Pay deals keep tradies in line with Big Mac index, but teachers lag

Labour accounts for 40 per cent to 45 per cent of a total project cost on average, and the ability of the major building-industry unions to push through wage rises averaging 4.7 per cent a year for almost one-quarter of a century shows a key driver of rising construction costs.

However, contracting companies are now trying to alter their enterprise bargaining agreements (EBAs) – albeit with the goal of reducing union restrictions on which subcontractors they hire – and this raises the question of whether Australia’s building industry unions will have the same power in future to ensure such wage increases.

Any changes to wage rates, however, will only come in future, said Domenic Schiafone, the Oceania head of research for quantity surveying firm RLB, which did the analysis provided to The Australian Financial Review.

“If activity declines, compounding 5 per cent annual increases add considerable financial pressure to the industry,” Mr Schiafone said.

“This is all conjecture of course, as the EBA has been approved by the CFMEU, and we believe is awaiting Fair Work Commission certification. This will see the 5 per cent increase annually until 2027/8.”

Rising wages can also be offset by improvements in productivity – broadly defined as the output per worker – and separate analysis by RLB last month showed the average annual output per blue-collar worker jumped 33 per cent between 2003 and 2023, while the output per professional employee in construction fell 17.2 per cent.

The latest analysis is limited to base hourly rates, modelled on a 38-hour week and does not include the overtime and various other allowances that increase an individual worker’s pay.

It shows the rate for a carpenter on grade CW5 under the Victorian CFMEU agreement has jumped from $18.87 in 2000 to $56.43 this year, a 199 per cent increase.

The rate of a grade 5 electrician under the Electrical Trades Union EBA in Victoria rose from $20.55 in 2000 to $63.22 this year – a 208 per cent gain – and for a registered plumber under the CEPU national plumbing union agreement jumped from $19.40 to $57.16, making a 195 per cent increase.

In contrast, the hourly rate of a grade 2 Victorian public servant rose 90 per cent from $24.56 to $46.73, a publicly employed fourth-year medical officer’s rate rose 109 per cent from $28.36 to $59.19 and a level 3.1 early childhood teacher’s hourly rate rose 166 per cent from $17.75 to $47.15 this year.

Over the same 24-year period, CPI inflation (to March this year) in Melbourne has risen 95.3 per cent, while the price of a Big Mac burger, which jumped from $2.59 to $7.90, has leapt 205 per cent.

Not even construction union wages can keep up with the biggest gain in cost, however – housing. Melbourne’s median house price more than quadrupled over the period to March 2024, rising 324 per cent from $191,000 to $810,000, according to the Australian Bureau of Statistics.

In NSW, the hourly rate of a carpenter under the CFMEU aware jumped 209 per cent to $50.04, a plumber 205 per cent to $54.09 and an electrician 185 per cent to $56.89, the figures show.

The rate of a grade 5 public servant, meanwhile, rose 105 per cent to $47.21, a fourth-year medical officer rose 104 per cent to $56.17 and a four-year trained early childhood teacher rose 113 per cent to $41.41 over the 24-year period.

Meanwhile, the median Sydney house price soared 376 per cent to $1.365 million.