Skill Shortages in Australian Labour Market

 Skill Shortages in Australian Labour Market

 

Table of Contents        Page

Executive summary2

Introduction3

Aspect or Issue and Problem4

Discussion (Critical Analysis of the Issue)    4-7

Conclusion8

References9

I

Executive Summary

This report on the skill shortages in Australian labour market examines skills shortages in the context of the Australian business market and industries. Drawing on concept of skill and skill shortages, this study tries to explore what are the areas of skill shortages and what are its cause and prevalence in the present scenario. The purpose of this research project is to set out some clear thinking on the issues without any attempt to measure any particular shortage of skills. Skill shortages can have many causes. These include: no sufficient investment in skills development; rapid change in structure combined with low levels of unemployment; a recurrent flow in employment in relation to the economy; and lack of expert knowledge in the training system. In all probability, the shortages seen in the labour market are the result of all of these factors. 

Introduction 

This paper explores the issue of skill shortages in Australian labour market and it tries to analyse skill, skill shortages and its cause, effect and prevalence in the present scenario by discussing different areas of concern that leads to shortages of skills in Australia. To begin with let us first refer to the term ‘Skill’ in general sense of the word which means having special ability or capability to perform certain work having experience and training. In this respect according to DEWR skill is understood as a ‘certified qualification based on training’ (Department of Employment and Workplace Relations, 2006). Similarly, in another way Attewel (1990) states that ‘skill proves on reflection to be a complex and ambiguous idea’, maintained by unexamined assumptions (p. 422). At the core of understanding skill is the idea of competence—that is to do something well (Attewel, 1990; Grugulis, 2007).  

Therefore, Skill Shortages means lack of specialists and experienced labour manpower in undertaking certain kind of task in a business oriented company or in any business sector. Skilled Shortages happens when employers working for a company or firm fail considerably to fill positions for job at different levels within certain terms and conditions of functioning under nearby location. According to the definition of Skills Shortages adopted by the Department of Education, Science and Technology (DEST), as being 

[w]hen employers are unable to fill or have considerable difficulty in filling vacancies for an occupation, or specialised skill needs within that occupation, at current levels of remuneration and conditions of employment, and reasonably accessible location (DEST, 2002: 3). 

Though skill shortages in Australia are regularly shown as a great problem for its economy yet very little evidence about their occurrence, cause and consequence is available. So it is difficult to get genuine idea about where and why skill shortages occur. The causes of skill shortages are diverse as lack of expert knowledge is the main reason. However, having said this skill shortages are not widespread in Australia though they persist in certain areas and occupations where shortages have been felt in Australian market for experienced and specialist workers that will be critically analysed in the chapters to follow. However, certain proposition and guidelines should be adopted to combat this issue as labour shortages can sometimes go together with high levels of unemployment problems and sometimes shortages are limited to experienced workers having professional skills. Shortages results from diverse factors like lack of proper or adequate training provided in grassroots  level, high percent of wastage, change in technological factor, increasing demand for fresh skills within an occupation and location mismatch where the skilled people are not in close contact with the employers seeking those skills. Hence, the main focus of this project is to throw light on what are the areas or sectors of skill shortages in Australian labour market and the necessary steps to be followed so that skill shortage can be identified and worked out accordingly to avoid future shortages.

Aspects or Issues & Problems

The issue is related to the shortages of skilled labour in the Australian labour market especially in technical field including engineering, accountant, in medical staff such as nurses and doctors, automotive trades etc. as there is always a shortages when it comes to applied profession because the result of the research survey carried by DEEWR throughout Australia shows that it is hard to fill the number of vacancies listed each year. So, according to the Australian Government’s National Skills Shortage Strategy the following  are the causes of skill shortage in Australian market industry:  Australia has a strong economy with low rates of unemployment; limited skilled trades people  are available with the growth of new industries ; relocation of new industries into different parts or regions with a different skills base; lack of interest in particular businesses among potential job seekers; location of industry, and project based work in rural or regional areas with a small skills base; technological changes within an industry in terms of production resulting in new methods and hence skills needs; and changes in underpinning skills needs to successfully undertake trade training for example, Year 12 maths for technology trades (DEST, 2005). So, the government and the industry should study and monitor this issue and prepare for the future crisis.

Discussion (Critical Analysis on the Issue)

According to the Australian Skill Shortages Department (ASSD) and the Department of Education, Employment and Workplace Relations (DEEWR) research has been carried out on this issue continuously over the past three decades. The research is done to identify skill shortages in the Australian labour market. The research results identify occupations where shortages of skills are evident or emerging at the national, territory and the state level. Similarly, according to Extract from Leggett, C. (in press 2013) ‘Workforce Development and Employment Relations’, Employment Relations Record (13) 1: 2-12. Australian Workforce Future identifies ‘Australia faces a number of pressing workforce threats and opportunities’ from global challenges like technological innovation, from national challenge such as demographic change. Its importance is on raising productivity by increasing skills in the labour market and to avoid skills shortages in Australia. Workforce Futures sets six objectives that establish a social program as well as recognize labour market aspirations. They are: (1) Sustain economic growth and raise productivity by increasing skills and avoiding future skills shortages. (2) Lift the workforce participation rate to 69 per cent by 2025 to provide the required workforce and improve social inclusion. (3) Lift the unacceptably low level of adult language, literacy and numeracy to enable effective educational, labour market and social participation. (4) Increase productivity, employee engagement and job satisfaction by making better use of skills in the workplace. (5) Position the tertiary education sector to ensure it has the resourcing and workforce capacity to deliver skills for the new economy. (6) Lead a new partnership approach to workforce development at government, industry and enterprise level. For each of these objectives Workforce Futures lists a sequence of actions for their attainment and some pointers for determining their success. Also among the objectives of Workforce Futures is the resourcing of training provision to avoid skill shortages in Australia. In this respect, The Department of Employment and Workplace Relations makes the following distinctions when considering the extent and nature of a skill shortage: 

