Labour Market

Econtech Pty Ltd, trading as Independent Economics, is strongly committed to independent economic modelling that provides robust analysis and real solutions for the economic analysis of the labour market.

The Economic Impact of Migration:
March 2015

A report on "the Economic Impact of Migration" was prepared by the Migration Council of Australia using modelling commissioned from Independent Economics. "Migration" and "No Migration" scenarios for the Australian economy were simulated to 2050. Previous studies have allowed for the effects of skilled migration on the labour market, including through boosts to productivity and the employment to population ratio. This study goes further by also allowing for:

  • the linkage from higher population growth to higher rates of investment and wealth accumulation
  • a higher population providing greater economies of scale in infrastructure but a thinner spreading of the benefits from natural resources
  • the contributions to productivity growth from education and research and development, based on the theory of semi-endogenous growth
  • the linkages from the age composition of the population to government spending on social security, education and health

Download the Economic Impact of Migration Report

Download "The Economic Impact of Migration" (Migration Council web-site).

Contribution of VET to the economy

This report, which was commissioned by TAFE Directors Australia, provides "Cost-benefit analysis and returns from additional investment in Vocational Education and Training (VET)". It builds on previous studies of the economic contribution of additional investment in VET by:

  • fully including benefits not only for graduates but also for module completers
  • fully including benefits not only for up-skillers but also for re-skillers
  • modelling the role of VET as supplier of 43 detailed occupations to 120 industries
  • estimating the internal rate of return to VET investment for policy evaluation of further investment in VET

Key Findings

  • the internal rate of return to additional investment in VET is estimated at a high 18% p.a.
  • this reflects the fact that, in present value terms, the benefits in the form of higher employability and productivity easily outweigh the costs in terms of foregone earnings while studying and tuition
  • the additional investment in VET associated with the 2009 National Agreement for Skills and Workforce Development (NASWD) is estimated to have significant ongoing benefits for the Australian economy
  • households are better off by $0.6 billion per year
  • the workforce is more skilled with a 0.3% boost to the supplies of Technicians and Tradespersons as well as Community and Personal Service Workers
  • industries to expand significantly include manufacturing, automotive repair and personal services

Download the VET Contribution Report

Download "Cost-benefit analysis and returns from additional investment in Vocational Education and Training (VET)".

Building and Construction Productivity -
2016 Data Update

Independent Economics has now updated the key construction industry data used in its previous reports on construction industry productivity and workplace relations. This data update has not been commissioned by any organisation. Construction industry productivity is of concern because lower productivity means higher taxes are need to fund the construction of government roads, schools and hospitals. In addition, higher costs to business to fund the construction of retail, office and commercial space are likely to be ultimately passed on to households in the form of higher prices.

Background

Previous reports in 2007 and 2008 for the ABCC and in 2009, 2010, 2012, 2013 and 2014 for Master Builders Australia have examined the effects on changes in workplace arrangements in the construction industry on productivity. That is not re-examined again in detail here. Rather the aim is to update the data used in the previous reports in the interests of properly informed public debate. Some interpretation of this data is offered below. Readers will have their own interpretations. It is hoped that those interpretations take into account all of the data that is provided here.

By way of background, the following table presents a chronology of key changes in workplace arrangements in the construction industry. In general terms, official oversight of workplace relations in the construction industry was increased in the period from October 2002 to June 2006 and then reduced again from August 2009 to June 2012.

Date Event
October 2002 Building Industry Taskforce established
October 2005 ABCC established
June 2006 National Code of Practice for the Construction industry strengthened
August 2009 National Code of Practice for the Construction Industry weakened
late 2010 Reduced use of compulsory examination powers by ABCC
June 2012 FWBC replaces ABCC

The data file, which can be downloaded below, contains separate tabs for data on disputes, productivity and costs.

Disputes

The disputes data is sourced from the Australian Bureau of Statistics and is found in the "disputes" tab. It shows working days lost per thousand employees.

In the decade to 2005, on average there were 5.4 times more days lost per thousand employees in the construction industry than in the economy generally. Then, from 2006 to 2009, the average value for this ratio fell sharply to 1.7, when official oversight of workplace relations in the construction industry was at its peak.

As this oversight was eased, the ratio rose to 3.1 in the following four years, from 2010 to 2013, before finally reaching 5.2 in the two most recent years from 2014 to 2015.

Thus, the experience of the last 20 years has been that the rate of industrial disputation in the construction industry has been far higher than in other industries, except when the ABCC was at the height of its powers. On the positive side, there has been a downward trend in the rate of industrial disputation generally.

