Is Labor digging a hole on NBN labour?

Is Labor digging a hole on NBN labour?

Summary: NBN Co's hard stop has many observers wondering if the company hasn't bitten off more than it can chew — or whether construction bosses are just building too much fat into their contracts. Yet as NBN Co works to recover its momentum, it's worth considering whether Labor's determination to complete the project could see an alternative plan following the lead of our Asian neighbours.

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A friend of mine who did not attend university or even finish high school is currently drawing a six-figure package for a construction job that mainly involves pouring concrete and hitting things with hammers.

I don't know whether he'll be involved in the building of the NBN — nor does anybody, after NBN Co's surprise suspension of negotiations with 14 possible contractors. Yet I do know that this surprising turn of events highlights a significant problem in Australia's labour market, where decades of union intervention have normalised a situation where what used to be called "menial labourers" are drawing enormous salaries for digging holes, laying cable, pouring concrete, cutting trees and the thousand other tasks involved in any massive civil works project.

Multiplying these kinds of salaries times the tens of thousands of workers needed to build the NBN — and then adding on the usual margins for risk, both that which is inherent in the project and that posed by the continuing uncertainty around the NBN — is bound to produce a very, very big number indeed. And while NBN Co has assured us that it has an alternative plan that is thought to involve direct negotiations with Leighton-backed joint venture Silcar, I wonder if the solution may eventually lie overseas.


Australian ideas of workers' rights are far more progressive than those of our Asian neighbours. (Credit: David Braue/ZDNet Australia)

Both sides of the NBN debate have drawn heavily on the experience of overseas broadband to justify their respective positions: Stephen Conroy points to massive investments in broadband in other countries, while Malcolm Turnbull has recently taken to arguing that Korea has delivered better, faster broadband that also reduces cholesterol and whitens your teeth. Or something like that.

What these politicians are not, at least outwardly, considering is how those networks came to be built. And if you think they were built by heavily unionised fleets of construction workers enjoying healthy superannuation contributions, generous leave allocations, wage loadings for every hour spent standing upright or breathing while within 50km of a job site, and the like — think again.

Anybody who has visited the high-growth areas of Asia's emerging second-world economies — Dubai, Singapore, Abu Dhabi and even South Korea — knows their spectacular growth is entirely due to the armies of foreign workers brought into the country as a source of low-cost labour. Working under the strict supervision of local foremen and the ever-present threat of deportation, these largely unskilled migrant workers come from India, Bangladesh, Thailand, Sri Lanka, the Philippines, Indonesia and other countries to take on jobs that are too dangerous, monotonous or physically demanding for local workers to bother with.

Fast-growing Singapore, for example, had an estimated 290,000 foreign workers back in 2001, 580,000 in 2006, and added 53,000 more in 2009 alone. An entire government bureaucracy exists to manage their flow into and out of the country, with jail terms and caning among the penalties for those who overstay their permits.


Singaporean law may not mandate seatbelts in ute trays, but it does hold drivers to slower speed limits when carrying workers.
(Credit: David Braue/ZDNet Australia)

Not only are these workers happy to offer their services, but they do it for a song — living in high-density, often squalid conditions without healthcare, overtime, superannuation, protest rights or any of the other perks Australia's unionised workforce has long taken for granted. They can be fired and deported on a moment's notice. And what of on-the-job occupational health and safety protections? Little more than a hard hat and the promise that they can have the rest of the day off if they are crushed, run over, maimed or killed on the job.

Yet despite all this, they work long shifts with little reprieve — channelling the money they make back to families overseas that they may not see for months or years at a time. It's a difficult life by many standards, but the only option available for tens of thousands who have little alternative to a life of poverty and struggle back at home.

Decision time

I mention all this not to expound on the evils of capitalism, but to point out the very real impasse into which NBN Co's announcement places us. While our politicians monster each other over piddling points of policy, they ignore what now appears to be one of two major issues: one, that the construction industry is colluding to overcharge what it sees as a government desperate to get on with the NBN's construction; or two, that Australia's workforce has priced itself out of the market for major civil works projects like the NBN — and NBN Co has relied too much on overseas benchmarks based on lower labour costs.

