Special report: Australia's big dig for foreign workers

KARRATHA, Australia Tue Jun 14, 2011 10:56am EDT

1 of 4. A man arrives at a compound for employment offices in Karratha in the Pilbarra region of Western Australia April 19, 2011. Karratha and other remote boom towns are experiencing acute labour shortages. The reason for this shortage is simple: Australia, with a population of 21.8 million, does not have the workforce to exploit its enormous natural bounty -- at least not at the pace required to satisfy Asia's hunger for resources. Picture taken April 19, 2011.

Credit: Reuters/Daniel Munoz

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KARRATHA, Australia (Reuters) - Lucille Lievaux, a 25-year-old French geologist, commutes to work on a plane, a 1,300-km journey from Australia's Indian Ocean city of Perth to the mining town of Karratha, a smudge of suburbia on the continent's barren northwest coast.

Slim, blonde and passionate about her job, she sits in Karratha's busy single-storey airport, waiting for a jet to take her home. She has swapped her hard-hat and orange-striped overalls for a short-sleeved cotton top, jeans and sneakers. Wearing her sunglasses like a hair-band, she looks out of place in a departure lounge crowded mostly with unshaven men.

Only the dirt beneath her short fingernails and tanned, weathered hands would suggest she has something in common.

"Australia is like an El Dorado," says Lievaux, who came a year ago on a holiday. She now nets $5,000 a month, working two weeks out of every three at the Whim Creek prospect, an old open-cut copper mine dug out of the red rocky plain.

"It's so easy, so easy to find a job here as a geologist."

And it's so hard for Australia to find enough workers like Lievaux to sustain its mining boom. The tightening labor market is driving up wages, and combined with the resurgent Aussie dollar, is putting pressure on the entire manufacturing sector.

Lievaux may earn about $60,000 a year after tax and be chauffeured to work in a jet, but she is not particularly well paid by the standards of Karratha, an Aboriginal word meaning "good country, and other remote boom towns.

A mine supervisor can earn in excess of $200,000, more than the head of the Federal Reserve. A truck-driver's salary easily runs into six figures. A construction worker can make over $150,000, more than a doctor or lawyer.

"You can get girls cleaning at the mine camps and they can easily earn $100,000 a year," says Tracy Reis, 42, a travel agent based in Karratha.

The reason for this labor shortage, and the sky-high wages that come with it, is simple: Australia, with a population of 22 million, does not have the workforce to exploit its enormous natural bounty -- at least not at the pace required to satisfy Asia's hunger for resources.

The mining and resources industry, including oil and gas, has roughly $400 billion in new projects on the drawing board in Australia and will need another roughly 70,000 workers over the next five years alone, according to government estimates.

The construction industry is projected to need another 196,000 workers over the same period, many of them associated with new mining and energy projects.

The boom is just beginning and, already, labor is short -- not just for skilled jobs like geologists but also for unskilled work, creating a situation where even building laborers, cleaners, cooks and drivers are earning stratospheric wages.

But rather than flinging open the doors to foreign guest workers to fill these lower-level jobs, as countries such as Singapore and Dubai have done, Australia is taking measured and, some economists say, inadequate steps to import overseas labor.

GUEST WORKERS

Australian mining billionaire Gina Rinehart believes strongly it is time for a rethink.

"Australia needs guest workers", says the nation's richest person, with a fortune worth more than $10 billion.

Rinehart is chairman of Hancock Prospecting Pty Ltd and daughter of the firm's late founder, Lang Hancock, who pioneered the country's iron ore industry in the 1950s and '60s after discovering a mother lode in the rust-red landscape of the northwest Pilbara region, inland from Karratha.

Rinehart is fond of ruby-red lipstick and wears her dark wavy hair cut to her shoulders and sometimes a string of pearls, but she has the same flinty reputation as her father, the "king of the Pilbara", a famously hard-headed entrepreneur who once proposed using nuclear blasts to develop iron ore ports.

Rinehart declined an interview with Reuters but answered questions by email, saying Australia not only needed highly skilled migrant workers -- such as French geologist Lucile -- but also required unskilled, short-term guest workers for the costly, labor-intensive construction phase of development.

"Guest workers would benefit from jobs in Australia, increasing their skills and enabling them to provide for their own family's needs, so it is humanitarian assistance for them; in short, a win-win," she said.

Rinehart likens her idea to the use of seasonal workers in the farm sector to pick fruit -- when the work dries up, the workers go home -- but her suggestion that Australia should follow Singapore's economic model has angered trade unions.

In Singapore, unskilled foreign workers such as laborers and domestic servants are paid less than S$1,800 ($1,465) a month and cannot permanently resettle.

Paul Howes, a firebrand union leader and an influential figure in ruling Labor party circles, recently blew the whistle on what he says was one attempt in the oil industry to bring in Filipino workers on "slave-labor pay".

