End of union monopolies undermining the economy?

For the September quarter building and construction work is down 11 per cent compared to last year. This release is a memory-jerker reminding us what we confront in terms of the monopoly boosted costs of this essential component of capital investment.

On the Bolt Report of 21 November, Kimberley Kitching refused to criticise the CMFEU, arguing that the union had been good for its members.  John Slater of the H.R. Nicholls Society takes a contrary view arguing that the winners are the union chiefs and ordinary members lose out.

Unless John Slater was addressing a broader definition of worker, Senator Kitching is likely to be closer to the mark, just as the 1980s highly protected car assembly industry or the worker controlled postal and electricity monopolies were good for their workers.  They were, of course, especially bad for their customers and bad for the economy as a whole.

The fact is that monopolies offer some workers’ benefits. With construction and the CFMEU, these are created and maintained by a union that flouts all normal commercial behaviour by preventing competitive rivalry from lowering prices to the benefit of the owners/employees and their agents.  While the union puppet masters obtain many of the rewards created by their actions, the unionised workers also gain.

Ministers often argue that the effect of the union monopolies in construction is to lift prices by 30 per cent above the levels that would otherwise prevail.  A 30 per cent premium is cited by employer groups.  The PC (p. 383) has quoted costs of 38-200 per cent above those for comparable US projects.

Construction costs in the non-unionised house building sector highly competitive and are actually lower than those in the US.  Although these vary markedly, the mean cost in the US is $125 per square foot ($A 1815 per square metre) compared with $A1,400 per square metre for a full brick 2 story house in Sydney.

The PC also showed that the wage outcomes over the past two decades or so had been consistently above those in other sectors.

wage growth

Costs are much higher in Australia than elsewhere due to factors like the lowest number of working hours (36 per week) days off with long breaks, stop work triggered by high temperatures.

The Australian reports the latest CFMEU deal  imposed on (?) Lendlease has the following conditions.  Lendlease and other head contractors will ensure all subcontractors’ employees receive these same benefits.

lend lease

Grace Collier thinks Lendlease is a willing accomplice and points to similar deals it does overseas as evidence of union cooperation to screw the customer as a conscious strategy of the firm.

This long term trend in extracting excessive conditions means the real level of new work is overstated.  Over the past quarter of a century the ABS, using the industry price deflator, puts building and construction work as having increased in value by 145 per cent.  But if the more general GDP deflator is used the increase is under 50 per cent.  Although some of the cost increase might be due to higher land costs, with the exception of labour most of the building components – steel, cement, cranes, trucks etc, – have not moved in cost terms more than those of the economy in general.  This means a colossal cost in capital productivity incurred over the years.

building costs

The apparent agreement by the Senate to measures that reinstate the rule of law on unions therefore offer a great payoff fort the economy as a whole.

This entry was posted in Uncategorized. Bookmark the permalink.

13 Responses to End of union monopolies undermining the economy?

  1. Ubique

    Unions just adore non trade-exposed industries. They know the costs, no matter how big, can simply be passed on through to the mug punter in the street. The building and transport industries are a favourite. If only those pesky owner-operators could be regulated out of business.

  2. Bruce of Newcastle

    The CFMEU is only part of the story. Drain the whole swamp…

    Greater Sydney Commission Wants 10 Percent Affordable Rentals (today)

    Property developers across the Greater Sydney area may be forced to hand over up to ten percent of their dwellings on new housing or apartment construction projects to community housing providers under a new plan to address housing affordability concerns across the region.

    Unveiling the plan as part of its draft 40-year vision for the Greater Sydney metropolitan area, the Greater Sydney Commission has proposed that dwellings which occupy between five and ten percent of floor space in new areas which are approved for development will be set aside and given to community housing providers who will then use the space to provide affordable rental housing to households earning less than $67,000 per year.

    Of course they don’t ever consider the logic. Logic says if the developer has to give one apartment in ten away free then they will have to sell the other nine at 11% higher price to make the project commercially feasible.

    Then logic says because developers won’t be able to make any project economical until the price rises, there will be a deficit of new build until the price rises high enough through demand exceeding supply.

    Logic then says that, since rents are reasonably closely linked to the price of the property, rents will generally rise by that same 11%.

    And again logic would say that more people will thus be unable to pay the increased commercial rent demanded, because of the increase in apartment cost, so they will be forced onto the public housing waiting list.

    Whereupon the Greater Sydney Commission will write another report saying that 20% of apartments should be given to NGOs instead of just 10%.

    Logic is a bummer for lefties.

  3. thefrolickingmole

    Will be interesting to see if this legislation works as intended.
    Id love to see a few companies and unions who have colluded to strangle competition in the dock together.

    Can charges be retrospective?

  4. Tim Neilson

    “10 days paid domestic violence leave”.
    Why can’t they inflict domestic violence on their own time?

  5. Tim Neilson

    Bruce of Newcastle
    #2217223, posted on November 23, 2016 at 1:31 pm
    All perfectly sound, Bruce.
    But they won’t stop till they get to 100%.
    With a carveout for luvvie dominated areas. I mean no enlightened progressive actually wants low income types living in their own neighbourhood.

  6. Boyfromtottenham

    There is a typo in the construction costs para – compared us costs in $/sq foot with aust costs at $ / sq metre.

  7. motherhubbard'sdog

    What is missed by a lot of commentators on this issue is the reason the big construction companies are willing partners in this scam. Essentially these companies do very little of the work themselves, it is all contracted out to sub-contractors. The construction companies get a percentage of the total cost of the job. If they do a deal with the unions to insist on certain conditions and pay for workers hired by the sub-contractors, and that results in a higher cost, their cut goes up. They don’t care about the customers having to pay more than they should and they do not fear being undercut because the other big construction firms are all in on the scam as well.

  8. Herodotus

    Yes, Grace, for you it’s always the companies who are the willing accomplices.

    I nominate the Labor Governments who hand unions the power to disrupt (and stand over) as the real accomplices.

    Hopefully this week’s and next week’s successes in parliament will make a difference to those businesses who have to do business with the union cosa nostra, and to the economy as a whole.

  9. Can I ask a question – I understood that after DD election there could be a joint sitting to vote on the bills that were the subject of the DD. Why no talk of a joint sitting?

  10. Nerblnob

    Australian government tackling union corruption effectively?

    I’ll believe it when I see it.

  11. Mayan

    Does one detect an undercurrent of jealousy?

  12. Diogenes

    FMD – builders work fewer days than teachers. Lazy bastards

  13. Oh come on

    Can I ask a question – I understood that after DD election there could be a joint sitting to vote on the bills that were the subject of the DD. Why no talk of a joint sitting?

    Because the government wouldn’t have the numbers – even in a joint sitting of parliament – to pass anything. Remember that it only has a one seat majority in the HoR and isn’t anywhere close to a majority in the Senate.

Comments are closed.