If the latter is true and NBN Co is indeed in real strife here, it may need to start considering other options — and that could very well include a push for the government to speed the importation of non-unionised labourers to handle the massive amount of civil works involved in this project. Pundits are quick to warn of the difficulties in securing engineering and technical skills to roll out the NBN given competition from the resources sector — but not everybody building the NBN needs to have a Master's in Engineering. Once the initial planning is complete, the majority of the NBN's roll-out will be done by people who, like my friend, are adept at digging trenches, pouring concrete and hitting things with hammers.

The question is: how much do NBN Co's alternative plans rely on alternative labour sources? Given that the Gillard Government has bet the house on the NBN, it's not unreasonable to speculate that it will consider all options to reach its goal, but facilitating the importation of foreign low-skilled workers would be a political hot potato indeed.

As a party that has consistently shown itself happy to erode unionised workers' rights — and one that has agitated endlessly against an over-priced NBN roll-out — this sort of action should sit very well with the Coalition. Yet it would raise uncomfortable questions on both sides of the political fence.

Would a cost-conscious coalition, for example, support the importation of low-cost foreign labour to keep the cost of the NBN low? And would it accept a higher-cost NBN if those higher costs would allow the use of exclusively Australian labour? And would Labor be willing to compromise its history of supporting Australian workers' rights in order to deliver the NBN quickly and at lower cost?

Given the extent to which the NBN debate has been framed against our Asian neighbours, it may well be time to consider whether it's possible for us to keep up with their infrastructure development without adopting labour policies similar to those taken in fast-growing Asian economies.

Would a cost-conscious coalition, for example, support the importation of low-cost foreign labour to keep the cost of the NBN low? And would it accept a higher-cost NBN if those higher costs would allow the use of exclusively Australian labour? And would Labor be willing to compromise its history of supporting Australian workers' rights in order to deliver the NBN quickly and at lower cost?

There is always the possibility that NBN Co is just playing hardball with an industry that recognises the urgency of quick completion and is manoeuvring to extract as much benefit from the public trough as it can; the CEPU's NBN project coordinator Allen Hicks hinted at as much by suggesting pay cuts for NBN workers would slow down the project.

If we try to roll out major civil-works projects like the NBN while affording the entire workforce the same level of benefits traditionally afforded to middle management, the cost of the NBN will indeed blow out dramatically; never mind delays from strike action, mid-term renegotiations, political interference, and the like. And while importing labour to decrease tender costs may be politically and socially unpalatable in Australia, it's been essential in fast-growing countries that have successfully been able to pull up their economies by their bootstraps.

One certainly hopes completion of the NBN wouldn't require erosion of Australian workers' opportunities in this way. Yet as suggested by NBN Co's difficulties in securing its expected price, it's entirely possible that years of construction-industry dominance have put even our low-skilled workers on such a pedestal that we are no longer able to summon the manpower and political will to complete ambitious, nation-building projects. And that realisation, if it proves true and the government does nothing to resolve it, could turn out to be the biggest cost of the NBN.

What do you think? Is it worth paying billions more for the NBN to be built by well-salaried Australian workers? Does a project the size and cost of the NBN require new thinking and a willingness to import labour to keep overall costs down? Or are there entirely different reasons for NBN Co's dramatic change of direction?