"We have told the government that we cannot stand by and allow what is essentially the trafficking of cheap labor from Asia into the remote northwest of Western Australia," says Howes, head of the Australian Workers Union (AWU).

The issue of guest workers is explosive because it implies below-market wages and challenges the national ideal of an egalitarian state. Australia thinks of itself as the land of a "fair go", a classless society founded in the 18th century by convict outcasts from the industrial slums of Britain.

To some, the mere mention of guest workers summons up images of an underclass of lowly paid, Asian workers.

But supporters of guest-worker schemes argue it does not have to be this way, noting that fair wages are enshrined in industry labor agreements and stressing the real benefit to employers would be access to reliable, committed workers.

WANTED: SPEAK ENGLISH & TURN UP SOBER

Jared Fitzclarence, owner of Karratha Aluminum Welding, lives in a small, dirty caravan behind his little firm's workshop, which has six employees working on everything from repairing trucks to larger jobs for a local gas-export project.

Over the din of his welding shop, Fitzclarence explains how finding the right employee can be daunting. In filling a recent vacancy, he tried several hopeless local candidates before finally hiring a hard-working, reliable Bangladeshi.

"We couldn't get someone who wasn't a complete loser or a drug addict ... it was causing no end of trouble," he says.

"It's not just here. Any business along this entire road has massive problems getting decent staff."

Fitzclarence believes guest workers are a good idea if they speak passable English like his young Bangladeshi employee.

"I think that's fantastic if they speak English. That's my biggest problem ... It's a language barrier," he says.

Large employers complain about the difficulty in both finding and keeping good workers. Mining contractor Leighton Holdings says it turns over more than a quarter of its workforce every year as staff shop for every higher wages.

"It's a frightening figure," Leighton Chief Executive David Stewart told a business lunch in Melbourne.

"They are very much motivated by someone having different conditions -- the food's better in the camp maybe, they serve different beer in the kitchen. I've got no idea. But it's a real challenge for us. We can't have a business where there's that much movement of people. It's enormously challenging."

Australia's largest energy firm, Woodside Petroleum Ltd, has partly blamed labor shortages for delays to its A$14 billion ($14.9 billion) Pluto liquefied natural gas project, now nearing completion near Karratha.

The project, due to start producing in September, is already six months behind schedule and about $1 billion over budget. It also has been troubled by design problems and by a few weeks of weather-related delays, but the scarcity of labor, especially skilled workers, has become an industry-wide complaint.

Australia has around $200 billion in gas-export projects alone in the investment pipeline, and developers such as Woodside, Chevron Corp, BG Group Plc and Santos Ltd need to move fast to sign up Asian customers or risk seeing one or more of their projects fall over.

BIG AUSTRALIA

The question of guest workers is larger than the debate over labor shortages. It also touches directly on another important issue facing Australia: rapid population growth and its ability to host the more than 100,000 new settlers every year.

Australia's egalitarian ideal means all foreign workers have the right to resettle in the country permanently -- and very many of them do just that, adding to the strain on national infrastructure such as transport, hospitals and schools.

Even those who oppose the idea of guest workers, based on fears that it could create an economic underclass of outback shanty-town dwellers, concede it has some demographic merit.

Currently, foreign workers who come to Australia on temporary employment visas can bring their families with them and can apply to stay on as permanent residents -- and about a third of all such visa-holders are granted residency every year, according to an Immigration Department spokesman.

Every migrant worker who arrives in Australia on temporary work visas, known as 457 visas, brings on average one dependent with them, according to Immigration Department data for 2009-10.

In contrast, guest workers are typically not allowed to bring family with them and have no right to resettle, which would ease the pressure on population growth.

Bob Birrell, economist and sociologist at Melbourne's Monash University, who is skeptical of guest-worker schemes in general, concedes that Gina Rinehart's idea has some demographic merit.

"To that extent, I agree with her," Birrell says. "It surprises me to say that but she does have a point there. It's just that I don't think she's going to succeed here."

It may seem odd that Australia, with 22 million people sharing a continent the size of Western Europe, is concerned about population. But the country is mostly arid, forcing about 90 percent of people to cram into 3 percent of the country. In 40 years, the population is projected to reach 36 million.

In major cities, infrastructure is already failing to keep up with population growth, and new suburbs are emerging without trains or hospitals. In the outback, the situation is far worse.

To walk much beyond the town boundary of Karratha is to enter a barren wilderness. At points, the outback is so flat and empty it is possible to gaze out at a 360-degree horizon and perceive a slight curvature of the Earth.

Inside Karratha, trucks rumble along the main street, ferrying materials and men between the town, nearby ports and the mines, while miners in fluorescent orange overalls are everywhere on foot. A town with an official population of around 18,000 is actually bursting with around 28,000 people.

