A union push to increase first-year apprentice wages by up to 50% could significantly impact small construction businesses, leading to a substantially fewer construction apprenticeships and potentially costing the industry an extra $390 million over four years, according to a new study.
The Centre for International Economics study, commissioned by the Housing Industry Association and Master Builders Australia, found wage increases advocated by unions of up to 50% for first-year apprentices and 33% for second-years would cause the industry to spend 23.5% more on apprentices over four years to a total of almost $1.97 billion.
The study comes as several unions – including the Construction, Forestry, Mining and Energy Union, the Australian Council of Trade Unions, the Australian Manufacturing Workers Union and the Communications, Electrical and Plumbing Union – have called for wage increases for first-year apprentices from $317.75 to $423.66 per week or $11.15 per hour.
The ACTU submission says current pay rates are too low and a “key factor in explaining apprenticeship completion rates as low as 50%”.
But the HIA and Master Builders study found if apprentice wages are increased, there could be up to 12,000 fewer apprenticeships offered in the construction industry.
HIA senior executive director David Humphrey told SmartCompany the incentives for small construction businesses taking on an apprentice would diminish if the increase is passed.
“The CIE report case study uses the profile of a small business trade person. They simply will not take on an apprentice and during the business cycle, when they do need an extra employee, they will take on a sub-contractor type position,” he says.
The study found businesses are instead likely to increase their reliance on their own labour.
Because of the reduction in hiring incentives, the study predicts the total number of apprentice positions in the construction industry to fall between 12% and 24% or between 5,850 to 12,000 positions by 2017.
Humphrey says this reduction would be caused predominantly by the impact of increased costs on small businesses, since they are the main employers of apprentices.
“Due to the need to supervise the apprentice, businesses need to have a qualified tradesperson on staff to supervise. Consequently lots of large building companies don’t have a significant number of apprentices of their own, but they engage these small businesses and contractors to work with them on projects which do employ a number of apprentices,” he says.
In a statement from the CFMEU in regards to their submission to the Fair Work Commission, the union says the current pay rate of apprentices per week is $317.75 – “a woefully inadequate figure only slightly higher than the Newstart Allowance”.
CFMEU national construction division secretary Dave Noonan said in the statement the wages did not reflect the pressures on apprentices.
“Apprentices are not just 15 or 16-year-olds. Most are over 18 and many are in their 20s and may have families to support. A wage that does not cover basic living costs is a key reason why young people drop out of apprenticeships, despite liking the work.”
Humphrey says the wage increases would cause apprentices to be less competitive with fully-qualified workers and put further pressure on them and the industry.
“The downturn has been going for some time and we don’t want to displace the small recovery in the sector by having unnecessary cost increases,” he says.
The Fair Work Commission will begin hearings into the review of wages and conditions for apprentices, trainees and juniors in early March.
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