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Jun 8, 2012

Deep in the heart of Texas with the Business Council

A new BCA report on poor productivity in Australia appears to be aimed at increasing the use of immigrant labour. It is, as John Cleese might say, "wafer thin".

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I’ve seen some bad reports in my time, let there be no doubt. Minerals Council reports demonstrating that the world will end when a mining tax starts. “Independent modelling” showing with mathematical precision how a carbon price will obliterate entire industries. Copyright industry reports calculating that filesharing causes more economic damage than the entire gross world product.

The Business Council’s Pipelines or Pipedream (see what they did there?) report released yesterday isn’t the dumbest you’ll ever see. Nor the most biased. But it’s easily the most transparent. It is, as John Cleese might say, “wafer thin”.

To summarise: there is $960 billion worth of investment coming into Australia and it might all be endangered by high costs, low productivity and government-induced uncertainty unless we embrace what the BCA recommends — deregulating industrial relations to improve productivity, spend more taxpayer money building infrastructure for private companies and training more people to build stuff, and cut corporate taxes while raising taxes on consumption.

Those recommendations, as keen-eyed observers will spot, bear a strong resemblance to every other BCA recommendation for the past decade, but that’s a coincidence we’ll pass over. Indeed, in the interests of brevity, there is much passing over of this report to be done. It’ll feel like biblical Egypt by the time we’ve finished.

For example, let’s not dwell on how the $960 billion figure, conjured up by the best independent economists money can buy, Access Economics, is fictitious, lumps in government and private investment together and includes, on no basis whatsoever, a $60 billion high-speed rail project. Let us skip how more than a third of the money is for projects under construction now, so is hardly “under threat”. And let us ignore the BCA claim about low productivity issued the same day the ABS produced evidence of a significant lift in productivity. Emma Alberici did a wonderful job torturing Jennifer Westacott of the BCA on Lateline last night on these points. We must also pass over the point that the mining industry keeps complaining about labour and supply costs when its massive demand for labour and supply is driving those exact costs up.

The real issue for the BCA is cost and productivity. We’ve been hearing for months from business about how Australia is “an expensive place to do business”. Australian projects, the BCA avers, cost more to build and its construction sector has lower productivity than the United States.

On what basis? The BCA commissioned a US firm called Independent Project Analysis (actually, consultant Rob Young) to provide an eight-page analysis. Young had undertaken a comparison of what he believed were very similar construction projects in the Gulf Coast area of the US (Texas, Florida, Louisiana, Mississippi, Alabama) and Australia in 2003, and concluded that Australia was much more expensive. Back then, the same projects took 1.3 times longer in Australia than in the US.

But wait, the basis of the BCA’s  claim is nearly 10 years old? Well not quite, because Young has “updated” the 2003 study, not by doing more recent comparisons but by talking to some clients:

“The Australian productivity adjustment factor has recently been increased to 1.35 based on feedback from clients that productivity in Australia is declining due to the dilution of construction skills, more onerous construction management processes, higher turnover, and other factors that are not as prevalent in the US.”

But when you go into Young’s explanations for the 1.35 figure, things get murky. It turns out much of the difference is due, unsurprisingly, to exchange rates.

“If we adjust for factors such as currency exchange rates and price escalation that are outside the project team’s control, the performance of Australian industrial projects varies from being equal to the world’s best for some of the recent small, sustaining capital projects to being amongst the most expensive.”

That only gets a passing mention in the BCA’s study.

But here’s the interesting thing: why is Young and the BCA comparing Australia to places such as Texas? As it turns out, the comparison is completely inapt. Let’s focus on the Texas example, since it’s the biggest of the Gulf Coast states. Texas has 25 million people in an area less than a tenth the size of Australia. Its construction sector — currently in dire straits because of the US recession — employed 560,000 people in 2010-11. That’s more than half the entire construction industry workforce in Australia. The Texan construction industry has market opportunities and economies of scale far in excess of those of the Australian construction sector.

And what Texas also has is cheap immigrant labor. Lots of it, and much of it illegal. Texas had 1.7 million illegal immigrants in 2010 and construction is a key industry for employing them: about a third of the Texan construction workforce are immigrants, legal and illegal. This in turn means safety standards are wretched: unions are weak and fragmented and much of the workforce wants to avoid any encounters with authorities of any kind for fear of deportation.

