Korean Tiling Workers’ Informal Skill Formation and Role of Division of Labour in the Sydney Construction Industry
Joon Shik Shin
Asian Studies, Australian National University
Paper for 28th International Labour Process Conference
New Jersey, USA
15-17 March 2010
Abstract
Subcontractors in the unionised tiling sector in the Sydney construction industry have sought to increase their profits by transforming the labour process and reforming tile-laying arrangement since the late 1980s. These changes have placed the informal wage system, informal skill formation and division of labour as important issues.
It became common for subcontractors to sublet tile-laying tasks mainly to Korean middlepersons, in order to enhance their profits by lowering the contract rates of pay through the expansion of pyramidal subcontracting arrangements. So as to maintain or increase their profits, given the low contract rates of pay, Korean middlepersons introduced informal wage system through cash-in hand and huge wage differentiation between skilled and low-skilled workers. In addition, they introduced a form of team work which subdivided the previously holistic tile-task into several tasks by narrowing each tiling worker’s role in the overall tile-laying arrangement.
Traditionally, a tile-layer had multi-skills as many different tile-laying tasks had to be performed by a highly skilled single tile-layer. However, the informal and inequitable wage system in the pyramidal subcontracting arrangements has created an informal self-taught skill formation system. In addition, this system has urged the tiling workers to increase their discrete competencies as many tasks as possible to gain more wages in the tile-laying teams. Within the team working system that exists under pyramidal subcontracting the competencies of tile-laying skills are the central factor that determines workers’ wage levels. Therefore, most Asian-background tiling workers, including Korean and Chinese tiling workers, develop their skills by themselves through on-the-job work in order to advance to higher wage levels.
These changes have redefined the status and power of management, subcontractors and middlepersons, and skilled and low-skilled tiling workers in the labour process. This in turn has influenced their income and payment and the dimension of autonomy. Within this pyramidal subcontracting arrangement, middlepersons and leading hands could increase their autonomy and power while labourers’ autonomy and power was severely diminished. This paper will provide an advanced understanding of informal wage system, skill formation and division of labour in the global economy.
Introduction
Industry restructuring in Australia since the late 1980s has resulted in greater increasing of labour market flexibility, temporary migrant workers and casual employment. In particular, industry restructuring and labour market flexibility through pyramidal subcontracting arrangements in the Sydney tiling sector have resulted in a major decentralisation of tile-laying production from subcontracting firms to middlepersons’ micro or small tile-laying firms. This resulted in the expansion of informal employment which forced huge wage differences between skilled and unskilled tiling workers, eroded formal institutional skill formation and introduced subdivided division of labour.
Subcontracting in the Sydney construction industry generated negative externalities in terms of workers’ wages and skill formation. In order to cope with these problems, from the late 1960s to the early 1980s, the Building Workers’ Industry Union (BWIU) (now known as the Construction, Forestry, Mining and Energy Union (CFMEU) which was formed from a series of amalgamation)) developed union policies to protect the construction workers’ wages and to promote institutional skill formation.
The CFMEU policies have limited the spread of negative impacts of subcontracting across many highly unionised (commercial) trade sectors in the Sydney construction industry. However, the union’s policies had limited success in the tiling sector because, since the late 1980s, subcontractors introduced pyramidal subcontracting arrangements. Therefore subcontractors in the unionised tiling sector have increased their profits without difficult, by reorganising the labour process through the expansion of pyramidal subcontracting arrangements, team tile-laying and subdivided division of labour.
The object of this paper is to identify how the labour process transformation expanded the workers’ informal skill formation and subdivided division of labour in the pyramid subcontracting arrangements focusing on the Sydney commercial (unionised) tiling sector from the late 1980s. In addition, it is to examine the validity of the labour process theory for analysing the industrial relations of skill formation in prevalence of pyramidal subcontracting arrangements in the sector, in particular Braverman’s ‘deskilling and division of labour’ concept (1974) and Appay’s ‘controlled autonomy’ framework (1998).
In order to address these objectives, firstly, this paper briefly analyses the pyramidal subcontracting arrangements and the changes to the labour process. Secondly, it examines the informal wage settings and wage differentiation. Thirdly, this paper identifies the informal skill formation and narrow subdivision of labour. Fourthly, it explores the sources of tiling workers for informal skill formation. Finally, this paper analyses the impact of informal skill formation and narrow subdivision of labour. This paper used interview and participant involvement method which provided insightful findings on Korean tiling workers’ informal wage system, skill formation and division of labour in the Sydney tiling pyramidal subcontracting arrangement.
