, readers may be able to help me here, the exact number seemed difficult to find). Around 60,000 are on working holiday visas and ostensibly can only work three months out of twelve. The inevitable result is they work under the table. But at least they can quit their jobs and get new ones if the situation is very bad. There are also 90,000 here on student visas who can usually work up to 10 or 20 hours a week and about 30% do. Most of the rest are on skilled worker visas where employment is tied to a particular employer. About 20,000 a year transition to residence from skilled work scheme.

Employers always argue that they need to have the complete freedom to import labour virtually at will. At the moment tourism operators are screaming that they need more temporary workers and the government should allow more in. In an article in the NZ Herald headed “Foreign worker limits ‘choking tourism’” they complained that New Zealand workers didn’t want to go and work in the regions. The general manager of Goldridge Resort, Penny Clark, “said the ‘ideal’ of having Kiwis filling housekeeping or hospitality roles didn’t fit reality.”

Of course there is a simple answer to the problem of a labour shortage in places like Queenstown – pay better wages to attract the staff. When the market doesn’t respond to the price being offered – raise the price. It never seems to occur to the business operators that paying the minimum wage for work that can be very heavy and skilled like housekeeping and hospitality, and in parts of the country that are extremely expensive to live like Queenstown – just doesn’t add up.

It used to be a standard condition of employment in hotels like those in Queenstown that board and accommodation was provided. In those circumstances there was no problem attracting labour. Those conditions were eliminated along with set hours, overtime rates and much else during the dark days of the Employment Contracts Act in the 1990s and have never returned. It is no wonder the employers now rely on temporary migrant labour that they feel they can use and abuse.

Occasionally Unite gets consulted by MBIE over whether a company’s application for the right to bring in labour from overseas should be approved. This week we got one about the SkyCity Casino. It seems they want to bring in about 40 chefs of various sorts. I assume they too are claiming they can’t find people in NZ to do this work. 14 of the positions are Commis Chefs which is a junior position that SkyCity are paying $15.69 an hour for. That is $1.24 an hour above the minimum wage.

I thought it would be useful to look at the “market rate” for this position. The law of markets says that if something is in short supply (including labour) then the price will rise.

The Restaurant Association of NZ does an annual survey on wage rates. It has the Commis Chef rate increasing only 1 cent an hour between 2009 and 2013. The 2013 rate of $15.80 is also above that being offered at the end of 2014 by SkyCity. The survey also found that the Executive Chef rate had fallen from $26.12 an hour to $24.52; Food & Beverage Manager from $21.66 to $18.81 and Head Chef from $22.06 to $21.71. It seems that the industry is not pressured by shortages of labour to offer higher wages. In fact they appear to be using the importation of migrant labour to keep wages and conditions down.

The Hotel and hospitality sector was turned into a minimum wage industry not by importing migrants but by destroying unions in that sector in the 1990s under the Employment Contracts Act. It is a fact however that they would not have been able to keep it a minimum wage industry when unemployment began to drop again in the 2000s if they hadn’t been able to use temporary migrants.

This has certainly been true for restaurant managers in the fast food industry. Running a McDonald’s, KFC, or BK store is a complex undertaking. There are usually between 50 to 100 staff and often they operate 24/7. The average wage for a manager today is around $40,000 a year. 20 years ago the average was about $60,000 in today’s dollars.

So next time you hear someone from the hotel and hospitality sector complaining about the lack of skilled staff tell them to start training staff and paying wages that will make that job worth doing.

Personally I would like to live in a world without borders. As a start the reciprocal rights to live and work in each others country we have with Australia should be extended to the Pacific Islands. NZ and Australian big business have been happy to exploit these countries and import their labour (and sports people) for decades. Pacific people should have the right to live and work in Australia and NZ without being labelled “overstayers”. We are all Pacific Islanders.

Big business demands the freedom to move their capital anywhere and have it protected everywhere. That is actually what treaty discussions like the TPPA are all about. They have very little to do with trade and have everything to do with creating an international bill of rights for capitalists.

We also need an international bill of rights for workers. Anyone working in this country should have full employment rights no matter their legal status. Workers who expose abuse should be able to continue working legally while suing their boss for compensation.

No worker should have to stay with the employer who sponsored them for the full length of the visa. That is just modern form of indentured labour. All workers in a country’s jurisdiction should receive the legal minimums of that country at least. That should apply to all those “foreign” crew working to fish in NZ territorial waters.

Any employer caught thieving from their employees wages, forcing workers to work for no pay, or denying rest breaks should face jail time in the most serious cases. Deliberately ignoring health and safety that results in death or serious injury should carry a corporate murder, manslaughter or maiming charge that can also result in jail time for the guilty.

