Building commission report attempts slight of hand

Friday, August 3, 2007

The front page of the July 25 Australian gushed with a headline making the astounding claim that the Australian Building and Construction Commission(ABCC) had delivered "a $15 billion boost to the economy" by improving productivity as a result of reining in "thuggish union behaviour".

The Australian article was little more than a cut-and-paste of the media briefing released by the ABCC about a report on productivity in the building industry that it had commissioned from econometric modelling firm Econtech, titled Economic Analysis of Building and Construction Industry Productivity. The report was the second by Econtech on the building industry drafted at the bidding of the federal government. The first was commissioned by then IR minister Tony Abbott and was published soon after the tabling of the Cole Royal Commission's 2003 report into the building industry.

The Econtech report argues that the introduction of the ABCC as a "tough cop" into the building industry has significantly reduced "restrictive work practices" across the industry, increasing overall productivity by more than 9%. Its reasoning is based on a comparison of the costs of eight standard building tasks between the domestic housing sector and the commercial building sector. Econtech argues that a direct comparison can be made between two similar tasks across different parts of the industry and, since the materials are largely the same, any disparity in costs must be the result of labour costs (and so labour productivity).

In its 2003 report, Econtech referred to data collected by the quantity surveyors Rawlinsons that showed that the cost of completing a task in the domestic housing sector was on average 10.7% cheaper than the cost of completing a similar task in the commercial construction sector. It attributed this difference to "restrictive work practices" in the commercial sector, as opposed to the "more flexible" labour arrangements in the domestic housing sector.

In its 2007 report, Econtech found that while commercial sector costs remained slightly higher on average than costs of similar tasks in the domestic sector, the cost gap had closed significantly — to around 1.7% on average. Econtech attributed this costs convergence to increased productivity in the commercial building industry, for which it credited "the activities of the ABCC and the industrial relations reforms".

Stacking conjecture on assumption, the Econtech report went on to argue that the increased productivity of the commercial building industry would generate a flow-on effect throughout the Australian economy that would lower inflation and overall housing costs (by lowering the costs for large-scale multi-unit developments) and lead to an "Annual Economic Welfare Gain" of $3.1 billion per year. But be warned, because it would all come to nothing if the ABCC were abolished. The report's political message — vote Howard or the good times will end — is obvious.

Dave Noonan, national secretary of the Construction, Forestry, Mining and Energy Union (CFMEU) rejected Econtech's findings and criticised its methodology. "The Econtech report assumes that there's been a reduction in the cost of the commercial sector and that the gap is somehow attributable to that, but there's actually been a steady increase in commercial construction costs", he told Green Left Weekly.

Far from there being a fall in the cost of building houses and residential units, Noonan explained that there has been an escalation of costs in the domestic building sector, which explains the cost convergence with the commercial building sector. "There has been a spike in the cost of building houses and it's due to the fact that in some places there are skills shortages ... driven by the failure of governments to invest in vocational skills and training in the construction industry for young workers", he said. "What you see is a complete misuse of the data and it's being misused for nakedly political purposes."

Among the productivity improvements that the Econtech report attributes to the role of the ABCC are that under the new regime there is "less abuse of occupational health and safety issues for industrial purposes, proper management of occupational health and safety issues" and "proper management of inclement weather procedures". The result, according to Noonan, has been to make the industry less safe, not more efficient.

"We've had 22 construction workers killed so far this year. We have many members complaining about the poor safety on site and frustrated that the ABCC is actively advising builders to prevent the union from gaining access to sites to deal with serious safety issues", Noonan said.

"The same week that the Econtech report was released we had two construction workers killed. So the kind of crazy ideology that the Liberal Party is indulging in is costing workers dearly in lost lives and injuries. They are serious matters and we're going to continue to campaign around the ABCC's role in lessening safety in the industry and this federal government's disdain for the safety of construction workers."

Part of the Econtech report's agenda is to assert that both the extensive use of piecework (payment for the completion of a set task, rather than an hourly rate) and the prevalence of sub-contractors in the domestic housing sector have increased that sector's labour efficiency. This is little more than a veiled attack on the better wages and conditions won by workers in the construction sector and an attempt to justify the eroding of their rights.

"There's no doubt that they will use any means to make work less secure, less well-paid and less safe for construction workers", Noonan argued. "At the press conference for the launch of the report, John Lloyd, the federal government's head of the ABCC, made the observation that he wanted to attack construction workers' rostered days off and that he saw the increase of body hire in the construction industry as a good thing. The whole approach of the ABCC and the federal government is to drive construction workers into less secure and poorly paid forms of employment."

Noonan argued that there was a political agenda behind the timing of the release of the Econtech report. "What it demonstrates, yet again, is that the ABCC is an active participant in the political process and the election campaign", he said.

"It is an office of the Liberal Party that's working to get Howard elected. The very release of the document was the day prior to Kevin Rudd's launching his housing affordability summit and we have John Howard already scripted to run political lines that the abolition of the ABCC would raise the cost of housing by 3%. Of course that's total nonsense — the ABCC has no jurisdiction over the domestic market at all."

Issue