Productivity

The productivity data is also sourced from the Australian Bureau of statistics and is found in the "productivity" tab. It calculates productivity as real value added per head of employment. This simple and familiar measure of productivity is based on data that can be measured relatively accurately, compared to the more complex measures of productivity that have also been presented in the seven previous reports.

The data shows that both before and after the period of official oversight, growth in construction industry productivity lagged behind growth in the economy generally. It is only during the 10-year period of official oversight, from 2002 to 2012, that productivity growth in the construction industry (of 24 per cent) exceeded productivity growth in the economy generally (of 9 per cent).

This data needs to be interpreted carefully as labour productivity in the construction industry is also influenced by a range of other factors. It varies with the strength of engineering construction relative to residential construction, the economic cycle and the pace of economic reform.

Costs

The costs data is sourced from Rawlinsons Construction Handbook and is found in the "costs" tab. Rawlinsons are generally recognised as the leading provider of data on construction industry costs. The costs data is based on building tasks that are common to both commercial building (which is subject to industrial disruption) and domestic housing (which is largely free of industrial disruption).

The Rawlinsons data shows that the same building task in the same state is generally more expensive in commercial building than in domestic housing. Further, in NSW, Victoria, WA and SA, the average cost penalty shrunk during the period of greater official oversight from 2006 to 2012, compared to the average cost penalty in other years, although the opposite is true in Queensland.

When this cost data was originally compiled for our 2007 report, a data entry error was made. However, this error was acknowledged and corrected in our 2008 report. Some commentators with fixed positions still prefer to highlight this old, isolated error rather than acknowledge the evidence from a wide set of the latest data, such as that presented here.

Download the 2016 Construction Productivity Data

Download "Construction Industry data: 2016".

Building and Construction Productivity -
2013 Update

This fifth update of Econtech's seminal report on construction industry productivity was commissioned by Master Builders Australia. The first stage of the update analyses the contribution of improved workpractices in driving construction industry productivity. The second stage uses the findings of the first stage to estimate the flow-on benefits to the wider economy from the lift in construction industry productivity.

For this 2013 update, we have fully adjusted our 2012 update for the latest data. We also distinguish for the first time between the era covered by the Building Industry Taskforce and the Office of the Australian Building and Construction Commissioner or Taskforce/ABCC era (2002-2012) and the subsequent Fair Work Building and Construction or FWBC era (2012-present).

Key Findings of the 2013 Update Report

  • All the latest data continue to point to improved workplace practices during the Taskforce/ABCC era leading to a significant productivity outperformance in the construction industry.
  • The improved work practices are attributable to the activities of the ABCC, its predecessor the Taskforce and industrial relations reforms.
  • Using the latest data, the estimated productivity gain ranges between 10 and 21.1 per cent, depending on the measure and the source of information that is used.
  • The flow-on benefits to the wider economy from this productivity outperformance include a lowering in construction costs faced by both the government and private sectors.
  • This in turn flows through to mean that consumer prices and taxes are lower than would otherwise be the case, leading to a gain in consumer real after-tax wages of 0.9 per cent.
  • This is associated with a permanent annual gain in consumer welfare of $7.5 billion.
  • However, the building-industry specific nature of regulation in the Taskforce/ABCC era has been almost completely removed in the FWBC era, so it is reasonable to expect that most or all of the productivity gains built up in the Taskforce/ABCC era will eventually be lost in the FWBC era.

This modelling was undertaken using Independent Economics' Computable General Equilibrium (CGE) model. The Independent CGE model is unique among Australian CGE models in distinguishing four sub-industries in the construction industry (residential building, non-residential building, engineering construction and construction services).

Download the Construction Productivity Report

Download "Economic Analysis of Building and Construction Industry Productivity: 2013 Report".

Labour Market Modelling

  • "Economic Modelling of the Cost of Presenteeism in Australia", Medibank Private, 2007.
  • "The Economic Effects of Industrial Relations Reforms Since 1993", Australian Chamber of Commerce and Industry, 2007.
  • "Economic Analysis of Building and Construction Industry Productivity", Australian Building and Construction Commission: 2008 Update.
  • "Economic Analysis of Building and Construction Industry Productivity", Australian Building and Construction Commission, 2007.
  • "Modelling trends in Workplace Relations", Department of Employment and Workplace Relations, 2007.
  • "Modelling and Reporting on the Economic and Employment Impacts of Various Scenarios for Increases in Minimum Wages", Department of Employment and Workplace Relations, 2006.
  • "The Economic Impacts of Migration: A Comparison of Two Approaches", Department of Immigration and Multicultural and Indigenous Affairs, 2006.
  • "The Economic Impacts of the Migration and Humanitarian Programs on State and Territory Economies", Department of Immigration and Multicultural and Indigenous Affairs, 2004.

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