Contactors in a cold sweat: Gottliebsen

The KGB interview with the Prime Minister had the phone running hot. Business people speaking under protection of the Chatham House rule were delighted that someone had explained to the prime minister what was actually happening in the non-mining economy. Overwhelmingly, I encountered companies experiencing widespread capital city downturns. Even Perth is affected. Many believe non-mining Australia is in recession.

But as the day progressed, amazing stories of what was really happening in the labour market began to emerge. The most frightening stories came from the housing industry, where the government and the unions are combining in actions which, if successful, will lift the cost of building a house by between 20-30%. 

The plan is to make it just too difficult for home builders to use contractors (electricians, plumbers etc) to build houses, and to force the contractors and the contractors’ staff to be converted to employees of the builder. It makes no difference that contractors often work for many builders.

In the budget the government announced the first stage of this attack, which involves the electricians and plumbers reporting every job they do to the government. (The aim is to raise tax dollars but there are relatively few ‘sham’ contractors in home building – it’s genuine contracting or cash.)

The second stage of the contractor attack has already started in at least in one state, where builders are being forced to underwrite the safety of the contractors on the job. 

Once contractors are made employees and are paid on an hourly rate, productivity falls but union membership skyrockets – along with the cost of houses.

I understand another business employing contractors has been threatened that if they don’t make them employees then they risk losing a case before Fair Work Australia and being forced to pay backdated superannuation, shift allowances, and so on. Their business would be destroyed because the contractors were paid large sums in lieu of these payments. But in a Fair Work case that may be ignored.

In other words, it’s ‘stop using contractors or we will either put you out of business or make your life difficult’. These pressures pose tough choices for those who use genuine contractors because given the downturn, there is currently limited room to pass on the cost of losing contractor flexibility and productivity.

It would seem that these games are lifting the role of the cash economy dramatically – the disease that has done so much damage to Greece, Italy, Spain and Portugal.

But there were other surprises. When it comes to enterprise bargaining, one miner told me about the natural gas construction deal where the big gas developers gave a 400 per cent rise in the daily allowances and agreed extra people would be employed – more money for less productivity. 

But nationwide there is no shortage of blue collar workers even among miners. One miner told me they sought to employ around 75 people and were swamped with more than 2,500 applications. What I could not understand is that given the tough times in non-mining Australia why unemployment has not risen. 

The answer lies in lower hours of work and the dramatic rise in the cash economy.

Tony Abbott must be licking his lips.