Union Thuggery Hurting Construction Productivity: MBA

Thursday, January 30th, 2014
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As controversy surrounding conduct in the Australian building industry intensifies, an economist representing a major construction sector lobby group has linked what he says is a return to thuggish behaviour on sites since the abolition of a key regulator with a decline in the industry’s productivity.

In a statement released on Wednesday, Master Builders Australia Chief Economist Peter Jones says following a sluggish period throughout the 1990s, ABS data shows that the nation’s construction sector outperformed the broader economy in terms of productivity gains from the period spanning the start of the Cole Royal Commission in 2001 and subsequent formation of the Australian Building and Construction Commission (ABCC) right through to the ABCC’s abolition in mid-2012 (see table) as the regulator cracked down on illegal practices in workplace relations and ushered in a period of industrial harmony and workplace reforms.

In the twelve months following the Commission’s abolition, however, Jones says industry productivity dropped 0.6 percent, a phenomenon he warns could be the beginning of a trend unless the ABCC is restored notwithstanding that the broader economy saw productivity losses of 0.8 percent during the same period.

Jones says the data demonstrates the role the ABCC played in driving a more harmonious workplace environment.

“Not only was there a step-up in productivity, the building and construction industry unequivocally outperformed other industries during the period 2002-03 to 2011-12, the period the ABCC operated prior to its abolition by the previous government” Jones said, noting that the average ‘productivity gap’ between the building sector and twelve other selected industries closed by 5.5 percent during that time.

“The superior productivity performance in the building and construction industry during in the ABCC era contrasted with what virtually all commentators accept – productivity performance in the Australian economy during this time was poor.”

construction productivity

Jones’ latest claim – which follows a previous report from Master Builders last August claiming the work of the ABCC had delivered annual benefits of $7.5 billion to Australian consumers – comes as pressure intensifies on opposition parties to support government moves to reinstate the Commission amid media reports of corrupt conduct involving union officials and criminal gangs on major building projects.

Whilst corruption is a criminal matter and the former ABCC had no power to prosecute such behaviour, employer groups say the Commission had to power to refer possible criminal conduct to the police and that moreover, its presence on sites deterred behaviour which was conducive to creating an environment in which criminal conduct could take hold.

Unions, however, remain opposed to the ABCC’s reintroduction, claiming the former regulator had excessive power, lacked accountability and that its introduction by the Howard government in 2005 represented a form of discrimination against workers from one particular sector of the economy.

Moreover, whilst the ABS data does indicate productivity within the industry dropped in 2012/13 following the former regulator’s abolition, caution should be exercised in drawing conclusions from these figures as the aforementioned decline coincided with a period of low building activity – a previous period of which saw two years of successive productivity declines following the GFC in 2008/09 and 2009/10.

Anecdotal support for the notion that industrial relations problems have contributed to productivity drop, however, can be found in the ABS figures on industrial disputes, which show that the number of days lost per thousand employees throughout the industry came in at 84.6 in 2012/13 (up from 31.8 days lost per thousand workers in 2011/12 and 72.5 in 2010/11) as the end of the ABCC was followed by major strikes in Melbourne and Brisbane.

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