Pyramidal Subcontracting Arrangements and Changes to the Labour Process
Labour market flexibility policy was strongly influenced by a philosophy of neo-liberalism which was emerged in the 1970s. The 1987 ‘industry restructuring and efficiency principle’ accelerated the introduction of enterprise bargaining, which was implemented in 1991 under the Keating Labor government. The introduction of enterprise bargaining aroused considerable interest among employers in labour market flexibility at both industry and workplace levels (Rimmer and Zappala, 1988; Green and Macdonald, 1991; Wailes and Lansbury, 1997). Globalisation of labour market, industry restructuring and labour market flexibility policy encouraged an expansion in subcontracting, pyramid subcontracting and ‘all-in’ payment system, as well as introducing a more flexible immigration policy, which encouraged skilled workers to immigrate to Australia to work in this flexible labour market.
In particular, the conservative Greiner NSW government introduced a ‘no preference’ clause in the NSW IR Act 1991 which eliminated the ‘no ticket, no start’ practice on construction projects. This led to a major reduction in union membership and the financial resources of the CFMEU (McGrath-Champ, 1996: 9). Although casualisation, the subcontracting system and the informalisation of employment were also important factors contributing to the decline of union membership in the industry, the elimination of the ‘no ticket, no start’ practice was a key component in the CFMEU’s membership and financial decline. The membership of a union is a central component for unions’ power. Membership is the principal source of union funds, and the financial position of the union affects the capacity of the union to project its industrial, organising and political influence. Traditionally, the CFMEU’s membership density was very high due to a ‘no ticket, no start’ practice for work on the construction sites. This meant a construction worker had to belong to a union in order to gain employment in the industry. Due to the decrease of memberships, the union was not able to ban the introduction of the labour market flexibility.
The Howard government undoubtedly intended that the WRA 1996 would reduce the power of trade unions in Australia (Lee and Peetz, 1998). A number of legislative initiatives further decreased the CFMEU’s power. The Interim Building Industry Taskforce (IBIT) 2002-2005, the WorkChoices Act 2005 and the BCII Act 2005 were designed to weaken the union’s membership and financial power. These changes assisted subcontractors to introduce the pyramid subcontracting arrangement in the sector.
Pyramid subcontracting occurs when a tiling subcontractor sub-lets tile-laying work to a middleperson (owner of micro or small business) who engages tiling workers (CFMEU, 1997: 13). Subcontractors in the commercial (unionised) tiling sector have sought to increase their profits by reforming the tile-laying arrangement through the expansion of pyramidal subcontracting arrangements when Korean tiling workers started to inflow into the tiling sector since the late 1980s. Though this pyramidal subcontracting system breached the EBAs, the union was not able to stop the practices because of the decease of the union’s memberships and the government’s neo-liberal policies.
Marx’s concept of surplus value (profits) is still a useful idea for analysing the contemporary relations in Australia between labour, capital and the state. Contemporary management styles attempt to increase profits (surplus value) by using temporary migrants, including undocumented workers, to avoid investing in training and cutting labour costs by utilising labour market flexibility. Braverman’s labour process theory analysed the managerial control strategy which divorced the conception of work from its execution, by deskilling craft workers through the division of labour (Braverman, 1974: 63 and 107).
The labour market flexibility policy was further extended by the conservative Howard coalition government (1996-2007), emphasised industry restructuring which led to the decentralisation of production to small workplaces and enterprise negotiation. It also entailed different immigration polices. The introduction of enterprise bargaining by the federal government aroused the considerable interest among employers in labour market flexibility at both industry and workplace levels. The government policy encouraged more flexible immigration policies, enabling documented and undocumented skilled, semiskilled and low-skilled workers to immigrate to Australia to work in this flexible labour market. From the late 1980s, immigration policies attracted many undocumented Korean skilled and semiskilled tile-layers and tile-laying labourers with tourist visas to the Sydney tile-laying labour market.
Until the mid-1980s, most construction workers on the unionised sites in the Sydney construction industry were engaged directly by specialised trade subcontractors on wages and contract rates of pay. However, key changes in the construction industry occurred from the late 1980s, including the restructuring of the subcontracting system and the creation of more flexible employment arrangements. The process of restructuring the subcontracting system increased the power of head contractors and subcontractors who have since controlled the labour process with use of multiple employment arrangements.
