While there's not a great deal of difference in the case of conventional housing between Australia and the United States, Australia's subbies are more efficient on volume-built housing than their subcontractor counterparts in the USA.
The reasons why the housing subcontract system predominates in Australia is obvious Ä it works for builders, subcontractors and home buyers.
Even in Europe, subcontracting of labour for private housing appears to be on the increase.
Threats to the Subcontract System:
Although the building unions now concede that the housing subcontract system is entrenched, the union movement has tried to regulate housing subcontractors through price-setting tribunals.
The list of cases is very long. In the interests of brevity only the major ones will be summarised:
Justice Alley made the following observations:
"I am satisfied that the industry has been conducted for years on the basis that the operators are subcontractors ... I have formed the view that the basic object of the application is not the protection of pieceworker employees, but the regulation of subcontract conditions. The union seeks that the Commission do indirectly what it has no power to do directly, namely the prescription of conditions as to matters which do not pertain to the relations of employers and employees." (CNo. 4256 of 1977 Print D7792)
2. In 1979 the Victorian Society of Operative Bricklayers sought to have minimum contract rates included in the Victorian Bricklayers Wages Board determination. The Wages Board rejected the application.
3. In 1980 the South Australian Branch of the Operative Plasterers and Plaster Workers' Federation of Australia sought to vary the building trades (Plasterers and Terrazzo Workers) Construction Award to provide that subcontractors be engaged under the terms and conditions of the Award.
The Industrial Commission, in dismissing the application, made the following comments:
"The evidence substantially reveals that persons engaged to perform given tasks preferred to be independent contractors rather than "employees" bound by award prescriptions notwithstanding the benefits they may enjoy in accordance with the conditions of the award. That is, sick leave, payment for public holidays, long service leave and annual leave."
4. In 1979, the most comprehensive inquiry into the subcontract system was held in New South Wales. Commissioner Burns in his report to the New South Wales Government stated:
"It is not because of any reverence for those two concepts in `Free Enterprise' and `The Marketplace' that I am convinced that the present practice in the cottage building industry should be left alone. It is because they so obviously work."
Commissioner Burns concluded his comments with the following statements:
"The system works. It serves the industry and the public well and, I am convinced, offers a decent and satisfactory lifestyle for the self-employed tradesman.
"I believe that the present practice has infinitely more advantages than disadvantages and that the effects of the labour only, or substantially labour only, system on both the industry and the workers within the industry are better than anything that might be artificially imposed from outside."
The Burns Report represented an unequivocal endorsement of the subcontract system within the housing industry.
But of continuing concern is the erosion of the independent status of subcontractors.
In many cases these efforts have been aided and abetted by State Governments through amendments to legislation to deem subcontractors as employees for the purposes of workers compensation, health and safety and payroll tax.
One of the more common complaints levelled by the Unions against the subcontract system is that subcontractors evade personal income tax through the cash economy.
However, in 1983 the Commonwealth introduced a system of source deductions for prescribed payments to contractors in the building industry.
After the new system settled down most subcontractors found that it actually assisted them in scheduling the payment of their tax liability.
The prescribed payments system is now accepted by builders and subcontractors.
Attitudes of Subcontractors:
In the face of concerted efforts by the building unions to unionise and regulate subcontractors the housing industry in the late 1980s commissioned a survey of housing subcontractors.
The findings from the national survey provided no comfort for those who seek to regulate the conditions of employment in the industry.
The survey bore out that subbies see themselves as small businesses for whom freedom and independence are essential.
Many liked the excitement of working in a free market and the opportunity to make a good income when times were good.
On average, subbies worked a 50 hour week, mainly in on-site construction as well as quoting and tending to paperwork.
They viewed themselves to be financially fortunate and to be earning better than award-based employees. Most accepted market fluctuations as part of their job.
Fears of unionisation abounded. There was a strongly held view that unionisation would make housing more costly and reduce the amount of work available.
Although subbies were lukewarm on the need for representation, they viewed the threat of unionisation as a sufficient incentive to mobilise other subbies to join an organisation which was prepared to resist greater union interference.
It would be a retrograde step to drag these highly independent people back into the world of arbitration courts, awards, union membership and industrial disputes.
The Troubleshooters Available decision has resurrected moves by the Federal Government to bring self-employed workers under the control of the Industrial Relations Commission.
Such moves, while made in the name of "protecting" workers from the supposed financial and industrial manipulation of employers, smack of compulsory unionism and a denial of free enterprise bargaining.
While Senator Cook, Minister for Industrial Relations, contends the changes would be aimed only at stopping employers from having "quasi subcontractors" and would not interfere with the genuinely self-employed, these assurances look hollow.
If the Federal Government and the union movement are worried that there is an increasing trend by employers to engage workers under contract in a bid to short-circuit the obligations of an industrial award, they should first examine why employees are happy to accept these jobs.
Could it be the attraction of being one's own boss outweighs the so-called "advantages" of union membership and Commission awards?
While the building unions have been unsuccessful in penetrating the cottage building sector of the housing industry, they have made inroads into the high-rise residential sector, particularly in Sydney and Melbourne.
Home building firms which operate in both low and high-rise housing typically are forced to establish two divisions: One based on subcontracting for their detached housing construction, and for the medium density sector, award-based employees or if subcontractors are permitted by the unions, a rate schedule has to be adhered to and other commercial site conditions.
These building companies estimate that the costs of production on a unionised housing site are 30 to 50 percent higher than on a non-unionised housing site.
But with substantial excess supply of CBD office space there will be renewed pressure from the unions to increase further their sphere of influence into medium-density housing.
This push is being encouraged by the Federal Government which wants to see large commercial construction companies enter the medium density housing sector.
Of one thing we can be sure, should commercial building practices subvert present housing subcontract arrangements, there won't be any low-income families occupying the better cities housing.
The housing subcontract system is not faultless.
But there doesn't appear to be an alternative to the subcontract system which encourages incentive, motivation and personal responsibility to the same degree.
Australia's housing industry has achieved world-class efficiency through a highly flexible labour system which has been of considerable benefit to Australia's home buying public.
It is essential to the future affordability of housing
that subcontracting continues to provide a productive
basis for the industry and new home buyers.
Why HR Nicholls?