Accommodation is so tight that big miners such as Rio Tinto and BHP Billiton find it cheaper to fly their workers into Karratha for a few weeks at a time rather than build whole new settlements in the desert.

For long-distance commuters such as Perth-based Lucille Lievaux, their temporary mine accommodation is usually an air-conditioned shipping container with a single bed. But even regular visitors like her will create demand for more labor.

All new miners arriving in the outback, even if only for a few weeks, will need doctors if they get sick and entertainment if they get bored. They will also generate more demand for lowly skilled jobs such as cooks, cleaners and garbage collectors.

That exacerbates labor shortages and drives wages higher -- to the point where scores of foreign backpackers are now being drawn to towns like Karratha, able to earn enough in a few months to fund the rest of their trips around the world.

Some live in tents around the town, and can quit their job and vanish in the time it takes to stuff a rucksack.

THE SOUTH PACIFIC MODEL

This phenomenon is well known in the east of the country, where fruit-growing regions have relied for decades on the fickle flow of young backpackers to provide seasonal labor. But a few years ago the horticultural industry became so fed up, they did something radical: they set up a guest-worker scheme.

The scheme brings in workers from poor island nations of the South Pacific and is backed by the government -- though it is very quietly pursued and faces skepticism even from within the Immigration Department, which helps to administer it.

For Richard Hamley, who employs islanders under the two-year-old scheme to pick tomatoes, there is no good reason why the mining industry should not adopt a similar scheme.

"We were originally a little skeptical about it because we didn't think that islanders would have been a good fit, but we could not have been more wrong," says Hamley, who runs the tomato division of horticultural firm Costa Exchange.

"They are fantastic workers. They have a work ethic that makes Australians look silly ... A lot of Australians don't want to work on weekends and they take time off."

Hamley says his guest workers are actually more expensive overall than local labor, given strict obligations to transport and house them and to pay fair wages, but he stresses that they are much more productive and better value for money.

Right now, such a scheme appears to be a step too far for the mining industry, where unions deny labor shortages are jeopardizing some big projects and they point to the record profits being mined out of Australia by global firms such as Rio Tinto, BHP Billiton and Xstrata Plc.

"As far as I can see, all the projects that have been planned to go ahead have gone ahead," Ged Kearney, president of the Australian Council of Trade Unions, told Reuters. "There haven't been any major projects to my knowledge that have been held up critically because of a shortage of labor."

Even the AWU, however, does not appear to completely rule out the introduction of a guest-worker scheme, provided local workers are given first priority and training where required.

"Only after companies have shown they are prepared to invest in training to give Australians the first bite of the cherry should we consider bringing in guest workers," says AWU boss Howes.

Indeed, the ruling Labor party is moving quietly in the direction of guest workers for the mining industry with its "enterprise migration agreement" announced in May.

THE GOOD LIFE

Tailored for mining, this new arrangement enables developers to fast-track the import of short-term labor for projects worth more than A$2 billion. They can bring in construction workers and set their wages project-wide, giving them more control over costs, though wages would have to accord with "market rates".

Even Rinehart is pleased.

"I believe in short-term guest labor for pre-construction and construction periods and am delighted to see recent developments that major projects over A$2 billion will be able to access guest labor...," she said in the email to Reuters.

The key difference, though, between this new arrangement and a genuine guest-worker program like the fruit industry's scheme is that workers under the former still have the right to resettle and pursue the great Australian egalitarian dream.

The immigrant's dream is deeply woven into the social fabric of a nation where about a fifth of the population is born abroad, almost double the proportion of Americans born overseas.

Australia still maintains a tough stand against asylum-seekers and human trafficking, but the days of a "white Australia" policy are over: nearly half of the 208,921 people granted permanent residency in 2009-10 were from Asia, with just 19 percent from Britain, Ireland and Europe.

"It's a good life in here," says Mohammed Monirul Islam, the 28-year-old Bangladeshi who is a star employee at Karratha Aluminum Welding.

"If you do a little bit hard work, you will get more money. And you will have a good life," he says during a brief pause in his work, having pulled away his grimy welding mask to reveal dark wavy hair and a steady, focused gaze.

Islam says he has dreamt since childhood of leaving the problems of Bangladesh behind and forging a new life overseas. His first step overseas had been to Singapore where he worked 15-hour days, seven days a week as a ship-building supervisor.

Now in Australia on a 457 visa, he earns A$35 an hour and is applying for permanent residency. He plans to go to Bangladesh to take a bride, then later bring his parents out to Australia.

"Yes, of course. My wife and my parents, we'll be together here," he says.

(Writing by Mark Bendeich in SYDNEY; Additional reporting by Sonali Paul in MELBOURNE; editing by Bill Tarrant)

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