If a picture is worth a thousand words, what price a graph or in this case two?
The government’s slogan of “getting wages moving” in the current heated industrial relations debate is one that the construction industry struggles to comprehend. Wages typically grow with increased productivity, yet, as these two graphs illustrate, we find ourselves in a situation where the construction industry’s productivity performance has hit rock bottom while industry wage growth has continued to outstrip inflation and that of all other major industries.
Over the past 30 years the productivity of the construction industry has actually gone backwards and is now worse than it was when Barcelona hosted the Olympics, Kevin was home alone for the second time and CD sales started to surpass those of cassette tapes.
Moreover, the industry’s productivity performance lags other industries by over 33%. In monetary terms, if the gap could be closed, Australia could save $47 billion annually. This would be enough to pay for the entire cost of the National Disability Insurance Scheme (NDIS) with change left over to build the odd school, hospital or airport.
At a time when the government is looking for loose change under the cushions of the budget sofa, this is a huge potential saving that is hiding in plain sight.
Existing bargaining arrangements have consistently delivered wage increases for construction workers well above all other industries. Wage increases in construction agreements have averaged 3.9% per annum for the last three years which is at the upper end of what the RBA considers ‘normal.’ There is therefore no reason for the government to include construction in multi-employer bargaining legislation and every reason for the government to focus instead on using its buying power to coordinate and incentivise reform of the industry.
Lengthy procurement practices designed to give the illusion of value for money but that just deliver delays and budget overruns should be replaced by collaborative processes that incentivise real value for money for the taxpayer.
Prescriptive specifications that define to the last nut and bolt how a project should be built should be replaced by specifications that describe the desired outcome and allow the contractor to come up with the best solution to achieve it.
Barriers to adoption of digital technologies should be removed so that data is shared and leveraged and so that Gen Z workers are not put off entering an industry that still considers spreadsheets to be the height of technological advancement.
The need for productivity growth in construction is not just a financial one. The industry is facing a growing shortfall of workers needed to deliver an ever-increasing pipeline of work including projects required to make the transition to net zero, a 2026 Commonwealth Games, a 2032 Olympics and a renewed focus on defence investment. With every major country around the world also spending big on infrastructure we are completing globally for resources who have become less attracted to a country with frequent floods and bushfires, a high cost of living and propensity to lock people up during a pandemic.
Training programs, however worthy, will struggle to make a dent in our requirement for skilled workers when the economy is at full employment and there are industries with more favourable and flexible working hours.
The only way to deal with the shortage of resources is to get more productive—to do more with the resources we already have.
Whilst admittedly not as catchy as “let’s get wages moving” we need to rally around the catch cry of “let’s get productivity moving” if we are to realise a substantial financial saving for the economy and have sufficient resources to construct the much-needed pipeline of roads, transmission lines, hospitals and schools the industry is being called upon to deliver.
Opinion piece by Jon Davies, Chief Executive Officer, Australian Constructors Association
Originally posted via The Australian Financial Review 27 November 2022.