Why a Six Figure Salary is Only Good For Some Electricians

Most in the electrical trade in Victoria, were jumping up and down with joy on Thursday afternoon, after the union told the boys – and possibly a few girls – that by 2014 they can expect to be earning six figure salaries.

In what’s being referred to as a ‘landmark’ decision, the new enterprise bargaining agreements (EBA) mean each year for the next four years, a sparky can expect to earn an extra 5%, capping off their base salary at $107,000 by the mid noughties.

From an individual point of view, these blokes were ecstatic. They finally feel ‘rich’ and are getting ahead of the man. But none of them probably stopped to think about the potential economic cost that this could bring.

And let’s be honest none of them probably really care about the economic cost, which is fair enough. All they see right now, is a holiday for the wife to Thailand and maybe being one step closer to taking the kids to Disneyland one day.

Now, I’m not hanging it on Australia’s tradies, I’m married to one of the best in the business if you ask me.

But quite frankly, they couldn’t give a rats backside about the potential affects to the economy. Mainly because they don’t see how it affects them. The union was fighting for them and that means they didn’t have to worry about it.

Many times in the past, Kris has written about how the minimum wage can actually destroy jobs. This wage jump for electricians is certainly no minimum wage, but it can still have devastating implications for the industry that the union hasn’t looked at – or if it has, it’s ignored.

It’s considered a landmark case because it’s one of the only industries now to have a pay rise each year that’s ahead of the official inflation figures. Which is great for them.

But it ignores that potential ongoing cost to the economy that could take years to unfold.

For one thing, it could lead to a misallocation of labour. But more importantly, while there are winners from this decision, there are losers as well.

What the union forgets – or ignores – is that the new wage structure is only good for those that are in the industry now and manage to remain in their job.

You see, artificially high labour costs will just end up pushing more contracting businesses into handing out redundancies. Plus, it could make the hiring on of an apprentice less likely in the future. Especially when that apprentice could eventually just become another highly paid employee.

And even though part of the new agreement means that any sparky automatically earns a double hourly rate once they work over 36 hours each week, companies will be encouraged to keep the labour force to a minimum on a job site.

I mean, think about it. It’s going to be a lot cheaper to pay nine blokes two hours overtime each week than pay ten guys a flat 36 hourly rate.

The outcome is that it’ll eventually lead to less people being employed.

Then you have to consider the cost of building construction in Victoria. For many years now, the state has enjoyed a construction boom. Which may all come to an end because of this new EBA.

Increased labour costs are likely to lead to other states fighting to win the big construction projects. Or, unions in other states fighting for the same pay scales, and therefore even more electricians losing their job or missing out on getting a job.

Do you think the unions have considered these effects?

If you’ve ever been to union meeting, they’ll tell you, that they’re working for you, and that business is greedy and evil and you should maximize your benefits.

Well, of course you should maximize your benefits. But when the collective benefits for a privileged group means unemployment for the not-so-privileged few, the real impact of trade unions is revealed.

Look, the problem doesn’t just affect the electrical trade. It’s all part of the widespread problem that is wage fixing and trade unions.

And that’s one of the greatest mistakes people make when it comes to set wages determined by an organisation like a union or the government.

People think they’ve been ‘protected’ and looked after.

They’re not. The only people protected are the ones lucky enough to remain in the industry. Claims that unions look after everyone are clearly incorrect. It’s just that no-one pays much attention to the people forced out of their jobs thanks to the unions.

Sometimes these organised bodies fighting for everyone’s rights think they are doing the right thing, when they just end up hurting the very people they’re supposed to be trying to protect.

Shae Smith
Assistant Editor
For Money Morning Australia

 


Since starting out in the financial markets over a decade ago, Shae has extensive experience across various aspects of the industry. Shae cut her teeth in the derivatives industry, teaching clients basic trading techniques with technical analysis.

Joining Port Phillip Publishing eight years ago, Shae has worked across a number of publications, such as Australian Small-Cap Investigator, Gold Stock Trader and Microcap Trader. She’s spent the past two years however, honing her macro analysis skills alongside Jim Rickards, showing Australians how to invest and profit form global macro trends.

Drawing on her extensive experience, Shae is a contributor to Money Morning, and lead editor of sister-publication Markets & Money, where she looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.


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