Dris proposal for national licensing of the plumbing and gasfitting occupations

Licence tiers and qualification requirements

Two tier option

17. Removal of Certificate IV units

Under the status quo, to be eligible for a (full) licence, the applicant must complete a number of specified Certificate IV units in addition to the Certificate III qualification. Depending on the jurisdiction, these include up to four common units and a varying number of units that are specific to the particular licence category being applied for. Under the two tier option, Certificate IV units would only be required if the applicant were applying for a restricted (disconnect/reconnect) licence or an endorsement on their licence. To gain a non-restricted, non-endorsed licence, no Certificate IV units would be required.

Under the two tier option, the cost of undertaking Certificate IV units to gain a (full) licence would be removed, as the units would no longer be required. A cost saving (in period of fees and time) would therefore be experienced by all licensees applying for a new (full) licence, which allows them to work unsupervised. In practice, there are a number of skills which may not be covered, or covered to sufficient depth, in the training provided at the Certificate III level, based on stakeholder feedback. There is a likelihood that regulators and industry would seek to introduce a number of new endorsements to cover these skills. It is not possible to cost this impact as it is not possible to ascertain the number of additional endorsements that might be sought, however there is a risk that, in removing Certificate IV units that are currently required in a majority of jurisdictions, in order to achieve a ‘simple’ skills alignment with other trades, increased regulatory complexity could be an unintended consequence.

The following sections provide estimates of the benefits to licensees of removing the requirement for Certificate IV units. Implicit in this analysis is the assumption that these competency units are only undertaken for compliance and are not needed to develop the necessary skills to undertake regulated work. This assumption is strongly challenged by industry and regulator stakeholders. Section 3.2.8 provides further information on the skills and risks covered at the Certificate IV level for the specified units.

The impacts in this section should be considered in the context of the potential safety and consumer protection outcomes that could result from changes to qualification requirement. This is discussed later in this chapter.

Certificate IV units common across all licence categories

There are currently four Certificate IV units that are common across all licence categories; however, each jurisdiction varies in how many they require. Under the two tier model, none of these four units will be required.

Based on the number of new (full) licence holders, the benefit to industry of removing the four Certificate IV units that are common to all licence categories is $10.75 million per annum (annualised over ten years) or $70.21 million NPV over ten years as at 1 July 2012. The distributional impacts of this change are shown in Table 4.16, which provides the benefit that would accrue to each jurisdiction. As illustrated, the largest savings would be achieved in Western Australia, and Victoria and Queensland would also receive large benefits. These states have a high number of licensees at the (full) licence level and therefore have a much higher benefit than other states.

Table 4.16: Benefit of removing the Certificate IV units that are common across all licence categories

$ million	NSW	VIC	QLD	WA	SA	TAS	ACT	NT	National
Annualised ongoing benefit	0.40	2.22	2.37	4.00	0.63	0.48	0.45	0.20	10.75
10-year NPV as at 1 July 2012	2.60	14.50	15.50	26.13	4.14	3.14	2.95	1.28	70.21

For a detailed list of all the assumptions that relate to this benefit, and their associated references, see Attachment G.

Certificate IV units specific to a licence category

Specific units are those that are required by certain jurisdictions only for a particular licence category, and must be completed over and above those units that are common to each licence category. For example, for a water plumber licence, some jurisdictions require CPCPWT4011A Design and size heated and cold water services and systems. The number of specific units currently required varies according to the licence category and also differs between jurisdictions. Under the two tier option, none of these units will be required.

Given that the specific unit requirements vary across licence categories, assumptions have been made about which licence categories plumbers and gasfitters will apply for. In this regard, it is assumed:

eighty per cent of licensees hold a licence covering water, sanitary plumbing and drainage

all other licensees (20 per cent of licensees) hold a licence that requires one Certificate IV unit (given the uncertainty around which and how many licence categories the rest of the industry may hold, one unit has been assumed as a conservative estimate).

Bringing together these assumptions and the information above, the benefit to industry of removing the Certificate IV units that are specific to a licence category is $24.56 million per annum (annualised over ten years) or $160.15 million NPV over ten years as at 1 July 2012. The distributional impacts of this change are shown in Table 4.17, which provides the benefit that would accrue to each jurisdiction. As illustrated, the largest savings would be achieved in Victoria, Queensland and Western Australia, as they have a high number of (full) licence holders.

Table 4.17: Benefit of removing the Certificate IV units that are specific to a licence category

$ million	NSW	VIC	QLD	WA	SA	TAS	ACT	NT	National
Annualised ongoing benefit	1.70	4.73	6.02	8.53	1.86	0.51	0.78	0.42	24.56
10-year NPV as at 1 July 2012	11.06	30.88	39.28	55.64	12.16	3.34	5.08	2.72	160.15

For a detailed list of all the assumptions that relate to this benefit, and their associated references, see Attachment G.