Topics: NBN, Broadband, Government, Government AU, Asean, IT Employment

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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116 comments
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  • Of cause we should use our Australian labour, foreign workers should not be considered if we have our own talent here. Who would be left service this once the project is finished if we don't have local people trained?
    Problem is the governemt is trying to pass on the responsibility for the contruction to large corporations when the governement should be carrying the responsibility and manage plus hire the subcontractors themself. After all what good does paying the "fat cats" when the workers don't earn what they should.
    Having tooled up my business recently to install and maintain fibre IEN networks I can tell you the cost is extreme and it goes without saying that these costs will be pasted on to the customers regardless of if it is the government or private sector.
    Put simply, no one will spend $300k to $500k on equipment without the desire to get their money back within a set period.
    Take for example a ribbon fusion splicer and cleaver. The cost of these range around $30,000 - It has an expected life of around 5 years with calibration cost of $1000 anually and electrodes needing to be replaced at between 2000 to 5000 splices. The electrodes cost about $300 a set. Average cost for 5 years is around $40,000 without labour and repayments. Now what sort of money would you NEED to earn to pay for it?
    Put simply, if the NBN managed the subcontractors themself they would save the middle management costs & have more money for the network.
    fibretech
    • I forgot to mention a good cleaver is almost $2000 which needs blades replaced every 8000 or so splices & replaced twice in 5 years so add another $5000 to that $40,000. That's without OTDR, light source & power meter, VFL, Talk set, PON meter, Traffic detector, Scope, Digital heat guns, hand tools, consumables oh & I forgot, I'd like to be paid ;)
      fibretech
    • A very interesting point and thank you for sharing! You raise a serious issue, and perhaps this is one that begs another question: with so much construction work dependent on subcontractors – and shovelling the risk onto them – is our current labour structure simply too risk-averse and cost-heavy to do it properly? Certainly it would improve things if NBN Co managed subbies directly, but I suspect this would be a recipe for disaster as it would effectively require them to build another Leightons or Baulderstones. Could you see this happening in reality? And if it did, would that involve additional risk – currently worn by the middleman – that you as a subbie would have to carry? And would it be worth it for the extra margins you could command?
      braue
  • Your problem Mr Braue is largely that you seem to have forgotten the laws of supply and demand, you seem to think that, because you spent 6 or so years at Uni, your services are more valuable than the guy who didn't. they are not - his services are in demand and many of his peers went to Uni, expecting a cushy, highly paid job at the end of it meaning there were fewer people available to dig trenches and hit things with hammers.
    Rather than demand that we import low skilled workers or cut the entitlements of Australian workers, you could always pick up a hammer yourself. I'm sure your mate will be happy to talk you through which end of it to hold.
    Harry Tuttle
    • So we get back to the problem Mr Braue question posed: How do we undertake significant infrastructure projects in Australia if local labour costs are so inflated?
      redrover-fac06
    • Fear not; I am well acquainted with how to handle a hammer, and many other types of tool. My point has nothing to do with uni education versus lack thereof; I am only pointing out exactly the same thing you are. If supply is proved inadequate by a significant increase in demand, what do we do then?

      Our Asian neighbours, whose broadband efforts are lauded by our political leaders, have resolved this issue by actively increasing supply of workers to meet demand. How will we do the same? Or will our visions for future growth always be intrinsically constrained by artificial bottlenecks that we lack the political will to address? It is a serious conundrum, and one that's not easily resolved.
      braue
      • "Our Asian neighbours, whose broadband efforts are lauded by our political leaders,"

        They are? I must have missed that one, which of 'our political leaders' are you referring to?

        " Or will our visions for future growth always be intrinsically constrained by artificial bottlenecks that we lack the political will to address? "

        Yes perhaps we should have imported foreign workers to fast track the insulation rollout so it was even further down the track before the whole expensive farce was hastily cancelled, and it cost Garret his portfolio.

        "It is a serious conundrum, and one that's not easily resolved."

        No indeed, and it begs the question that it needs to be resolved anyway, because it all may be fast tracked 'resolved' in 2013 if the Coalition win the election, or the Parliament kills it because of massive cost and deadline over runs, all those scenario's are a distinct probability.
        advocate-d95d7
        • Malcolm Turnbull recently came back from Asia telling anyone who would listen what a great job Korea had done with their HFC and fibre rollout. Singapore, Japan and Hong Kong are regularly mentioned by pollies as being at the top of the ladder in world broadband, and a common theme in Julia Gillard's election campaign was that lack of an Australian NBN would see us losing jobs to our Asian neighbours. So, in response to your question, those political leaders.
          braue
          • Funny how you read that into Turnbulls report after his visit to Korea, I watched his Commsday address, the emphasis was more about how different Korea has done it and is doing it compared to the Australian NBN FTTH only like it or lump it approach.
            Post the Turnbull visit Conroy recently backtracked from using Korea as a example, because it's not how Australia intends to do it.

