Building a future

It was once the star performer of the Celtic Tiger. Now those still working in the building sector are being asked to take a 20% wage cut. Stephen Rogers wonders if it will help the industry

THE Construction Industry Federation has predicted employment in the sector will be 75,000 by the end of the year, just a quarter of the 280,000 employed at the property peak in 2007.

To many, that sharp decline is hardly surprising. In 2003, it was reported there were 11 cranes prominent in the skyline over Cork city working on a myriad of new developments.

Today, skylines across the country are clear right up to the grey clouds which reflect the national mood, while many of the building sites over which the cranes would previously have towered either remain unfinished or lie vacant.

The reasons for the decimation in construction employment have been played out, almost ad nauseam, in the media.

Commercial courts have almost filled their diaries with hearings into the affairs of businessmen who amassed fortunes during a construction bubble which has now been abruptly burst.

In fact, many of the shells which litter our cities are the result of their expensive gambles gone wrong.

However, in terms of re-invigorating the industry into the future, the debate still rages.

The Construction Industry Federation has signalled it will be seeking a 20% reduction in the legally binding rates which govern the pay and conditions of 50,000 site-based staff.

If — and it is a big if — such demands were to be accepted by the Labour Court, which signs off on changes to Registered Employment Agreement rates, it would mean those workers would have endured a 27.5% reduction in their wages in the space of just a year.

The employers’ body claims the existing “high” rates under the REA are creating what one source described as a “rampant black economy” in certain sectors.

Subcontractors are offering their services for rates which fall well below the legally-binding minimums, knowing that there is a high likelihood that their actions will fall under the radar of the state’s monitoring machinery.

In the electrical industry, it is already estimated 90% of employers are non-compliant with the REA, paying well below the legal rate.

One construction employer source said numerous examples had emerged where management grades had taken so many pay reductions that those supposed to be working under them on the REA rates were earning more each month.

Furthermore, pressure is being brought on companies by cross-border competition who can provide workers to take on construction jobs on wages well below the REA minimums — but which work-starved craftsmen and labourers in the North will gladly snap up.

Nonetheless, trade unions are asking what any reduction in the REA rate will actually achieve other than decimating the earnings of 50,000 more potential consumers whose spending power might otherwise contribute to getting our economy up and running once more.

The unions point out there is no evidence the 7.5% wage reduction in the sector, agreed after much debate last January, contributed to even one job being created or saved.

When that 7.5% reduction was signed off by the court it came with a recommendation which both employers and employees appear to chosen to put their own slant upon.

That recommendation stated: “The court further recommends that the reductions should be regarded as a temporary measure of derogation from the current REA rates and their continued application should be reviewed in January 2012 and in each subsequent year. Those reviews should have full regard to the prevailing circumstances of the industry and other relevant considerations.”

The unions say this does not give scope for further reductions, but instead means the 7.5% should be restored as soon as practicably possible.

The employers, however, say it is a licence to seek further efficiencies in the event that the situation does not improve.

In the months since the pay cut was introduced the Government made a move which decimated any hope of construction revival in a way pay considerations could never have achieved.

CIF was deeply critical of the Government’s decision in the budget to take a hatchet to the Public Capital Programme. Major road projects, school building, public transportation and energy projects were all abandoned as capital investment was reduced by €755m, 16% in 2012 and a further 15% in 2013.

CIF described the move as “nonsense economics” which would lead to further job losses, reduced taxes and spending in the economy.

The only positive ICTU could find in the wake of the budget announcement was that the Government committed to investigating the incentivisation of investment by private pension funds in major job creation projects and critical infrastructure, such as broadband and transport.

To date there is no signs that such an investigation has yielded any concession to actually start the investment.

In the coming weeks, both employer and employee representatives will meet at the Labour Court to discuss the pay rates in the industry.

The CIF’s claim for 20% is the same as they initially sought last year. It is likely that the figure is once again an introductory gambit and that any reduction that does emerge will be less.

What remains to be seen is whether unions will be coerced into accepting any reduction to the rate when they know they will find it hard to bring back the levels their members would demand once the construction industry returns to full health.