Overall impact of changes to Certificate IV units under the two tier option

Bringing together the impacts in Tables 4.16 and 4.17 (that is, changes to both common units and category specific units), the overall benefit to each jurisdiction from removing Certificate IV units is shown in Table 4.18.

Table 4.18: Overall benefit from changes to Certificate IV units under the two tier option

$ million	NSW	VIC	QLD	WA	SA	TAS	ACT	NT	National
Annualised ongoing benefit	2.09	6.96	8.40	12.53	2.50	0.99	1.23	0.61	35.31
10-year NPV as at 1 July 2012	13.66	45.38	54.78	81.77	16.29	6.47	8.02	3.99	230.37

18. Removing tradesperson registration licences

A key component of the two tier option was the removal of the need to license tradesperson registration holders who work under supervision and who are not able to sign off on technical compliance or contract with the public. The removal of this licence would mean that all licensees currently holding a tradesperson registration licence could choose to become a (full) licence holder (or equivalent in each jurisdiction – for example, in Queensland this category is known as a ‘provisional’ licensee). This would allow them to work independently without supervision and sign off on the technical compliance of completed work. This would be a significant change to the structure of the industry and could have an impact on the level of competition and, therefore, wages.

Although data on wages in the plumbing and gasfitting industry is limited, at least one source suggests that there is a wage differential between tradesperson registration holders and plumbers and gasfitters holding a (full) licence. This differential is estimated to be between $2.38 and $10.40 per hour.¹⁰

It is not clear the extent to which this wage differential is driven by licensing distinctions or other factors. To the extent that licensing plays a role, there appear to be a range of potential impacts associated with effectively merging the two licence types.

The first potential impact is for the wage rate of each licence group to equalise to the same level. Given the limited information on current wages and the uncertainty surrounding the impact of this change, we can only speculate about the level at which the wage would potentially equalise. At the extremes, an equalisation of wage rates could occur as follows:

The average wage for the new (merged) (full) licensees could fall to the wage that is currently earned by tradesperson registration holders.

The average wage for the new (merged) tradesperson registration holders could increase to the wage that is currently earned by (full) licensees.

Alternatively, the average wage rate could equalise at a point somewhere in between the current wage rates for tradesperson registration holders and (full) licensees.

The second potential impact is a narrowing of the wage differential. As above, we can only speculate about what this impact would look like. The net effect will depend on how the wages change. The potential scenarios are:

the wage rate only increases for those currently holding a tradesperson registration

the wage rate only decreases for those currently holding a (full) licence

the wage rate for those currently holding tradesperson registration increases and those currently holding a (full) licence decreases.

The structure of the plumbing and gasfitting industry may affect any potential change in the wage differential. Currently, (full) licensees may be more likely to operate as independent sole traders conducting small retail jobs, whereas tradesperson registration holders may be more likely to work on large commercial and industrial projects. If this is the case, these licence holders would be operating in different segments of the plumbing and gasfitting market. As there may not be direct competition between plumbers and gasfitters in one segment with those in another, the wages of these groups may be less interrelated. If the wage differential remains, however, there could be some scope for plumbers and gasfitters to move between the market segments and change the competitive dynamics of the industry.

Any of the impacts outlined above could be possible and the extent to which the market structure would affect labour mobility and wages is difficult to identify. If the extreme-impact scenarios occur, the magnitude of the effect would be quite significant. However, if either wage rates change or one changes by only a small amount, the impact could be quite minor. While the uncertainty surrounding this impact means it has not been quantified, some information can be provided on the direction of the impact. When a wage rate rises, it pushes up the costs of providing plumbing services. The opposite is true for a wage rate fall, which would decrease the costs of providing plumbing services.

Another related impact from removing the tradesperson registration licence is the ability to free up more resources to address skills shortages in the plumbing and gasfitting industry. Plumbers are on Australia’s Skilled Occupation List for 2012, suggesting that Australia needs additional labour in this market and is open to skilled migration to fill those gaps. If more trained and qualified plumbers are able to work as (full) licence holders, it is possible that the labour shortages in this industry may ease.

Three tier, sub-option 1

19. Changes to Certificate IV units

Currently, to be eligible for a (full) licence, the applicant must have completed particular Certificate IV units. Depending on the jurisdiction, these include up to four common units and a varying number of units that are specific to the particular licence category being applied for.

The key difference between the three tier option and the status quo is that, under the three tier model, all licensees across Australia would have to complete the same number of common and category-specific units to be eligible for a (full) licence. Under the sub-option with four common units, for some jurisdictions the required number of units would be higher than current requirements, whereas in others it would be the same or lower.

