Five years after the boom, battle rages over mining wages in Australia

November 22, 2016 6:08 PM EST

A giant excavator loads a mining truck at the Fortescue Solomon iron ore mine located in the Sheila Valley, around 400 km south of Port Hedland, in the Pilbara region of Western Australia December 2, 2013. REUTERS/David Gray/File photo


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By Jonathan Barrett and Aaron Bunch

SYDNEY/PERTH (Reuters) - Coal prices may be recovering, but there are no celebrations in the mining town of Collie, Western Australia, where workers are fighting Indian conglomerate Lanco Infratech over plans to slash their wages almost in half.

The move to cut pay at Lanco's Griffin Coal mine comes five years after the peak of a commodity price boom that saw miners, truck drivers and even cleaners earning six-figure incomes in Australia's remote outback mines and offshore oil and gas fields.

But unwinding the wage hikes has proved difficult after a collapse in prices for coal, iron ore and other resources pushed dozens of mining companies into bankruptcy and many more to the brink.

Lanco's move to switch from an employee-friendly wage agreement to statutory minimum pay when the agreement expired is among the first of its kind and has quickly become a national test case.

China's Yanzhou Coal Mining Co <600188.SS> and U.S. giant Exxon Mobil Corp (NYSE: XOM) are among other companies pursuing controversial changes to wages and conditions.

While lower wages will help struggling projects survive, some economists worry widespread cuts to worker incomes will weigh on consumer spending and economic growth.

Australian wages are growing at their slowest pace on record, the Australian Bureau of Statistics data for the September quarter shows, representing less than half the wage growth rate workers enjoyed a decade ago.

Workers in Collie believe the wage cuts will have devastating consequences for their tight-knit town of about 7,000 residents.

Graham Latham, who retired from Griffin Coal in July because he was unhappy with the new pay rate and job conditions, said businesses including a hardware store, camera shop and fashion boutique have already shut their doors.

"When I first started at out there it felt like a family atmosphere, but now you just feel like a number, you know?," he said.

WAGE RECLAIM

A KPMG report for lobby group the Australian Mines and Metals Association (AMMA) has found wages in the iron ore industry are 20 percent higher in Australia than in competing jurisdictions, and offshore vessel operators are paid 2-1/2 times more.

During the boom time, miners regularly paid dump truck drivers high six figure salaries, while travel arrangements allowed some workers to live in holiday areas such as the Indonesian island of Bali during their breaks.

Nicholas Ellery, partner in legal firm Corrs Chambers Westgarth, said the severity of the wage cuts was a result of these high wages and incentives many people enjoyed in stronger economic times.

"Businesses are just trying to find ways to survive and stay viable," Ellery said. "This is happening across sectors and while industries are doing it tough, we'll see more of it."

Companies including Fortescue Metals Group have changed shift rosters, and penny pinching - from cutting back on soap and bottled water at mines - has become commonplace.

Still around 46,000 mining construction jobs were lost between 2013 and 2015, according to National Australia Bank data.

Coal prices have surged this year but projects run by Lanco and Yanzhou's local arm, also in Collie, operate on longer-term contracts and have yet to see higher prices feed through.

Griffin has lost an average A$48.9 million ($36.2 million) a year since 2011, according to court filings.

"There is a significant gap between the cost of production and the income received for selling each tonne of coal," Griffin's chief financial controller James Riordan told Reuters. "Labor costs are by far the biggest cost of production."

A spokesman for Yanzhou's local coal operations said the company had been negotiating since early last year without success.

"The proposed 15 percent reduction is unfortunately reflective of the difficult economic and operating conditions we are continuing to address at this time," the spokesman said in a statement.

COMPANIES IN BOX SEAT

Lanco's successful bid in Australia's industrial relations tribunal to return workers to an industry minimum has set a precedent that other companies are now holding over their work forces during negotiations, said unionist Steve McCartney.

"Companies think this is a green light to attack wages and conditions for workers all over Australia," said McCartney. "Our people in Collie are digging in."

Some Griffin maintenance workers are facing a potential pay cut from around A$130,000 a year to A$80,000, although negotiations with the company are ongoing.

Exxon Mobil subsidiary Esso wants to move workers at its oil platform operations in the Bass Strait fields, south of Australia's mainland, from one-week-on, one-week-off shifts, to two-weekly shifts designed to improve productivity.

It has started proceedings to move workers onto award wages although an agreement could be reached in the interim.

An Esso spokesman declined to comment.

Jane Beauglehole, a long-term resident of Collie and wife of a worker at Lanco's operations, said industry minimum wages would affect all aspects of family life.

"Work is saying, 'We've got counselors you can use, come use them'," said Beauglehole. "And I say, 'a workforce shouldn’t need counselors to help the workers because it should be a happy place to work in'."

($1 = 1.3524 Australian dollars)

(Editing by Lincoln Feast)



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