Within the pyramidal subcontracting system operating in the tiling sector, the subcontractors indirectly employed tiling workers via middlepersons. Under the system, the subcontractor directly employed only office staff to carry out supervisory, administrative and marketing duties. However, this activity violated the enterprise bargaining agreements (EBAs) between the CFMEU and the subcontractors. The EBAs allowed the subcontractors directly to employ skilled tile-layers, apprentices and labourers. For formal skill formation, the tiling subcontractors had to employ apprentices, in both permeant and full-time positions, who learned tile-laying skills from skilled tile-layers during on-the-job training and have attended tiling courses at a Technical and Further Education (TAFE). In addition, they also employed labourers, in fulltime permanent or casual positions, who delivered all materials to tiling sites. In this way, the traditional and formal roles of skilled tile-layers, apprentices and labourers were clearly classified, as shown in Table 1.
However, from the late 1980s, the subcontractors in the tiling sector started to transform the labour process and deploy new Koran migrant tiling workers in order to cut tile-laying cost by introducing and gradually expanding the pyramidal subcontracting system. This system resulted in sub-subcontracting the tile-laying work to Korean middlepersons (sub-subcontractors). In addition, most Korean tiling workers consented to the labour process transformation by the subcontractors because of the Korean tiling workers’ language barrier and the middlepersons’ desire to be owners of small businesses.
Table 1: Traditional and Formal Employment Classification and Key Roles
Classification / Key Roles / EmployerSkilled Tile-layer / Performing all tile-laying tasks from preparation to the final task of grouting and associated work / Subcontractor
Apprentice / Learning tile-laying skills and assisting several skilled tile-layers / Subcontractor
Labourer / Delivering all materials to the tile-laying work sites / Subcontractor
Source: CFMEU (1997: 3)
The changes in the immigration policies gave the subcontractors the potential to utilise the skilled and semiskilled Korean tile-layers and labourers to achieve ‘free rider’ benefits without investment in training for tile-laying workers. However, it was difficult for the subcontractors and Korean tiling workers to maintain a direct employee–employer relationship due to the language barrier. The inability to communicate with potential workers was a central factor preventing the subcontractors from utilising the Korean-born tiling workers. In order to overcome this crucial problem, Lebanese and Italian tiling subcontractors introduced and expanded pyramid subcontracting by employing Korean tiling workers via middlepersons even though this was banned under the EBAs. Most Lebanese and a few Italian-background tiling subcontractors established and expanded the system by subletting tile-laying tasks to Korean middlepersons with the requisite English language skills. Pyramid subcontracting enabled the subcontractors to utilise all Korean tiling workers via Korean middlepersons. This ‘miraculous combination’ of new immigrant policy and pyramid subcontracting satisfied the desire of subcontractors to increase their profits by utilising Korean documented and undocumented Korean tiling workers.
Currently, many smaller tile-laying businesses run by middlepersons supply the casual-based tiling workers for tile-laying. In some cases, the middlepersons in the Sydney Korean community in turn sub-let some tile-laying tasks such as the screeding, floor tile-laying, and wall tile-laying and grouting (Korean Tile-layer 2, Interview 19/04/2005; Korean Middleperson 4, Interview 05/04/2005). In particular, the grouting task has often been done by Korean-background female casual workers.
Informal Wage Setting and Wage Differentiation
Despite a strongly-held CFMEU principle of wage equity for all construction workers, the union has recognised that tiling work is easily quantified (square metres), providing a basis for contract rates of pay. This accounts for the tiling subcontractors’ preference for contract rates of pay to middlepersons through the pyramid subcontracting system, which extends informal employment. This process results in the externalisation of labour costs, as well as the externalisation of risks and responsibilities. This method of calculating the amount of tiling work to determine rates of pay and the subcontractors’ labour market strategy has led to an increase in the number of casual and informal wage-based tiling workers and middlepersons. A very large number of tiling workers are engaged on a cash-in-hand basis.
The informal wage system in the unionised tiling sector has grown from the reorganisation of the labour process and the deployment of new immigrant tiling workers by the subcontractors and middlepersons. Few Korean tiling workers were employed on a permanent wage basis by tiling subcontractors in the unionised construction sites in 2001 under the EBAs. In fact, more than 90 per cent of Korean tiling workers were employed on a daily wage which resulted in a high proportion of casual tiling workers within the informal employment (Shin, 2002: 151).