To be eligible for a (full) licence, the required units under this sub-option would be:

four units that are common across all licence categories

a varying number of units that are specific to the particular licence category being applied for.

The impacts in this section should be considered in the context of the potential safety and consumer protection outcomes that could result from changes to qualification requirement. This is discussed in section 4.1.4.

20. Certificate IV units common across all licence categories

In jurisdictions that currently require fewer than four of the Certificate IV units that are common across all licence categories, this option would increase the cost of obtaining a new (full) licence because more units would need to be completed. To complete these additional Certificate IV units, there would be a fee cost and a time cost for licensees, the level of which varies across jurisdictions. Based on the current number of new (full) licensees, an increase in the common units required for a (full) licence would lead to a cost to licensees of $11.24 million per annum (annualised over ten years) or $73.29 million NPV over ten years as at 1 July 2012. The distributional impacts of this change are shown in Table 4.19, which provides the cost that would accrue to each jurisdiction. The largest costs would be incurred by New South Wales, Victoria, Queensland and Western Australia because there are a high number of (full) licensees in those jurisdictions. Tasmania is not affected because it already requires all four common units. It should be noted that undertaking a full qualification at the Certificate IV level is often less expensive than undertaking a large number of separate units, due to the funding models used in many jurisdictions. However, no jurisdiction currently requires a full Certificate IV qualification to obtain a full licence and no such requirement was supported through the Interim Advisory Committee (IAC) or in the vast majority of submissions.

Table 4.19: Cost of increasing the number of Certificate IV units that are common across all licence categories

$ million	NSW	VIC	QLD	WA	SA	ACT	NT	National
Annualised ongoing cost	1.21	2.25	2.41	4.06	0.64	0.46	0.20	11.24
10 year NPV as at 1 July 2012	7.90	14.70	15.71	26.49	4.19	2.99	1.29	73.29

For a detailed list of all the assumptions that relate to this cost, and their associated references, see Attachment G.

21. Certificate IV units specific to a licence category

Specific units are those that are required only for a particular licence category and must be completed over and above those units that are common to each licence category for a (full) licence. For example, for a water plumber licence, some jurisdictions currently require CPCPWT4011A Design and size heated and cold water services and systems. The number of specific units currently required varies according to the licence category and also differs between jurisdictions. The number of units proposed under the three tier model can be seen in Table 4.20. To be conservative in comparing the costs and benefit of each option, this table excludes units that are relevant for an endorsement under any of the options.

Table 4.20: Number of Certificate IV units required under the three tier model for specific licence categories of a (full) licence

Licence category	Number of Certificate IV units
Plumber (water and sanitary)	2
Drainer	3
General gasfitter	2
Gasfitter Type B	1
Fire protection	1

Note: Excludes units relevant for an endorsement under any option.

This change would lead to a cost in some jurisdictions and a benefit (reduced cost) in others. The net impact depends on whether the jurisdiction currently requires:

fewer units than proposed, meaning a cost would result as licensees must complete more units under this sub-option to become a (full) licensee

more units than proposed, meaning a benefit would result as licensees must complete fewer units under this sub-option to become a (full) licensee.

Given that the specific unit requirements vary across licence categories, to estimate the cost or benefit the following assumptions have been made about which licence categories people apply for:

eighty per cent of licensees hold a licence covering water plumbing, sanitary plumbing and drainage (which may be under one licence)

all other licensees (20 per cent of licensees) hold one licence (given the uncertainty around which and how many licence categories the rest of the industry may hold, we have conservatively assumed there is no impact on these licensees).

These assumptions are combined with:

an estimate of the number of new (full) licence holders per annum

the fee cost, time cost and number of Certificate IV units, which varies across jurisdictions.

Bringing together this information, the number of category-specific units required by most licensees (80 per cent) is estimated to be four. Comparing this to the number of units required currently, all jurisdictions except the Australian Capital Territory would experience a benefit because they currently require more than four units. The Australian Capital Territory already requires most licensees to complete four units, meaning that they would not be impacted. The impacts are shown in Table 4.21.

Table 4.21: Impacts of the Certificate IV units required that are specific to a licence category

$ million	NSW	VIC	QLD	WA	SA	TAS	NT	National
Annualised ongoing impact	0.32	0.90	1.93	1.63	0.77	0.10	0.08	5.73
10 year NPV as at 1 July 2012	2.11	5.88	12.57	10.60	5.03	0.64	0.52	37.34

For a detailed list of all the assumptions that relate to this cost, and their associated references, see Attachment G.