The result? The construction sector to which Young compares Australia is a slaughterhouse. It’s cheap expendable immigrant labour. In 2010, there were 89 deaths in the industry in Texas, or just under 16 fatalities per 100,000 employees. That compares to a national construction industry figure for the United States of 9.8 fatalities per 100,000 employees (over in Florida, the next biggest Gulf Coast state where the industry has now shrunk to about 308,000 people, the fatalities figure in 2010 was a little over 10).

In comparison, in Australia, despite the best efforts of the ABCC to persecute the CFMEU, construction industry fatalities were 3.9 per 100,000 workers in 2010. The Australian construction industry is four times safer than the one the BCA and its consultant compares us to and more than twice as safe as the whole US construction industry.

So, yes, a dangerous construction sector run on illegal immigrants and America’s underclass of working poor inevitably will be cheaper than our own.

Is a Texas-style industry what the Business Council wants? The council is all for a big expansion in immigrant labour — indeed, removing impediments to temporary migration is one of the report recommendations. The construction industry has long had a problem with the exploitation of foreign workers via sham contracting, with attendant safety problems as well as loss of tax revenue.

This is the flipside of the debate over immigrant workers. Employer groups are quick to level the charge of xenophobia at unions, and there’s no doubt unions are speaking up to protect the interests of their members. But the record of the construction industry shows that some employers will exploit foreign labour.

And if that’s not the BCA’s agenda, then why is it making the comparison?

Bernard Keane — Politics Editor

Bernard Keane

Politics Editor

Bernard Keane is Crikey’s political editor. Before that he was Crikey’s Canberra press gallery correspondent, covering politics, national security and economics.

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53 comments

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53 thoughts on “Deep in the heart of Texas with the Business Council

  1. Steve777

    The BCA purports to be “an association of chief executives of leading Australian corporations that aims to build a better and more prosperous Australian society”. Indeed. And it’s funny how a ‘better’ and ‘more prosperous’ Australian society is one that neatly accommodates the CEO’s other major objectives – maximising the profits of the corporations they head on a 3 to 5 year time horizon, along with their salaries and the value of their share options. What a happy coincidence.

    Of course in the interests of profitability they want to pay their employees as little as possible. They want current and potential employees to accept whatever salaries / wages and conditions they deign to provide. They certainly don’t want their employees to be able to negotiate their salaries and conditions from a position of strength. And they don’t want to spend any more time or money than they absolutely have to on nuisances such as fair trading rules, health & safety or environmental requirements. After all, we can depend upon the CEO’s to fairly balance these requirements with their desire for profits and be fair to all concerned, can’t we? And of course they want to pay as little tax as they can get away with.

    Of course higher rewards for employees, job security, bargaining power for employees and a cleaner and safer work environment don’t contribute to a ‘better’ and ‘more prosperous’ society in the way that higher profits do, do they.

    Good on Emma Alberici for her detailed probing of the BCA’s wish-list. Ms Westacott must have been assuming that Emma would, like most of the media, simply accept the BCA’s self-serving drivel as self-evident truth.

  2. Hamis Hill

    Political Thought from Plato to Nato, probably on the banned book list decribes Adam Smith, Moral
    Philosopher, As having written The Wealth of Nations in order to “understand commercial society and better it”.
    Not exactly the same objective as The BCA outlined by STEVE777 posted above.ie The BCA aims to build a better and more prosperous Australian society.
    Not quite but pretty close to a direct steal from Smith who, by clear contrast was investigating the BCA types, not propagandising for them. .As someone who gave us the term “The Idle Rich” could hardly be accused of doing.
    The above book accompanies a series of BBC radio Reith lectures on politics. Reith will be remembered as the man who insured that the powerful new medium of public radio broadcasting in the UK did not turnout like the propaganda organ it became in Deutschland between the wars.
    All these “banned”, (read suppressed” books are part of the ammunition of democracy, with these lockers now being broken open and the contents distributed care of the internet.
    Will this overcome the glaring deficiencies in the underfunded and curiculum manipulated Australian
    education system?
    Is this sort of adult education necessary to save Australian democracy from its enemies, its
    brainwashing enemies? Who don’t want you to know the truth in the same way that the medieval
    control freaks notoriously did not want anyone to read the Bible?
    I remember reading about the Scots missionnaries from the Celtic Church in Northern Ireland who, in the first millenium taught Dark Age Europe how to read and write and who would typically set-up in the marketplaces touting “We are here to sell wisdom”. Not quite the same church as Rome is it?

