“From a labour front, these are the most challenging times we’ve ever seen. You’re talking about wage rates going up in the order of 25-30 per cent at the moment.”
That is the conundrum that Tyrecycle CEO Jim Fairweather finds himself in – pay high wages or don’t have a workforce. Such is the current situation in many parts in the waste industry as labour shortages hit and wages start to rise. The culprit? As with many cases over the past two years, COVID-19.
Like a lot of labour-intensive industries, the waste arena relies on overseas workers to fill in the myriad of gaps that appear in the work force when there is low unemployment. However, due to strict immigration legislation due to the COVID outbreak, a lot of the blue collar, overseas-based labour that would walk into a job in the waste industry are now stranded in their home countries unable to get back into Australia.
Add to that people who are close contacts, have COVID, along with a general lack of labour due to low unemployment, then you “have the perfect storm”, according to Fairweather. The answer? Simple–open the borders, said Fairweather. And he doesn’t mean let everybody in with no restrictions. But he does believe the government needs to be more malleable in allowing people into the country that have been double vaccinated, had a booster and are willing to adhere to local rules around spreading COVID–i.e. wear masks, sign into premises and keep social distancing.
“We need to get international labour back in the market because we are running at four percent unemployment, and we cannot find the people to fill the slots,” he said. “And the people we can find are extremely expensive for the roles that they do, and it is putting huge cost pressure on operators likes us in terms of delivering a value for money service to our customers.”
Fairweather said the costs of shipping are adding to margins being squeezed, which means they have had to pass some of those costs onto customers. This in turn has meant they can’t pass the labour costs to the customer because they have already asked them to shoulder some of the burden with shipping.
“And when you’re talking about the shipping costs, you’re talking about that now being far greater than what our collection costs are,” he said. “Just the cost of moving the TDF (tyre-derived fuel) offshore is now far greater than what we were originally charging our customers for the whole service.”
Fairweather said that his companies are currently running at 60 per cent labour capacity. In days gone by, labour hire agencies would have filled in the missing gaps but the market is so tight they can’t even do that.
“We were running at about 50 percent no shows for interviews at one stage as people stayed home with job keeper,” he said. “That has fallen away now, but it is incredibility hard to get people.”
While he is not too worried about the immediate future, in six months’ time is could be a different story. Then there are the issues of the current force being over stretched, which leads to tiredness, and then safety issues start to kick in.
“We can sustain it for now and into the medium term we are okay,” he said. “We are hoping in the next six months the borders open up and this labour issue goes away or at least starts to improve. The danger will be whether it starts to impact the capacity of the market to collect all the tyres. Our workforce is very tired, they are working long hours and lots of overtime just to get through the sheer volume of work we have to get through.
“Our primary concern is the health and safety of our workers. You need to make sure you are managing fatigue and all those sorts of things. It is always important, but especially so in this environment. We are managing that very carefully. Lately, the top two items in my board report every month is managing our labour force and safety.”
The final aspect that worries Fairweather in the immediate future if the ramping up of blue collar labour needed in other, better paying industries.
“The tricky part at the moment, is that for this type of work, the mines are getting busy again,” he said. “And when the mines get busy they can pay whatever they want to pay, and you just lose workers. He said in the waste industry, drivers have gone from $30 an hour to $40 an hour. Fitters have gone from $35 an hour to $50 an hour. Plant operators have gone from $26 an hour to$34 an hour. If a worker does a 10 hour day and some overtime and double time and other penalty rates, they are probably earning $550 a day so they’re earning $130K.”
While Fairweather is concerned at the moment, he is a not a gloom merchant. He does see an end to the issue but would like the government to step up and shorten the amount of time it will take the overseas workforce to start entering the country again.
“We are okay at the moment,” he said. “It has been a complicating factor that the COAG waste bans just come in as well. There is lots of movement in the market. There are smaller operators dropping out of the market, which is increasing the demand for our services.
“Our outlook is we remain very positive, and we think the borders will open and we are confident we can continue to run the business cost effectively, efficiently and maintaining our service levels for our customers. As we go forward, and as the borders start to open up, that should ease pressure in the labour market , which will continue to grow on the trajectory we were on.”