Money Games

Pay up: 7-Eleven picks on international students 

A Fairfax and Four Corners joint investigation revealed that certain 7-Eleven convenience store franchisees are conducting “wage fraud and other illegal activities”.

MOJO-Business-Logo (1)According to the Sydney Morning Herald, a review of 225 7-Eleven stores showed “a staggering 69 per cent of stores had payroll compliance issues, including falsification of records and rosters in one month alone”.

Former ACCC head Allan Fels said the franchise model of 7-Eleven – where the head office took 57 per cent of gross profit – was dooming the franchisees, and forcing them to underpay workers.

The falsification of records enabled franchisees to use the “half-pay scam” where they pretend to work 80 hours to hide the fact that an employee is working these hours.

As a result, staff worked double the number of hours recorded in the books, and received around half the award wage.

The Sydney Morning Herald reported 7-Eleven workers were often international students on visas receiving cash payments of about $10 to $12 per hour, well below the minimum wage.

As the students were only legally allowed to work 40 hours each fortnight, employers “threaten to report them to authorities for breaching their visa if they complain about working conditions”.

Cartoon artwork by Tim Newport
Image by Tim Newport

Labor senators have consequently requested the Government to give these students amnesty, which would allow exploited to reveal more about their treatment without facing deportation for breaching their visa requirements.

According to the Business Spectator, 7-Eleven chairman Russ Withers denied an accusation from Mr Fels that the chain made exploitation of workers inevitable.

“We have operated for 38 years from zero stores to 620 and you simply cannot have that track record if what Allan [Fels] says is true,” he said in a statement.

“We still believe the underpayment of staff is relatively small, and that the vast majority of franchisees are doing the right thing.

“This is embarrassing, it is unfortunate, but there is no way that there was any mass cover-up from head office.”

In response to the scandal, 7-Eleven has agreed to spend between $400,000 and $1.7 million on buying back the franchises that are struggling financially, and paying back shareholders.

The Sydney Morning Herald reported that 7-Eleven would guarantee support for the hundred or so stores that are earning less than $310,000 per year.

Mr Fels and Consumer Affairs Victoria director David Cousins are leading a review of 7-Eleven’s business model and on how to compensate underpaid staff.

Mr Withers promised to reimburse the staff who were underpaid.

This was backed up by calls from the Shop Distributive and Allied Employees’ Association, who vowed to help workers take legal proceedings – likely through class action – against the chain.

Crikey intern Marc Sudholz described class-action lawsuits, and whether one was likely to be successful if it was undertaken against 7-Eleven.

Following the Fairfax and Four Corners investigation, petrol station franchise United Petroleum has also been accused in the scandal, with reports they are underpaying staff members.

With a Senate inquiry into allegations of franchisees underpaying workers looming, United Petroleum has agreed to cooperate fully and show their books to the inquiry.

In an embarrassing moment for Opposition Leader Bill Shorten, he confused 7-Eleven with Subway, saying that Australians had been “appalled and disgusted by the scenes at Subway” at a media conference on Wednesday.

Leading the Four Corners investigation, Adele Ferguson wrote in the Sydney Morning Herald that the inaction from 7-Eleven’s head office regarding the exploitation of staff members was an indictment on the franchise.

“Exploiting staff is unconscionable and franchisees doing it should be punished severely. However, the role of head office peddling a flawed business model and paying lip service to enforcement is almost worse,” she wrote.

The Fair Work Commission has launched three separate investigations into the exploitation of 7-Eleven workers since 2009.

Hockey abandons Budget emergency rhetoric 

The Australian dollar was trading at its lowest point since April 2009 on Saturday morning at just US$0.69c.

It’s largely been attributed to a slowdown in growth of the Chinese economy, which has led to falling commodity prices, mining investment and exports.

An Australian Bureau of Statistics report – released Wednesday – showed the Australian economy’s growth came in below expectations.

GDP grew 0.2 per cent between April and June, just half of the 0.4 per cent many economists expected, and according to the ABC, its lowest quarterly growth rate since the March quarter of 2013.