  3. Brady

    @Hams

    “Will this overcome the glaring deficiencies in the underfunded and curiculum manipulated Australian education system?”

    No.

    I’m a primary school teacher (and sometimes high school) and if the parents of Australia could truly look into the state of education, I believe they would be horrified. Some of the stand out problems I have seen:

    1. Behaviour: Shockingly bad. Gone are the days when students can be expelled, as, and I quote the DET, ‘To do so would remove the opportunity’s for this child to receive an education’ (Never mind the fact that ‘this’ child’s behaviour is ensuring that their 29 classmates education is being severely compromised.) I regularly (when teaching high school) get swore at, and physically intimidated with little consequences to the students.

    2. Ready made consumers: I look at horror when Coles/Woolies/NAB and Co run their school programs to ‘help’ Aussie kids. While its true, there must be some benefit, what much more apparent is the short term goal of getting people to use their business, and, the long turn goal of brainwashing our dear children to become ready made consumers. I would forgo any help these companies offer, for the chance that students not be treated as commodities.

    3. With the advent of state liberal governments in N.S.W, Vic and Qld, education is taking a particular bashing. Sections of America have recently tried the ‘pay for performance’ technique, and it was, and always will be a dismal failure. What is more frustrating is that there are countries out there who we could model out system on, who’s academic achievement of students is going from strength to strength (South Korea, Finland) while Australia’s is in sharp decline. Governments in general (but epecially the Lib’s), despite there assertions to the contrary, see education reform in only one way. How can we spend less money on it.

    4. My aim in any class that I have, is too teach the students to be critical observers. Ie, to examine what is presented to them, to look for hidden agenda’s and to be mindful that what MSM says to be true, and what actual is true, are two very different things. What I find is that basically 100% of who they are, what they believe, and how they interact with society is formulated by television. Its actually frightening how drone like they have become, and we, as Australian parents have to take full responsibility for this.

    Can it be fixed. Sure. More money for public school and less for the private schools (though that third swimming pool is a tad worn looking) would be a start. But more import then money, is addressing the behaviour issues, and protecting them form the corporate sector, (this really is a whole society problem) and let them once again be children, not consumers.

  4. Hamis Hill

    Just look at the history of mining in the New World under Imperial Spain and you will see where the present crew get their model. and that model goes back the the slave society of Ancient Rome. Que??
    That is right, those who ignore history are doomed to repeat it. To emphasise the point the miners would prefer an Imperial Spain model then a banana republic one and would be quite happy to support an anti-democratic government of the roman as opposed to Christian type. What do you think these cretins just dreamt it up overnight? They follow a well established, centuries long model
    against which the forces of democracy have struggled for centuries. Getting people to forget this history is part of their modus operandi, while deluding their little lambs they set them up for slaughter. And this pattern of “Herding” human beings g,oes back millenia to the first domestication of animals. History, it is really hard for some. and arming themselves for the defence of democracy?
    Easier to bleat on about the unfairness of it all. Had a look at the history of Latin America lately and compared it to the history of Christian America( protestant America). Noticed any difference?
    Noticed any change in the cultural direction of formerly, democratic and protestant Australia and the change of the Liberal party to the DLP? All too confronting? Wake up before it is too late.
    As Tammy Wynette sang “They’re sanctified and they’re ancient and they drive an ice cream van”
    Meaning thy’ve been around for a while and worship a child-abusing God? Go on, go back to sleep.
    Wu Sun Tsu”The Art of Strategy”, “Know your ememy, Know yourself, One hundred battles, One hundred victories”. Self-indulgent whining losers, look in the mirror, drop the crap and get organisedbefore it is too late. All along the watchtower indeed, you clueless clods.

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