Unions can object and expose the hypocrisy of employers demanding the right to import labour while paying a pittance to their staff. But ultimately the only effective way to turn the situation around is to reunionise the sectors and force the bosses to pay.

9 COMMENTS

  1. Mike, how do you respond to the default NZ employer defence on minimum wages – namely that they would love to be able to pay more but can’t because of competition and tight profit margins? – because this is what we constantly hear and read.

    • That is actually why we need enforceable legal minimums. Most of the industries I deal with are actually large multi-nationals. They pay what they have to pay. Competition does force them to lower wages to the minimum. legal minimums put a floor under which competition can’t go. It would make only a marginal difference to the price of hotel room or a burger to pay a substantially higher wage to staff. Often they just pay the minimum because that is what they are told to do to maximise profits for their owners. McDonald’d pays $20 an hour and provides full time work to most workers in Denmark but the price of a burger is the same as in NZ.

      • McDonald’d pays $20 an hour and provides full time work to most workers in Denmark but the price of a burger is the same as in NZ.

        I recall arguing the point with a rather politically-naive person who maintained that if wages were increased for fast-food operators, that would increase the cost of a burger. I replied that that meant workers were subsidising cheap fast-food through suppressed wages.

        On top of that, any productivity gains are not passed on to workers through higher pay, but is paid to shareholders instead.

        This, I maintain, is the prime reason why wages/salaries are generally low in the Western world; any productivity gains are passed on not to workers, but to shareholders, as corporations compete to pay higher dividends to attract investment.

        This infograph from the New York Times puts it quite clearly; https://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday . Look at how productivity has risen – but wages have not.

        • Not to mention the CEO’s and middle management who enjoy salaries yet undermine my production value with their silly unnecessary procedures and frankly poor organization. They don’t provide any actual production value, they just organize, and poorly. These people are not worth their salaries!

          They’re not worth their salaries!

          They’re not worth their salaries!

          They’re not worth their salaries!

          They’re not worth their salaries!

          I don’t know how many times I have to say it!

  2. In countries like Brazil people work in a restaurant to earn less then $2p/h and still have to pay high rates to live there. Looking from that point of view at least you can live with dignity earning the minimum wage here, and that taking into account PPP.

    • Funny thing, Julyanne – even Bill English admitted that living on the minimum wage long term was not feasible;

      “GUYON: Okay, can we move backwards in people’s working lives from retirement to work and to wages? Mr English, is $13 an hour enough to live on?

      BILL: People can live on that for a short time, and that’s why it’s important that they have a sense of opportunity. It’s like being on a benefit.

      GUYON: What do you mean for a short time?

      BILL: Well, a long time on the minimum wage is pretty damn tough, although our families get Working for Families and guaranteed family income, so families are in a reasonable position.”

      – 6 November 2011
      http://tvnz.co.nz/q-and-a-news/transcript-bill-english-david-cunliffe-interview-4504396

      Funny how those who are apologists for low wages never really have to endure it themselves.

    • You mean dignities like not being able to afford new clothing (relying on used stores), not being able to provide your own transport, having to visit food banks to be able to feed your kids (or just your self)?

      Or dignities like having a car, which doubles as the family home? Sending kids to school hungry because, while you both work, there’s just not enough money for 3squares/person/day?

      If you’ve been lucky enough not to have to endure low wages, you should daily get on your knees and thank God that your job has remained, or that your family’s wealth remains. Because as many of us know, one day it can all collapse – even for the apparently mega-rich, and sometimes hard work and good management just aren’t enough.

      Wear those knees out Julyanne, because one day you may find that your financial resources are suddenly gone.

  3. Awesome article!!

    Solidarity with migrant workerts!!

    No one choose their country and ethnicity!! No borders!! Free mobility of people!!

    Down with nationalism!! Long live internationalism!!

    • I vehemently disagree with this comment.

      The only reason NZ can claim to be “clean and green” is our low population density. We actually suck at looking after our environment, its just that there are not enough of us yet for that to be so obvious.

      Our birth rate is now just below replacement rate. It will be immigration which increases the population of NZ.

      If we had open borders there are millions of people who would love to come and live here, and we would soon see the open spaces and lifestyle that makes this country so attractive destroyed.

      Ever been to California? The California coast is pretty much totally built up. When that happens, there’s nothing particularly special about the place anymore.

      India or China? Thats what a place looks like when human populations overrun the natural environment. Over crowding and pollution.

      I do not think we have to let the entire globe suffer human overpopulation before we say enough is enough. Its selfish certainly, but I’d rather live in a place that is not overpopulated.

      But anyway, this is off topic. The rest of the article, I completely agree with.

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