Shortcuts / 01 September 2022

Australia’s labour shortage crisis

Everywhere you turn in Australia people are looking for workers. Businesses are calling it a “crisis” and the new Albanese Government is holding a Jobs and Skills Summit this week to try to fix some of the most serious issues. So in this Squiz Shortcut, we look at how it’s come to this, who’s responsible for educating and training the workforce of the future, and some of the ideas on the table to try to turn it around.

It feels like just about every business is understaffed right now…
Yep, and you’re not imagining it – employers are currently struggling to fill 480,000 jobs. To put that in context, that’s nearly double the number of job vacancies that existed before the pandemic started in early 2020.

Isn’t unemployment quite low right now?
It sure is – it’s at a 50-year low of 3.4%, so there’s not a huge pool of people looking for a job. And it’s important to note that with unemployment, the people who are looking for work might have different skills to those job vacancies, or they might not be living in the right area.

So is COVID to blame for all of this?
It’s not that simple… Australia’s long border closure during the pandemic made things a whole lot worse – but then again, the entire world’s been dealing with COVID… So it’s important to note that other than Canada, Oz is the most affected country in the developed world when it comes to labour shortages, according to the OECD.

What are you hinting at?
That these challenges have been brewing for a while. Even in pre-COVID days, the government and economists were talking a lot about Australia’s “structural skills shortage”. That basically means that our schools, unis, TAFEs and other courses – are not creating enough graduates with the skills employers need.

What’s an example of that?
So the Chamber of Commerce and Industry says for about a decade before COVID, we were in an apprenticeship “drought” because about 50% of people who started one finished it. That means the pipeline of people in everything from hairdressing to the construction industry has been drying up for quite a while.

Didn’t migrants help in addressing that?
It did, and we had a lot more coming in during those pre-COVID years. That masked the problem rather than fixing it. The issue came into focus when migration dried up when Australia closed its borders during the pandemic.

Where is Oz at on migration?
The Grattan Institute estimates we’re down about 500,000 temporary migrants compared to 2019. That includes foreign students who have left our shores, other skilled migrants who returned to their home country, as well as the young working tourists who contributed a big part of the workforce on farms and remote and regional economies.

They haven’t come rushing back?
No, and that’s because our borders were closed for so long – a lot longer than many other countries. This year the number of foreign students arriving in Oz is running at just a quarter of where we were in 2019. And we’re competing with the rest of the world to get those skilled migrants back.

So what’s happening to skill-up Aussie workers?
There’s a lot of focus on vocational education right now. It’s usually completed at TAFE colleges, but it can also be done at other private or community-run institutions. These sorts of courses are often funded by state and federal governments in partnership with industry.

What kind of courses are included?
Everything from qualifications to work as a chef, a childcare worker, or labouring on a construction site. Those courses might take anything from 4-6 months for a Certificate 1 course to a couple of years for an Advanced Diploma.

What’s the difference between vocational ed and university?
VET is meant to be much more hands-on than uni. That’s because industry groups contribute to the curriculum and training, and the courses are meant to adapt really quickly to what employers need.

Meant to?
Well, that’s the theory, but something’s not working quite right… The government’s own figures show 60% of people who complete a VET course improve their employment situation after training. And a big review of Australia’s vocational education system back in 2019 found that there were some private institutions delivering really poor outcomes and courses just weren’t adapting fast enough.

What industries are under the most pressure?
There’s a Skills Priority List and some that make that top 10 include construction managers, civil engineers, preschool teachers, nurses, IT specialists, chefs and child care, and disability and aged care workers.

Don’t a lot of those require university-level qualifications?
They certainly do, which means it’s not a quick turnaround for graduates if a uni bachelor’s degree is a minimum of 3 years. That’s why the university sector wants to make it easier for someone who’s got a degree to retrain in another area.

Like teachers?
Exactly – many state governments want to fast-track uni graduates who don’t have a teaching degree to retrain to get in the classroom within a year, rather than the 3-4 years it would take if they started from scratch.

Sounds like we might need a summit to try to fix all these problems…
And wouldn’t you know it, we got one… This week’s Jobs and Skills Summit was promised by PM Anthony Albanese during the election, and it’s underway in Canberra with a who’s who of business, politics, unions, academics and community groups.

Cool, can I come too?
Soz – there are just 142 places, and they’ve been filled by the likes of Atlassian co-founder Scott Farquhar, iron ore magnate Andrew ‘Twiggy’ Forrest, and the bosses of companies like Qantas, Coles and Woolworths. On the union side, the ACTU’s Sally McManus is the most prominent voice.

What about the politicians?
State and territory leaders are there – but not the federal Coalition leader Peter Dutton. He said no to an invite, but Nationals leader David Littleproud and Greens leader Adam Bandt both said yes.

It sounds like there’s a lot of ground to cover…
There sure is, and what the government wants out of it is agreement on how we can build a bigger and better-trained workforce, as well as ways to ensure workers get a bigger slice of the pie with higher real wages.

Remind me what real wages are again…
It’s the purchasing power of one’s income rather than the take-home figure. Millions of workers have seen their wages go backwards in real terms in the last 12 months because inflation (aka price rises) is running hot at more than 6% while wage growth has been less than half that. 

And is there going to be some agreement?
It seems so. There is a lot of consensus on the problems and some agreement on what needs to happen next. One of the big ones is migration. Unions and employers both agree we need to boost the annual intake from 160,000 people to 200,000.

Right, what about in the short term?
The government is focused on plugging gaps for particular industries, particularly for tradies, IT specialists and aged care workers. So there will be more TAFE places sooner at a cost of $1.1 billion. So keep an eye out in the October Federal Budget for all of that. 

And what about wages?
It’s tricky. But there was some progress made yesterday with the unions, business sector, and the government agreeing on a way forward with reforms to the Fair Work Act to protect workers while giving employers more flexibility to grow and put on more people. So get set for an industrial relations debate in parliament soon. 

It’s all quite a lot, isn’t it?
It sure is, but we’re here to help. 

Squiz recommends:

Treasury’s issues paper for the Jobs and Skills Summit

12 of the most fun jobs

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