Grattan Institute report finds underpayment and exploitation of recent arrivals widespread

As the federal government looks at publicly releasing a scathing report into flaws in the immigration system that have allowed sex trafficking and other migrant exploitation to flourish, the Grattan analysis shows thousands of recent arrivals are being short-changed by employers.

Using Australian Bureau of Statistics data, Grattan has found up to 82,000 (16 per cent) of recent migrants are paid below the national minimum wage and up to 42,000 are underpaid by at least three dollars an hour.

Grattan Institute Economic Policy Program director Brendan Coates, who is the lead author of the report, said the exploitation of migrant workers was "rife" in Australia.

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, according to the report.

Mr Coates said underpayment was a significant problem across the nation's workforce but was particularly acute among recent arrivals, who were particularly at risk.

"Exploitation of migrant workers, who are often young and vulnerable, is a blight on Australia's claim to be the land of the fair go," he said.

Not only does such exploitation hurt recent migrants, it also "weakens the bargaining power of Australian workers, harms businesses that do the right thing, damages our global reputation, and undermines confidence in the migration program," Mr Coates said.

The Grattan report found recent migrants are at higher risk of exploitation because they tend to be younger, have less experience, and work in industries where exploitation is common.

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These disadvantages are compounded by visa rules such employer sponsorships, weaker bargaining power, cultural and social norms and information barriers, it added.

The report follows the government's release of the Parkinson review which found the migration system was "broken" and in need of major reform.

The government has already made some changes, including capping the number of hours international students can work and increasing the temporary skilled migration income threshold from $53,900 to $70,000.

Home Affairs Minister Clare O'Neil has said the government will overhaul the system to simplify visas, improve processing times and redesign the points test to ensure arriving migrants have the skills the country needs.

Ms O'Neil said a growing share of people entering the country on temporary skilled visas were being funneled into low-wage jobs, which were the "essential ingredients to the worker exploitation that we know is occurring in Australia's workplaces".

The government is still developing its overarching response to the Parkinson review but is understood to be preparing to release a separate review of migrant exploitation undertaken by former Victorian Police Commissioner Christine Nixon.

According to Nine newspapers, the report has found gaps and weaknesses in the visa system that allowed criminal organisations and others to exploit vulnerable people.

Mr Coates welcomed the changes so far announced by the government as "steps in the right direction".

But he said much more needed to be done to prevent further exploitation.

Grattan has recommended changes to visas to make them portable so that workers are not tied to exploitative employers.

Mr Coates said international students should have their work hours capped at between 20 and 30 hours a week, to be assessed on an annual basis.

Grattan has also called for the Fair Work Ombudsman to be renamed as the Workplace Rights Authority and be given a $60 million a year funding boost and powers to issue infringement notices to employers who underpay their workers.

Mr Coates said underpaying employers were hit with just $4 million of penalties in 2021-22, which was dwarfed by the $3 billion raised by the Australian Taxation Office from errant taxpayers and the $232 million of penalties for breaches of competition and consumer law.