22. Overall impact of changes to Certificate IV units under three tier, sub-option 1

Bringing together the impacts in Tables 4.20 and 4.21 (that is, changes to both common units and category specific units), the overall impact from changes to Certificate IV units varies across each jurisdiction. Table 4.22 shows the impact for each jurisdiction. Costs are demonstrated in brackets.

Table 4.22: Overall costs from changes to Certificate IV units under three tier, sub-option 1

$ million	NSW	VIC	QLD	WA	SA	TAS	ACT	NT	National
Annualised ongoing cost	(0.89)	(1.35)	(0.48)	(2.44)	0.13	0.10	(0.46)	(0.12)	(5.51)
10-year NPV as at 1 July 2012	(5.79)	(8.82)	(3.14)	(15.90)	0.84	0.64	(2.99)	(0.78)	(35.95)

23. Availability of Certificate IV units

Some stakeholders have expressed concern over the current availability of Certificate IV units. Under the status quo, if there are no places available for a tradesperson registration holder to undertake Certificate IV units, their progression to the (full) licence level could be delayed. If availability is limited, under the three tier model, increasing the number of units required could further increase this delay and impose a cost on licence holders. Additional costs could also be felt if places are not available locally, as additional travel costs could be incurred.

Information on the extent of the availability problem is limited and submissions did not provide additional information or evidence relating to this, so these impacts have not been included in the quantitative analysis. If Certificate IV units are not 100 per cent available, this could also affect the results quoted in Tables 4.17 and 4.20.

Three tier, sub-option 2

24. Changes to Certificate IV units

Similar to the first sub-option under the three tier model, sub-option two (the preferred model) requires Certificate IV units to be completed to obtain a (full) licence. However, the number of Certificate IV units required that are common across licence categories is only two under this option.

The category specific units under this sub-option are the same as under sub-option one, with the exception that two units are subject to an endorsement rather than being required for all licensees. Given there is limited information of the number of licensees that hold endorsements and no additional information was provided during the consultation period, this impact has not been accounted for in this analysis.

The impacts in this section should be considered in the context of the potential safety and consumer protection outcomes that could result from changes to qualification requirement. This is discussed in section 4.1.4.

25. Certificate IV units common across all licence categories

In jurisdictions that currently require fewer than two of the Certificate IV units that are common across all licence categories, this option would increase the cost of obtaining a new (full) licence because more units would need to be completed. This is the case for New South Wales, which only requires one unit. Conversely, in jurisdictions that currently require more than two of the Certificate IV units that are common across all licence categories, this option would decrease the cost of obtaining a new (full) licence because fewer units would need to be completed. This is currently the case in Tasmania, where all four common units are required. All other jurisdictions already require two units and are therefore not impacted.

The impacts on New South Wales and Tasmania are shown in Table 4.23.

Table 4.23: Impacts of the Certificate IV units required that are common across all licence categories

$ million	NSW	TAS	National
Annualised ongoing impact	(0.40)	0.24	(0.16)
10-year NPV as at 1 July 2012	(2.63)	1.57	(1.07)

For a detailed list of all the assumptions that relate to this cost, and their associated references, see Attachment G.

26. Certificate IV units specific to a licence category

As discussed, the category-specific units required under this sub-option are the same as for sub-option 1 detailed above. As outlined above, the changes to category-specific units would impact all jurisdictions except the Australian Capital Territory. The impacts are shown in Table 4.24.

Table 4.24: Impacts of the Certificate IV units required that are specific to a licence category

$ million	NSW	VIC	QLD	WA	SA	TAS	NT	National
Annualised ongoing impact	0.32	0.90	1.93	1.63	0.77	0.10	0.08	5.73
10 year NPV as at 1 July 2012	2.11	5.88	12.57	10.60	5.03	0.64	0.52	37.34

27. Overall impact of changes to Certificate IV units under three tier, sub-option 2

Bringing together the impacts in Tables 4.23 and 4.24 (that is, changes to both common units and category specific units), the overall effect on each jurisdiction from changing the required number of Certificate IV units is shown in Table 4.25. When considering the changes overall, some jurisdictions would incur a cost and others would receive a benefit. To demonstrate this in Table 4.23, costs are shown in brackets. The overall impact at a national level is positive. This is in contrast to the overall impact under sub-option 1, where many jurisdictions would incur a cost.

Table 4.25: Overall impacts from changes to Certificate IV units under three tier, sub-option 2

$ million	NSW	VIC	QLD	WA	SA	TAS	ACT	NT	National
Annualised ongoing benefit	(0.08)	0.90	1.93	1.63	0.77	0.34	-	0.08	5.56
10-year NPV as at 1 July 2012	(0.53)	5.88	12.57	10.60	5.03	2.20	-	0.52	36.28