Australia’s nominal GDP – which excludes the effects of inflation to show output in current prices – grew by just 1.8 per cent.

In The Guardian, Greg Jericho provided an in-depth graph showing the slowdown in growth in the Australian economy.

He wrote that “our national income [is] now … 0.7% below where it was last year” and Australia’s nominal GDP growth rate was “the lowest such result since 1961-62, figures so dismal they predate decimal currency”.

In addition, he wrote that the 41 per cent increase in the Federal Government’s fixed capital expenditure on defence for the June quarter – due to the launch of the Australian Navy’s guided missile destroyer HMAS Hobart – was “not spending that will improve the productive capacity of our economy”.

HMAS Hobart
HMAS Hobart

According to theSydney Morning Herald, the increase in defence spending was primarily behind the economy receiving any growth at all for the period.

But Treasurer Joe Hockey said that the timing of the defence spending was a coincidence, and it wasn’t brought forward to bring about artificial growth in the economy.

Sales revenue also fell by 0.1 per cent in July 2015, and has fallen 0.7 per cent since the end of May.

According to the ABC, it was precipitated by a drop in sales across the country, particularly a 3.3 per cent drop in electrical goods and a 1.4 per cent fall in hardware goods over the last month.

In response to the slowdown in growth, the RBA held the cash rate at 2 per cent on Monday. According to The Australian, this was in line with the expectations of economists.

“Key commodity prices are much lower than a year ago, in part reflecting increased supply, including from Australia,” the RBA said in a statement released on Tuesday.

“While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year.”

On Tuesday, Mr Hockey denied  Australia was at risk of falling into a recession – or a fall in GDP for two successive quarters – saying that the Government’s policies were “adding momentum to the economy”.

“The services sector growing at its fastest pace since 2008, service exports up more than 7 per cent over a year, jobs growth is strong, surveys show robust levels of optimism across all sectors of business, and bankruptcy is at the lowest level in 20 years,” The Australian reported Mr Hockey as saying.

Sydney Morning Herald economics editor Ross Gittins reaffirmed Mr Hockey’s point when he wrote that strong growth in the previous quarter made this quarter’s figures look particularly weak.

“Examine the figures for the year to June and you don’t find much evidence of an economy likely to collapse in a heap. Consumer spending grew by 2.5 per cent, home building by 10.4 per cent, public sector spending by 3.3 per cent,” Mr Gittins wrote.

In The Conversation, Griffith University Professor Tony Makin underlined how Australia’s weak export figures – which indicate its international competitiveness – was the “main culprit for Australia’s sub-normal economic growth in recent years”.

While Alan Kohler wrote in the Business Spectator that macroeconomic factors, such as poor terms of trade – which refers to exports compared to imports – weak commodity prices and unemploymen at a 13-year high, have frightened Australian businesses away from investing.

“Australia’s businesses are both scared and comfortable. They are not investing for fear of what the future holds, and by and large they appear to be quite comfortable with that,” he wrote.

Deutsche Bank chief economist Adam Boyton also predicted on Friday that the Australian dollar could hit US$0.50c by 2017.

“I wouldn’t be surprised if the Australian dollar is printed with a ‘five’ handle in the next three years,” Mr Boyton said.

“As far as reaching a bottom, I don’t think we’ll know what that is until Chinese growth picks up, and our economy adjusts from the mining boom enough [that] the RBA will be considering raising rates. All of those things seem quite some distance away, and I don’t think the Australian dollar is likely to rise until at least 2017 or 2018.”

The Age economics editor Peter Martin also weighed into the debate, writing that a dollar hitting US$0.60c would strengthen some Australian industries.

“A lower dollar means higher prices (although perhaps not as high as when it hit its all-time low of 47.70 US cents in April 2001),” Martin wrote.

“But it also means that firms the high dollar locked out of foreign markets suddenly find themselves competitive. This week’s national accounts showed manufacturing growing for the first time since 2011.

“Architects, universities and all manner of firms that try to sell overseas are back in the game. It’s what we need.”

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