The Economics of Wage Theft

This assignment delves into the complex issue of wage theft. It examines the economic incentives behind this practice, analyzing how low wages, lack of regulation, and power imbalances contribute to its prevalence. The discussion also considers the detrimental effects of wage theft on both workers (financial hardship, diminished well-being) and businesses (damaged reputation, legal repercussions). Finally, potential solutions are explored, including strengthening labor laws, improving enforcement mechanisms, and raising public awareness.

Running head: CORPORATE GOVERNANCE AND ETHICS
Corporate Governance and Ethics
Name of the Student
Name of the University
Author Note

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Abstract
The purpose of the following paper is to develop an idea about the wage theft in the organization
named 7 Eleven. It has been a reputable organization in the food industry but the reputation of
the industry has been ruined because of the scandal they have got involved in. The scandals that
have surrounded the company are discussed in this paper. The reactions of the higher authority in
this regard have been discussed as well. The legal actions that have been taken and the unethical
things 7 Eleven has committed are documented in this paper properly. This will be helpful in
understanding the situations properly. The problem of the wage theft and the condition of its
victims are discussed here as well.

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Table of Contents
Introduction......................................................................................................................................3
The problem of wage theft...............................................................................................................3
Consequences in the society............................................................................................................4
Case of wage theft in 7 Eleven and responsibility of the organization...........................................5
Legal issues faced by 7 Eleven........................................................................................................7
Conclusion.......................................................................................................................................8
References......................................................................................................................................10

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Introduction
The ill effects of wage theft have loomed large on the skies of Australia. It has been a
serious issue that has been looked after with great caution. However, very little remedy has been
found in this scenario. The laborers give their best efforts to look after the production of the
organizations and if they are not paid well according to the government regulations and laws, it
is a serious concern indeed. This has gained a great focus of late since many such cases are
getting highlighted. The wage that the laborers earn is half of the national level. The employees
and laborers are underpaid in many cases. The recent studies have brought this new into the
limelight. One of the companies that has got the biggest focus in this context is 7 Eleven. The
question of ethics is quite associated with this aspect. If the employees are not paid well by their
employers, this automatically creates a rage among the laborers. The normal rate of the wage is
$12 per hour for the employees. If this rule is violated the government is laible to take very strict
actions against it.
The problem of wage theft
Wage theft is a very serious problem nowadays in Australia. The international students
have been the victims of it in many major ways (Meixell and Eisenbrey 2014). This has been a
serious problem indeed. This is why this incident has created a huge havoc in the professional
fields. The exploited backpackers have been found to be the main victims behind this ill fate of
the society as a whole. The national agencies had conducted some researches regarding this
incident (Meixell and Eisenbrey 2014) They have found some key things and that are very
alarming as well. They have found that:-

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 About one third of the international students and backpackers were reported to earn about
$12 or less. This is almost half of the wage that a casual employee receives in the jobs as
temporary migrants in Australia (Lee 2014).
 Underpayment has become a common trait in many of the industries but it has become
very common in the food services. It is more prominent in the fruit and vegetables
picking (Lively et al. 2017).
 The migrant international students and backpackers, who went to do this work as a part
time thing, received almost half of the minimum wage and that is deeply unethical
indeed.
 This is completely an illegal process and the protests have been increasing to find a
remedy for this (Lee 2014).
Consequences in the society
The wage theft or wage scandal is a completely illegal process and highly unethical as
well. The effect of this evil is always negative on the society. The migrant youth from different
countries will feel it to be full of risks to take up temporary jobs (Osborne 2017). The workers
and the taxpayers always suffer due to the underpayment of money from the employers. The
taxpayers have to pay their taxes at a certain amount every year but if their income decreases
they will be in a deep pool of trouble (Chen and Sandino 2012). The trust on the ethical
businesses will also evaporate from the minds of the human beings since the people would soon
cease to believe that all the organizations that are serving in the food services industry do not pay
their workers proper wages (Osborne 2017).

