ABCC will target construction companies, not unions

Both sides are misinforming the public and the PM isn’t helping much.
The Australian, October 22, 2016
Did you see Ewin Hannan’s report in this paper earlier in the week (“ABCC bill could shut out companies”, October 19)? If so, you will be seeing some truth about the Australian Building and Construction Commission. If the ABCC is established, its main thrust will not be chasing rude, swearing union officials. Instead, its core agenda will be forcing change within businesses in the construction sector.
The ABCC will ensure that companies that sign up to anti-competitive union agreements, like the 350 businesses in Hannan’s report, will be shut out of government work.
If Malcolm Turnbull wants his ABCC legislation to be supported by the Senate and the community, he should craft a narrative around this argument. Talking about union thuggery and higher wages is the least effective way to garner broad support for the ABCC. Many voters don’t see a problem with having union thugs around if it leads to things like higher wages.
The ABCC legislation has a core task: it entitles the government to bring in a building code. This code is an anti-corruption code of conduct. It is the central mechanism by which the government will clean up the building sector. However, the code does not apply to unions. It applies only to companies. No one in the government talks about that but they should because it is incredibly important.
The ABCC will identify companies that have breached the code. The easiest way to do this is by looking at their enterprise bargaining agreements. Companies that breach the code will be denied the ability to work on jobs funded with federal government money. In this way, the government intends to force construction businesses to compete in a free and open market instead of price fixing with each other, a practice referred to as “agreeing on a level playing field”.
In Queensland, 350 companies have signed an identical EBA to establish a level playing field. This means that 350 businesses competing for the same work are paying their staff exactly the same amount, down to the last cent. When this sort of thing is happening, a competitive market does not exist and the consumer is being ripped off. These companies are unlikely to have signed the EBA because deep inside they are militant unionists. They are likely to have signed it because their client, the head contractor, would have made it clear that without doing so they would not be allowed to work on the project.
Of course, head contractors (large construction firms) are not militant unionists either. They just want an easy life, free from union trouble, and the best way to achieve this is to push the industrial relations risk on to the shoulders of their subcontractors. More important, if they agree with the union to fix the labour costs of all the subcontractors that work on their projects, they can charge higher prices for building. This means bigger profits for shareholders and higher executive salaries. It is a win-win scenario for everyone inside the cartel.
Before projects begin, head contractors hold talks with unions to draw up an EBA and sign a master copy. Then they give the unions a list of all the subcontractors tendering for work, whereupon the unions visit the subcontractors with the master copy in hand and make it clear (and this is where the thuggery and bullying can come in) that without the subcontractor’s signature on the EBA tenders will be denied and no work from the head contractor will come their way.
In this way, the unions are the agent of the head contractor, a big business, and the enforcers of a cartel. They ensure the operation of an anti-competitive business model, a model that relies on price fixing the subcontractors’ input costs to maximise profit for all those playing on the level playing field. It is this price fixing that has given us the reputation as the most expensive construction destination on the planet.
This week I appeared on the ABC’s Q&A. The conversation turned to the ABCC and the argument went down the same old ideological and misinformed route. One side talks of thuggish union people and the other side says unions are being thugs only to ensure worker safety.
Both sides are misinforming the public. The Prime Minister, who wrote a column in these pages about the issue recently (October 17), isn’t helping the matter much. His messaging is all about the unions, whereas it should be about how the code will bring competition into a non-competitive sector and ensure that small businesses are not the victims of unfair business practices.