Labor reshaping Australia’s IR system to fit the union vision

The Australian Labor Party and the trade unions have been waging a war against what they call "insecure work" and contracting for some years, but it is only now they are in power that the reality is starting to dawn on employers.

Take BHP.

The mining giant complains that the cost of Labor's "Same Job. Same Pay" policy will cost it $1.3 billion (US$850 million) per year. Apparently in the mining industry contract labour, hired through a labour hire firm, works for less pay than someone employed directly.

This is apparently by design. When large miners negotiate deals with the unions they tend to accept higher pay rates knowing that they can fill up a significant amount of their labour demand with contractors at a cheaper rate.

BHP claims that the $1.3 billion is the equivalent of 5,000 jobs. That means that the average pay of a worker is $260,000. It's no wonder that there are plenty of contract workers available for hire at a figure somewhat less than that, but still well-over average pay rates.

Should we feel sorry for BHP? At current profit levels, an additional $1.3 billion would appear to be fairly trivial. BHP earned a net profit after tax of US$41 billion (A$63 billion), making the loss equivalent to two percent of net profit.

But commodities are a cyclical business, and only 2 years ago in 2020, BHP's full-year profit was US$8 billion (A$12 billion approx), in which case it would have been more than 10 percent of profit.

Besides, companies like BHP run tight ships, and an increase in the wage bill will almost inevitably mean redundancies, so we should be thinking more about the BHP workers.

The unions like to portray anyone being paid less than anyone else as exploitation, but it's hard to see someone on $200,000 plus as downtrodden.

Oversimplifying the employer-employee relationship

The truth is that there are a variety of reasons why people will work for less, or more, or on contract.

Contract work gives the worker more flexibility, or it may allow them to work more hours for higher wages, just at a lower unit cost.

From a business point of view if you are in a cyclical industry, the ability to stand down a worker by terminating a contract rather than making them redundant, with all that entails, can be attractive, and even necessary to survival.