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Immigration Minister Michael Woodhouse said ''criminal employers should not be tolerated and need to be held to account''.
''By breaking the law, unscrupulous employers not only harm their staff but they also gain an unfair advantage over their law-abiding competitors,'' the Dunedin-based National list MP said.
Dunedin North MP Dr David Clark said migrant exploitation was a ''growing concern'' which exposed shortcomings in New Zealand's legislation.
The MPs comments came after the Otago Daily Times published a report earlier this week on migrants who say they are paid as little as $4.37 an hour, often without holiday or sick pay and too afraid to complain to authorities.
Although the MPs agreed there was a problem, they differed on its solution.
Mr Woodhouse said he ''asked officials to try and quantify the scale of the issue in New Zealand''.
''While I believe the prevalence of serious offending is low, any exploitation of migrant workers is unacceptable,'' he said.
''I have been working with leaders of migrant communities to encourage migrants to speak up and come forward if someone they know is being exploited.
''I have also changed immigration policy to encourage victims of exploitation to speak up without being disadvantaged with regard to their visa status.''
Mr Woodhouse also introduced the Immigration Amendment Bill (no 2), which passed its first reading last November, which allows penalties of imprisonment for up to seven years, a fine of up to $100,000 and deportation from New Zealand in the most serious cases of migrant exploitation.
Dr Clark said those measures would not be enough if the Labour Inspectorate was not strengthened.
''It's woefully inadequate at the moment,'' he said.
The number of inspectors needed to be increased and given more extensive training, he said.
The cost of more inspectors, in Labour's proposed policy, would be covered by the application fees for workers' visas, he said.
Employers would also have to ensure New Zealanders could not fill any roles and migrants should be paid a living wage, he said.
''It sends the message that when workers are coming in they are coming in to do skilled jobs,'' he said.
New Zealand Council of Trade Unions general counsel Jeff Sissons backs Labour's policy to increase the number of inspectors from the current 35.
By comparison, he said Australia employed more than 600 Fair Work Inspectors.
Mr Woodhouse said this year's budget included funding for six more labour inspectors and seven more immigration staff.