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.
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.
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.
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.