Migrant workers in Australia twice as likely underpaid

Up to 16 per cent of migrants are also paid less than the national minimum wage.

The institute's economic policy expert Brendan Coates says endemic underpayment has to stop.

"Exploitation hurts migrants but 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," he said.

He described employers taking advantage of young and vulnerable migrant workers as a blight on Australia's claim to be the land of the fair go.

Home Affairs Minister Clare O'Neil has declared Australia's migration system fundamentally broken and over-reliant on temporary workers, saying more resources are needed to remedy the underpayment of foreign workers.

Grattan's 114-page report proposes 27 recommendations the Albanese government should pursue.

These include expanding temporary skill-shortage visas to be made portable so migrants can escape exploitation and find employers who treat them fairly.

Another proposal is issuing temporary workers with a tax file number when they arrive.

The authors also suggested a workplace justice visa, allowing migrants to stay in Australia while pursuing claims for unpaid wages.

They criticised employers getting away with underpayments, saying hefty fines were few and far between, with the Fair Work Ombudsman enforcing just $4 million worth of penalties in 2021/22.

Grattan said this paled in comparison to the tax office hitting people with $3 billion in penalties and the consumer watchdog imposing $232m in fines.

The institute argued criminal penalties should be introduced with a maximum sentence of 10 years behind bars for employers who knowingly underpaid workers.

The changes would cost $115m a year, covered by a levy on certain temporary visas, set at $30 for each year of work rights tied to each category.

Heavy penalties levelled against dodgy employers would also help cover the costs.