            Granted Gillard will use any leverage in promoting the NBN as it is the Labor Party reputation as a responsibly Government that is in the line here, and after the insulation farce this one cannot be allowed to fall on its head.
            advocate-d95d7
          • Could you do me a favor and stop comparing completely different countries. Your statements about demand and labor are completely uneducated, you cant magically create labor because you want your precious NBN to be built

            And if you are comparing Australia to those Asian countries, stop cherry picking the stuff that like (fast broadband) and ignoring the issues that such countries have, such as really low minimum wage

            In fact the low minimum wage is one of the reasons their infrastructure roll-outs are done so cheap

            This is reality in Australia, deal with it, we have high standards. We have a massive resource boom (that is actually benefiting our country), where the mining companies are paying a complete premium for the labor, that is creating the labor shortage

            And as for importing workers, lol!
            deteego
          • heya,

            High standards indeed. We just have a heavily unionised workforce, that is happy to see our country run into the ground for their own greedy short term gain.

            Right now, we are cruising on the back of a mineral boom, which keeps everybody happy. When that runs out, you're going to see a lot of sad faces, when people realise we've essentially destroyed our manufacturing capability, and priced ourselves completely out of the market. Do you ever wonder why factories like Mitsubishi, or Bridgestone or Toyota have recently closed factories in the past few years?

            Do you really think that a "foreign" worker is somehow not able to do the same job an Australian labourer is? Sorry, but that's just racism speaking. Heck, I suspect a lot of the readers here were originally from overseas.

            Historically, big infrastructure projects like the Snowy Mountains Scheme were built by migrant workers. And we made sure they were rewarded (e.g. English classes, bringing their family over etc.).

            However, in this day and age, this seems an unpalatable option, as Australian workers don't like to be awakened to the fact that the same jobs can be done cheaper by somebody overseas.

            We need to be smarter about what we manufacture, and how we direct our energies. There are still fields that we are competitive in, but hitting hammers and digging trenches isn't one of them. And heck, why not let a migrant worker do it - they get money to send to their families, and we get our work done cheaper. Everybody's smiling.

            And to the person above, yes, the uni degree doesn't necessarily make anybody a better person, however it does (hopefully) give you some more skills that would be in demand. There's nothing saying that the author's friend couldn't have also chosen to go to uni to get those skills, however, perhaps he felt he was better off starting work right away in a labour job, when the pay was more or less the same.

            That's a market failure that we need to fix, so that people will actually regard gaining these skills as a good value proposition.

            Cheers,
            Victor
            1000031563
          • You forgot the part about foreign workers being paid the same wages as local workers

            So all of that waffle of yours didn't amount to anything, its not going to be any cheaper then using (local) workers
            deteego
          • It didn't amount to anything you are right deteego but he had a political agenda and needed to get it off his chest, that's all that matters!

            "High standards indeed. We just have a heavily unionised workforce, that is happy to see our country run into the ground for their own greedy short term gain."

            Anti-union by any chance?

            :)
            advocate-d95d7
          • victorhooi – Coherently and clearly argued, and exactly what I was trying to point out. Our manufacturing base is evaporating as manufacturers outsource absolutely everything that's small enough to be transported on ships – leaving us with a top-heavy industrial base based largely on digging resources out of the ground and turning them into overpriced buildings to house our ever-growing consumer society.

            Now we find that we have overspecialised our workforce with so many protections and paddings that our government can't even afford to hire domestic workers to complete major infrastructure projects like the NBN. This labour market may seem tenable inside this union-driven bubble we have created, but if Australia's labourers were ever opened up to competition on a global scale, the low-value job market – and I use the term not to be elitist but to describe jobs for which new workers could be easily trained as replacements – would be overrun.

            Belittling foreign workers as somehow providing lower-quality products is short-sighted and blatantly incorrect. Objectively, the only reason Australia's NBN cannot be built more cheaply by importing labour is because of the protectionist laws in place within Australia.