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Case of wage theft in 7 Eleven and responsibility of the organization
7 Eleven has been a well reputed organization in the food and beverages industry (7-
eleven.com 2018). They have served all across the country and they have many outlets all around
the world. These scandals have been the talking points of many experts over the months. The
Franchisees had been paying the employees the wages at a rate that was not at all acceptable.
They even had been blackmailing their employees to do the double shifts. This is completely an
illegal thing and immense protest was needed to stop this (Clibborn 2015). One of the most evil
things they had committed was to threaten the migrant workers about reporting to the
immigration if they spoke out of all these things outside the workplace. The situation turned out
to be horrible for the employees. They were being paid by their employers at every second hour
they worked and they were rudely threatened to be kicked out of their jobs if they ever spoke
about it outside (Clibborn 2015).
The organization sells food and beverage items across the country and their reputation
had been ruined badly indeed. A joint investigation had been laid out positively to find out the
reason of the situations (Galvin 2016). The investigation had been carried out by the ABC’s Four
Squares and Fairfax Publication Business Day. The study had revealed that almost one third of
the total stores in Australia had paid their workers less than what they had expected. This wage
was less than the normal wage rate indeed (Woolever 2012). The franchisee income was also less
as well. The numbers were so shocking that the experts found some problems in it instantly.
They thought that the returns would be higher as the outlets are open all seven days of the week
and all 24 hours of the day. This is why the people could not think of it (Galvin 2016).
One of the major things that has been noticed is the fact that this organization has been
working in the Australian 7 Eleven model and the head office used to take more than 50% of the

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profit margins (7-eleven.com 2018). This means all the stores had to manage all the costs during
the revenue and staffing costs within the profit margin that was left after covering the profit
margin taken by the head office. An obvious question pops up in mind that how they have been
paying their workers with so less a profit margin (Woolever 2012). The answer is they had been
paying their workers very little money that is well below the national average. The unethical
thing they had been engaged in is the fact they used to threaten their workers to shut their mouth
about this injustice. They even forced the workers to do double shift that is not according to the
employment relations (Fritz-Mauer 2016). It has also been found that they had been paying about
$10 per hour to their workers. Even they used to harass their workers as well. This is completely
unethical and against the spirit of the business as well. The employers do not have any right to
deprive the employees of their rights (John, Knyazeva and Knyazeva 2015).
The employers only pay the employees half of the amount that should be paid. This can
also be termed as ‘half pay scam’. The award rate for the employees is $24.69. However, of the
employees work for about 40 hours per week, they would only get $12 per hour. This is a big
injustice being done to the employees in big time (Trabert 2013). This is a huge wage scandal
committed by 7 Eleven indeed. However, this is not the only place where the misconduct can
come to a halt for the employees of the organization. Mostly they hire the young boys who come
in from the other countries to study here. They are a global convenience giant. Their
responsibility is to provide their employees with the best facilities in the world. In spite of doing
that they are depriving their employees of the basic facilities (Trabert 2013). The international
students who came to work in this organization were told that they will be reported to the
immigration department if they uttered these things outside. The workers were deprived of their
rights very badly. They worked for 30 days and they got paid for only 15 days. However, the

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company is on its growth path. The different departments are blaming each other for this. The
operations general manager of the company has spoken in the favor of the company and its
policies as expected.
It has been one of the most important aspects of the organization since the employees
have been waiting so long to get some justice. The various communities have counted that the
compensation has risen to around $110 million. The employment law systems had been violated
time and again by 7 Eleven in most of the cases. The criticism around the country has been
fuelling over and over again. The legal communities have ordered the organization to repay the
money to the workers. Almost 3000 workers have complained against the franchise system of 7
Eleven. This has resulted in the repayment of more than $110 million.
Legal issues faced by 7 Eleven
Many legal steps are always taken against the case of wage theft. Wage theft or scandal is
believed to be one of the most important things in the scenario. Wage theft means depriving the
employees of their deserved money. This has been very badly misused by the organization 7
Eleven. They have also trapped the international students to get the most service out of them.
The students will be badly harassed by the authority and they are paid almost half of what they
deserve (Stewart and Owens 2013). This is why the students and backpackers have protested
against this system. The investigation process went on properly and it found the management to
be guilty. The Federal Government of Australia has taken some strict steps against this ill habit
as well. The workers got vulnerable to the system and it is the responsibility of the government
to rescue them. The Federal Government wanted to make the Fair work Amendment 2017 come
into practice (Stewart and Owens 2013). If this bill can be passed in the parliament, it will very

