Report – McKell Institute, May 2022

Wage Cutting Strategies in the Mining Sector – Update

Executive Summary

In 2020, The McKell Institute published Wage Cutting Strategies in the Mining Sector, a report which calculated the economic impacts of labour-hire and casualisation in Australia’s mining sector. That report identified that, routinely, major mining sector employers were utilising labour-hire firms to minimise wage costs. The 2020 report noted that, while it was the individual workers who suffered most directly from such cost cutting, the communities long-reliant on a vibrant mining sector were impacted, too.

Two years on this report examines the most recently available data to update McKell’s 2020 report.

Part 1 of the report outlines the current state of Australia’s mining industry, and the impact that the COVID-19 pandemic has had this key sector. In recent years, the mining sector has seen record-breaking profits, an increase in exploration work, and increasing export volumes of ores. Further, while most industries were suffering due to the pandemics and unpredictable lockdown measures, over the course of 2019-2020, the mining industry accounted for over 10 per cent of the GDP. And during that same time, resources and energy exports reached $221.2 billion in value. This report notes that, while this recent success is certainly welcome, it also creates an obligation upon the sector to ensure those working on its frontlines are adequately remunerated.

Part 2 of this report then details how wage costs are minimised in the mining sector. It notes that excessive use of contractors and labour-hire firms impacts the wages of those in the mining industry, in addition to the communities that rely on those mines.

Part 3 of the report reiterates the findings from McKell’s 2020 report. In that report, it was noted that the labour cost reductions associated with workforce casualisation and the increased use of labour-hire firms would cost neighbouring communities between $485 million and $851 million in economic activity.

Finally, in Part 4, the report tables the ongoing costs of wage cutting in the mining sector activity located in five federal electorates heavily dependent on mining income: Flynn, Capricornia and Dawson in Queensland, and Hunter and Paterson in New South Wales. The estimates in this report indicate that the use of labour hire firms cost neighbouring communities between $571 million and $989 million in economic activity. Those estimates are likely to understate the true impact of the strategies employed by mining firms given that large numbers of casual mineworkers are classified by their employers and the Australian Bureau of Statistics as not being in the mining industry.

Key Findings

Finding 1: Wage cutting strategies in the mining sector within the federal electorates of Hunter and Paterson, NSW, cost the community between $130 and $235.85 million in localised economic activity per year.

Finding 2: Wage cutting strategies in the mining sector within the federal electorate of Flynn, Queensland, cost the community between $218 and $357.5 million in localised economic activity per year.

Finding 3: Wage cutting strategies in the mining sector within the federal electorates of Capricornia and Dawson, Queensland, cost the community between $223.1 and $395.9 million in localised economic activity per year.

Finding 4: Across all five electorates, up to $989million per year is lost in local economic activity due to wage cutting strategies utilised by the mining sector. This represents a significant economic loss to regional communities across Australia.

Read the full report here: https://mckellinstitute.org.au/wp-content/uploads/2022/05/McKell-Wage-Cutting-in-the-Mining-Industry-Final-.pdf.