A recent Four Corners and Fairfax investigation exposed the underpayment of workers in 7-Eleven franchises. Credit:Arsineh Houspian Ryan Tseng's is not an isolated case. Nor is the recent example revealed by Fairfax Media and Four Corners of workers underpaid in 7-Eleven franchises. On Wednesday, new 7-Eleven chairman Michael Smith described his company's misuse of foreign workers as "the tip of the iceberg". "We have a problem in this country." He was not wrong. As a joint Fairfax Media and Monash University investigation revealed this week, hundreds of thousands of temporary foreign workers at any one time on a range of visas are being underpaid and exploited in industries from fruit picking and meat processing to factories, retail and sex. The investigation surveyed Mandarin-language websites, where jobs are openly advertised at $10 to $13 an hour, significantly below Australia's legal minimum wage.

Taiwanese worker Ryan Tseng (right) was duped into paying $300 for butchery training but ended up unskilled, out of pocket and exploited. Credit:Facebook Illegal labour is systemic and more widespread than previously believed, with 80 per cent of advertisements targeting foreign workers offering wages below legal rates. The winners are employers, including the supermarket giants at the top of the Australian food supply chain, the shady middlemen that sign up the workers, and the Australian consumers who enjoy lower supermarket, restaurant and massage parlour prices courtesy of this exploitation. Ryan Tseng came to Australia on a working holiday visa and ended up working at a Sydney meatworks for just $4 an hour. Credit:Facebook

The losers are obvious. But at stake also is Australia's reputation as a country that cares for its workforce and that is genuinely seeking a place among the world's innovative nations. An economy where employers can pay its workers $4 an hour has little reason to change its ways. Is reform possible? Is Australia able to reclaim its once proud place as a leader in workplace rights? Like Ryan Tseng, Hanks Cheng, 31, travelled to Melbourne on a working holiday visa in 2014, and through a Mandarin language website found a job in Geelong. Early this year he was paid a casual rate of $15 an hour cash to pick and pack oranges – no tax, no super, no holidays, and no sick pay. The minimum legal rate for such work is $21.61. "When we were in Taiwan we call it "black labour," Cheng says. "Always cash in hand, no tax, no super. And they say Melbourne is the lowest rate in the whole of Australia." Melbourne of all places – the birthplace of the eight-hour day, the spiritual home of the union movement. What happened?

Australia's reputation as a leader in worker's rights was forged more than 100 years ago as part of a settlement philosophy that also included protection of Australian industry: high tariffs and secure, full-time employment for men in heavily unionised industries. By the early 1980s, this cosy model remained intact but was set to be hit by a perfect storm of social change, economic decline and neo-liberal economic reform. Women with children demanded the right to work, and the number of local students needing jobs to support their studies rose dramatically. Both trends encouraged the casualisation of work. These trends coincided with the Hawke and Keating Labor governments' determined push to open the Australian economy to competition through the floating of the dollar, the reduction in tariffs, and enterprise bargaining.

Australia's high wage economy inevitably transformed from one based on commodities and manufacturing to one based on of commodities and services, where employment is more casual and mobile. Education emerged as a new export industry, focused on attracting overseas students, many of whom would need work to help support themselves. Others were students in name only, fodder for a flourishing new business in labour trafficking. Thirty years of this kind of economic restructuring has produced large and steady pool of local and international casual workers. The result is a workforce with more than 30 per cent of people engaged as contractors, casuals or in labour hire (although employer groups dispute how "insecure" many of these jobs are). British economist Guy Standing describes this group as part of the "precariat", a burgeoning new class of Western world workers reliant on transitory work.

The opening up of the Australian economy also led to the signing of a raft of free trade agreements and the embracing of the idea of allowing foreigners work rights in Australia. Thirty years ago, Australia had almost no temporary foreign workers. At the end of last year, Australia was host to 750,000 foreigners with temporary work rights, mostly on student, working holiday and 457 skilled visas. Another 470,000 people were here on visitor visas, largely for tourism. Australia is unique in that award rates for casuals are higher than the full-time permanent equivalent, reflecting that casual workers forgo holiday and sick pay. For many students, working parents and others, casualisation and flexibility are positives. Positive, that is, if you're lucky enough to be an Australian citizen paid the legal, award rate. Today's labour market is very different to that which greeted the many migrant workers that came here to live after World War II. Newcomers back then typically had permanent residency and the legal and work rights that accompanied it. Today's temporary foreign workers are often here at the pleasure of their employers. Economists have a theory of a "reserve wage", a pay rate below which people will not work because they have options: other jobs, starting their own business, unemployment payments, the support of parents or a spouse.