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effectively be important from the perspective of the workers. This will increase the total number
of the civil penalties. The employment law systems had been completely broken down in the
case of 7 Eleven.
It has also been reported that an ex franchisee of 7 Eleven had not paid the full amount to
its staff. This is why he has been charged with a huge amount of money. He was almost fined
more than $ 150000. The Fairfax Media investigation had found that the guilty parties and they
had fined them to the most. They had found that this underpayment matter had become a very
systematic one in the operations of 7 Eleven. It had also been found that one of the workers had
been underpaid of about $14000 between 2013 and 2014. This caused a huge problem in the
business community. One of the franchisee owners was Mr. Chang. He had been the culprit
behind all this in his store that was owned by 7 Eleven (Stewart and Owens 2013). The Fair
Work Ombudsman had taken a strict action against him properly. The tactics that were used to
make these underpayments were used fairly well by the store owners. The audit showed that the
employees were being paid about $25 to $30 per hour but they were paid much lower than that.
This business model that the different stores of 7 Eleven used to follow were completely illegal
(Allegretto et al. 2013). Another wide practice had been noticed that the employers used to pay
their employees at a roper rate. However, they compelled their employees to pay back an amount
of money in cash after sometime.
Conclusion
This paper can be concluded by saying that wage theft has been looked upon as one of
the most derogative offences in the modern day business community. The offence that 7 Eleven
has committed is one of the worst case scenarios. The authorities have not provided their workers

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the perfect wages. This is why the employees have been enraged a lot as well. This evil practice
of underpayment to the workers of 7 Eleven has become known to the people all over the
country and international basis as well. The Federal Government has taken some strict actions
against this malpractice. The organization has been forced to repay the wages to their workers on
an urgent basis. The workers had been exploited by the head office and the investigation by the
Fairfax Media had opened up the wage fraud in front of the public.

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References
7-eleven.com. (2018). 7-Eleven | Your Go-To Convenience Store for Food, Drinks, Fuel &
More. [online] Available at: https://www.7-eleven.com/ [Accessed 17 Jan. 2018].
Allegretto, S.A., Doussard, M., Graham-Squire, D., Jacobs, K., Thompson, D. and Thompson, J.,
2013. Fast food, poverty wages: The public cost of low-wage jobs in the fast-food industry. UC
Berkeley Center for Labor Research and Education.
Chen, C.X. and Sandino, T., 2012. Can wages buy honesty? The relationship between relative
wages and employee theft. Journal of Accounting Research, 50(4), pp.967-1000.
Clibborn, S., 2015. Why undocumented immigrant workers should have workplace rights. The
Economic and Labour Relations Review, 26(3), pp.465-473.
Fritz-Mauer, M., 2016. Lofty Laws, Broken Promises: Wage Theft and the Degradation of Low-
Wage Workers. Emp. Rts. & Emp. Pol'y J., 20, p.71.
Galvin, D.J., 2016. Deterring Wage Theft: Alt-Labor, State Politics, and the Policy Determinants
of Minimum Wage Compliance. Perspectives on Politics, 14(2), pp.324-350.
John, K., Knyazeva, A. and Knyazeva, D., 2015. Employee rights and acquisitions. Journal of
Financial Economics, 118(1), pp.49-69.
Lee, S., 2014. Policing Wage Theft in the Day Labor Market. Browser Download This Paper.
Lively, C., Plantenga, S., Schwartz, K., Bey, A. and Delgado, E., 2017. Unethical Business and
Fair Trade.

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Meixell, B. and Eisenbrey, R., 2014. An epidemic of wage theft is costing workers hundreds of
millions of dollars a year. Economic Policy Institute (Issue Brief# 385), September, 11, pp.808-
32.
Osborne, S., 2017. Morey calls for action on wage theft. Newsmonth, 37(2), p.9.
Spencer, N., 2015. Intergenerational theft is happening. Green Left Weekly, (1046), p.2.
Stewart, A. and Owens, R.J., 2013. Experience Or Exploitation?: The Nature, Prevalence and
Regulation of Unpaid Work Experience, Internships and Trial Periods in Australia. Adelaide:
University of Adelaide.
Trabert, L., 2013. Low-Wage Employment. Labor Markets and Social Security: Issues and
Policy Options in the US and Europe, p.101.
Weng, Q. and McElroy, J.C., 2012. Organizational career growth, affective occupational
commitment and turnover intentions. Journal of Vocational Behavior, 80(2), pp.256-265.
Woolever, L., 2012. High-End Food, Low-Wage Labor. Dissent, 59(2), pp.26-32.