Tradies are like the weather vanes of the economy. They are among the first to feel an upturn, and they tend to cop it before anyone else when the State’s fortunes fall.

In keeping with the analogy, some of them might have whiplash with the way things have changed in WA.

A backdown by one of the State’s most militant unions is the latest evidence that the heat has come out of the resource-based economy. In a sign we are well past the period of drunken economic revelry that marked the boom, the mining union registered a wage deal that did not guarantee its train-driving members an annual pay rise.

The union caved in and accepted that any pay rise — or lack thereof — would be based on individual yearly performance reviews with employer BHP Billiton, following 18 months of unsuccessful wrangling for a 5 per cent annual increase. It is a far cry from the boom days when 10 per cent a year increases were not uncommon in mining-related industries. And it comes hot on the heels of a pay cut in an agreement created by the construction division of the same union, the Construction, Forestry, Mining and Energy Union.

Yes, a pay cut. I rewrote that in case you thought it was a misprint. After all, this is the union that at one time went on strike literally over a shortfall of chairs at a stopwork meeting.

The union’s heady track record for striking makes it all the more incredible that it is now hawking a new enterprise bargaining agreement around city-based builders and subcontractors that is worth up to 20 per cent less per worker. This includes a cut in allowances as well as a reduction in wage rates of 9.5 per cent for trades and between 8 per cent and 11 per cent for labourers. The union concedes there had to be a structural readjustment, but won’t say much more.

To put these reductions into perspective, it is worth noting these workers are already among the best paid blue-collar workers in the world. Nonetheless, it seems pay rates have reached that line in the sand that employers have been waiting on for several years.

But what does that mean for the rest of us? Clearly, it’s a signal that the abnormal resource-driven profits enjoyed in WA have tapered off. And if the State wants to progress in the manner to which we have become accustomed, we need to seek new export markets outside the resource sector.

We’ve long talked about broadening the economy, but little has been done to help entrepreneurs build new niche industries.

There are many bright businessmen and women out there who have already succumbed to the so-called entrepreneurial seizure by starting their own business, but Australia’s culture of entrepreneurialism is somewhat lacking.

The 2011 Global Entrepreneurship Monitor showed 54 per cent of Australians surveyed considered entrepreneurialism an interesting career path, which was below the 57 per cent international average.

We are well behind the Dutch — those great inventors of the stock market — with their 83 per cent support for an entrepreneurial career path.
Australians appear to come undone through a fear of failure, with 43 per cent of those surveyed holding such as fear, which is third only to those in the United Arab Emirates (51 per cent) and South Korea (45 per cent). Only 31 per cent of Americans and 35 per cent of the Dutch claim to have such fear of failure.

Perhaps this is why there appears to be such a great local preference for pouring money into investment properties rather than new businesses.

Frenchman Thomas Piketty — who is being heralded as the most prominent economist since Milton Friedman — has provided some interesting insight into this issue.

Dr Piketty points out that capital and property grow at a faster pace than wages, so anyone able to add rental income to their wage will grow progressively and disproportionately rich compared with the average joe. He says the incentive therefore is to be a landlord, rather than a risk-taking entrepreneur.

But the effect of funnelling resources into investment properties is that there is relatively less support for ground-breaking innovations.

Landlords do not actually produce anything, and they do not invest in existing companies seeking to expand or export. All the landlord does is sit back and enjoy the profits of a relatively low-risk rental property.

In my view, the State and Federal governments support this cycle by giving landlords tax breaks such negative gearing, while punishing entrepreneurs through payroll tax that puts a disproportionately heavy burden on small business.

Of course, it would be a brave and perhaps foolhardy party to suggest removing negative gearing benefits, and it is not something I am advocating, but surely the Government should even the playing field by introducing better tax incentives for small businesses and entrepreneurs.

But there are many other sectors that could step in to help build the State’s wealth.

Let’s take the case of Agworld, a West Leederville-based farming software start-up that had 12 clients and three staff before an investor got on board.
Within three years of getting financial backing from a local investor, it grew to 40 staff and more than 1200 clients around the world. Imagine if the investor had decided to put its money into property instead of backing this tech-start-up. We would end up with another salmon brick block of flats in Maylands, rather than income from farms across the globe and jobs for dozens of people.


© The West Australian

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