            But if these laws mean even the government lacks the financial means to execute broad, ambitious nation-building agendas – what does that say about our prospects for the future?
            braue
          • Maybe you have to accept the fiscal reality of NBN is way too god damn expensive for Australia, there is a reason why the EIU gave Australia a lower then normal rating, its because Australia is spending the most per capita on internet out of any country

            The NBN (or the price that is currently at) is clearly too low, the actual cost of a national FTTH would be higher then that. Its nothing to do with our workforce, nothing to do with unions or protectionist laws (asia does not import foreign workers) or any of that crap

            Its that putting cables into everyones homes is RIDICULOUSLY expensive, not even asian countries do **** like that. You have to ACCEPT this

            And furthermore, nation building agendas almost always fail. There is a reason why most countries have stopped doing them since the 80's
            deteego
          • *Right now, we are cruising on the back of a mineral boom, which keeps everybody happy. When that runs out, you're going to see a lot of sad faces,*

            you're right - no boom lasts forever. in the case of Australia, where you have a private household sector highly addicted to debt and credit, it doubles the imperative on the Government to manage its fiscal affairs conservatively and run budget surpluses (to offset or insure private profligacy). smart countries like Norway, UAE, etc know that the oil bounty they've enjoyed for decades won't last forever - hence, they invest (save) in sovereign wealth funds instead of spending taxpapers' money like there's no tomorrow.

            *when people realise we've essentially destroyed our manufacturing capability, and priced ourselves completely out of the market.*

            Australia is only one of many industrialised nations that has witnessed a massive shift in manufacturing capacity from the developed world to the emerging markets. i don't think we should self-flagellate over a phenomenon that is clearly global in nature. at least, we have full employment here in Australia and solid wage/income growth.

            *Do you ever wonder why factories like Mitsubishi, or Bridgestone or Toyota have recently closed factories in the past few years?*

            because the Federal/State Government refused to cough up more subsidies or freebies these greedy foreign corporations keep asking for.

            *However, in this day and age, this seems an unpalatable option, as Australian workers don't like to be awakened to the fact that the same jobs can be done cheaper by somebody overseas.*

            which jobs? you mean the Bangladeshi dishwasher who's being exploited, paid as casual and worked like a dog by some unscrupulous restauranteur in Leichardht? how can jobs be done "cheaper" by foreign workers unless they sleep in bunk beds, cramped ten to a room, scrimp on essentials and live relatively miserable existences (esp. in a country such as Australia where the cost of living is sky-high)?

            *We need to be smarter about what we manufacture, and how we direct our energies.*

            agreed. the relatively small size of our population (and hence, domestic market) means that we shouldn't be making cars in the first place. we don't have a comparative advantage in engaging in this type of activity. after all, more cars are now sold in developing countries than developed countries.
            toshP300
    • meh ... the question Mr Braue posed*
      redrover-fac06
  • Yeah... I cant believe zdnet and this guy! get foreign labour? low skilled?? do you think that hitting things with a hammer and pouring concrete requires no skill? your friend getting 6 figures probably has over 6yrs experience in his field, they would pay an apprentice if they could be sure that this person would do it properly! but.. the company has liabilities they need to make sure this job is done right, peoples lives are really on the line here! and also what is the chance of you being killed on the job in your workplace? this has to be priced in and yeah all those overseas workers have not been trained in a culture of quality work. zdnet the microsoft shop needs to fade away....
    adamzski
    • 6 years experience to get 6 figures? Yeah, I think your white-collared bunch would be over-the-moon with such a quick return. If you leave school at year 10 you're talking a 22-yo pulling in these 6 figures with 6 years experience. The flip-side is someone just coming out of uni (broke and with a massive HECS debt) starting out on a $35-40k salary.

      There is no doubt the Aussie construction/menial labour market is currently over-paid compared to the rest of the world. I'm certainly considering making a career change!
      tenoqx
  • I really wish there was something that I could do to speed up zdnets demise but I guess there doing everything they can already http://www.alexa.com/siteinfo/zdnet.com.au#bounce
    I hope advertisers realise this and look at click troughs and stats like this
    adamzski