Temporary foreign workers, here at the mercy of employers and with little or no family support, English language skills, citizenship or social security, have no such reserves . "These are the vulnerable ones," says Flinders University labour market economist Sue Richardson. "They will work for wages that the Australian nation finds unacceptable." So little is known about these visa holders it is difficult to assess the true extent of the breaches and exploitation. The Australian Bureau of Statistics collects no data specific to foreign workers. But a Fairfax Media investigation shows that worker rip-offs are far more widespread than acknowledged by governments, and they cross a surprising range of sectors, including in traditional union strongholds such as stores and food processing. Such has been the spread of illegal jobs says CFMEU national secretary Michael O'Connor, that many among the country's "elites" on both sides of politics have not noticed it. "My experience in dealing with Canberra, with all sides, is that they genuinely don't understand … that the labour market that's in their head no longer exists."

No surprise, therefore, that unscrupulous employers across Australia look at foreign workers and see an economic opportunity. Especially when the risk of detection and prosecution seems so minimal. This is made especially so by legal loopholes that allow shady and often fly-by-night middlemen to take responsibility for the pay and conditions of gangs of workers, shielding often big name and reputable companies from the embarrassment of exposure. And what of the authorities responsible for enforcing Australian workplace laws and standards, the Fair Work Ombudsman? Sue Richardson says the idea of allowing foreigners work rights in Australia is reasonable, just as Australians enjoy such rights in other countries. "The issue is the enforcement," she says. "How effective is the Fair Work Ombudsman's office, particularly outside urban areas, and how much has it been overwhelmed by this big shift (in the number of foreign workers) in this country?" The Fair Work Ombudsman Natalie James declined an invitation to be interviewed for this story but said migrant workers were "disproportionately represented" in civil penalty actions and other enforcement.

O'Connor is in no doubt that the Ombudsman's office, as it is currently resourced and operating, is not up to the task. "People say they can police it and you go, 'Well you're not doing a very good job because it's (exploitation) everywhere'." Once Ryan Tseng and a friend realised their meatworks employer was using them as cheap labour, they sought advice from the Fair Work Ombudsman. "We said we would like to figure out this is legal or not, but the officer told us it's very hard to distinguish 'work' from 'training'," says Tseng. "We were told that if we lodged a complaint, our employer would know who complained." Tseng says he was concerned he would be tagged a trouble-maker and that, because the labour hire/training firm who signed him up controlled many positions across a network of meat factories, he would not find another job. "So we decided to finish the 'training' program', at $200 a week for 50 hours, and more, of work." The failure of enforcement is reinforced by the diminished role of unions as the informal policeman of Australian workplace law. At the height of its strength, in the mid-20th century, Australia's union movement counted 60 per cent of the workforce as members That figure has slumped to 17 per cent overall, 12 per cent in the private sector and a dismal 1.9 per cent in agriculture, forestry and fishing.

The new employment model and the rise of the "precariat", problems of the paucity of information, the loopholes of the middlemen, and the combined lack of oversight by regulators and unions, are ideal conditions for exploitation of workers by profit-hungry or profit-squeezed businesses. It is a problem that could extend into areas of higher-skilled work, unions say, if Australia signs the current version of the China Free Trade Agreement and accepts side deals attached to it, in particular the agreement allowing Chinese investors in infrastructure projects over $150 million. This week Trade Minister Andrew Robb's rejected Labor and union claims about the China agreement as "utterly false" and "racially charged". O'Connor says Labor and the unions should have been more vigilant and vocal when assessing previous trade deals and visa programs but were worried about being accused of being "xenophobic or racist". Yet despite exploitation and abuse and, arguably, the loss of Australian jobs to low paid foreigners, even the most vocal of unions are not calling for the drawbridge to be lifted, or for a return to the economic model of the 1980s.

They accept that, just as working overseas is a rite of passage for many young Australians, so too is working in Australia an important adventure and, hopefully, a money spinner for young travellers and students here. Clearly there are problems with a system that leaves workers so beholden to their employers and in fear of deportation. Whistleblowers who call out exploitative employers need protection – the recent 7-Eleven scandal is a case in point. Also in need of overhaul is the lack of regulation of the small labour hire companies and shady middlemen that trade in people, often paying illegal rates. Unions want employers to be held responsible, even if it is the middleman paying workers $10 an hour. The National Union of Workers is pushing for new collective agreements to be signed by the key players up and down industry supply chains, committing to deal only with suppliers and contractors who adhere to lawful pay and conditions. "So in the case of the food industry consumers would know that the food in their fridges is produced and supplied ethically," says NUW national secretary Tim Kennedy.

Such reform would come too late for Ryan Tseng personally. But he says change is needed for the sake of Australia's good reputation abroad. He apologises for his English but makes his meaning clear nonetheless: "Many Taiwanese think 'we are going on working holiday or we need some job to earn some money. But they give us $200 for more than 50 hours. This too little; not good' ."