Skill shortages exist when employers are unable to fill or have considerable difficulty in filling vacancies for an occupation, or specialised skill needs within that occupation, at current levels of remuneration and conditions of employment, and reasonably accessible location. Skill gaps occur where existing employees do not have the required qualifications, experience and/or specialised skills to meet the firm’s skill needs for an occupation. Workers may not be adequately trained or qualified to perform tasks, or may not have up skilled to emerging skill requirements. Recruitment difficulties may be due to characteristics of the industry, occupation or employer, such as: relatively low remuneration, poor working conditions, poor image of the industry, unsatisfactory working hours, location hard to commute to, inadequate recruitment or firm- specific and highly-specialised skill needs. (Department of Employment and Workplace Relations quoted in Department of Education, Science and Training 2000, p.4)

Taking all these points into consideration on the skill shortages in Australia the demand in skill trends in Australian labour market shows that employers buy and make skills in business firm and industry as they look for experienced labour to fill the vacant position left over instead of going for a fresh employee because they take this as a big hindrance to run or take forward their business in both the internal and external labour markets. In addition to this, the employers also look for higher levels of skills since technological and organisational change is hard to adjust and maintain. So they always look for the person having experience and technical skills to fill the vacant position. Moreover, the changing expectations of the younger generation towards the job is also not so encouraging and the youths don’t like sticking to one job for long as they keep on changing from one job to another because with modernity the youngsters are looking for newness in life as well as in the jobs they do due to change in fashion, wages per hour and are not willing to take up jobs that involves lot of time and so on. This attitude of young people towards work and challenge of new technology in Australian labour market force the employers to retain the older workers by giving certain incentives so as to avoid shortages. According to the Australian Bureau of Statistics report, nearly 70% of Australians are in the labour force. The participation percentage for males is 68.3%, and for females is 55.5%.  Likewise, employed number of persons is 11.4 million: 8.1 million involved in fulltime, 3.3 million doing part-time jobs; another 75% in services, 20% in manufacturing and construction, and 5% in mining and agriculture. The unemployed number is a bit over half a million of whom 17,500 are seen long term (Lansbury and Wailes, 2011; Australian Bureau of Statistics, 2012). 

Similarly, the supply trends of manpower in Australian labour market shows a raising disparity between different sections of people involved in business industry. There is increased number of higher qualified people in Australia; however, the rate is highest among females compared to male counterparts but females are less involved in technical skill jobs having highly qualified whereas males are mostly found doing technical works thereby creating gender disparity in the labour industry. To support this case according to the report of Lansbury and Wailes (2011: 132-133) that ‘women have not fared as well as men in the labour market, as their wages have been lower, they have been concentrated in low paid areas of work, and they have been disadvantaged in terms of entitlements’. Meanwhile, skill shortages and skill gaps are indirectly related to unemployed and underemployed where sometimes a shortage leads to unemployment and sometime lack of finding skilled labour to fill the vacant space by someone new to the occupation creates a skill gap that leads to the rapid growth of the business firm. To talk further on this issue, Australia has greater female participation in higher education that leads to higher growth in service sector including more participation in business industry. Despite this youth unemployment is higher because younger people stay longer at school causing shortage without any outcomes for the future. Therefore, the proportion and numbers of older workers are increasing in the labour market competing for the vacancies that creates skill shortages in Australian market industry. So to get rid of this shortage problem Business Company or firm are hiring skilled labour and technicians within Australia and from other parts of the world to meet their demands of production. According to Nelson in ‘A New Approach to Tackling Skills Shortages in Trades, Media Release,’ reports states that: 

In recent times, the public has been made aware by our politicians of the risk posed to our economy by current and prospective skills shortages (Nelson, 2004).

Similarly, adding to the above citation Keating argues whether this claim is based in fact is yet to be seen. But what is based in fact is that there are approximately 1.7 million Australians without sufficient work (Keating, 2005). Some people have no jobs at all while most others are forced into less hours work than they want at going earnings. This phenomenon is generally masked by official use of persons created measures of labour force participation that fail to identify underutilisation in  labour market. Data collected from the August 2005 quarter illustrate the point: When hours of underutilised labour are taken into account to augment the official persons-based measure, the official unemployment rate of 5.03% unemployment becomes a labour underutilisation rate of 9.63% (CLMI, 2005). Nearly 10% of our available labour power is idle. This is relates to the people having no work at all and to those who are limited in doing certain hours of work. As the population is expected to rise it is obvious to have an assumption that the unemployment rate to go high as well that ultimately leads to the shortages of skilled manpower in the country.

The areas of concern of skill shortages in Australia are diverse in the sectors like engineering and elect technology trades and professionals, mining industry, agriculture, forestry and fishing, resource sector occupations, manufacturing and construction, retail store, transport and storage, communication services, and property of business service where shortages are very much evident and to fill the position in these fields country has to look for skilled technician visa migrants to overcome this shortages as these are the hardest vacancies to fill in Australian labour market industry. For example, the National Skills Initiative Engineering Working Group reported:  

On the supply side, privatisation of public utilities has reduced the traditional training ground and supply of skilled labour for engineering trades, and large companies are typically more focussed on training for their own skill requirements. DEST (2002: 8).

Similarly, in another paper the Senate Employment, Workplace Relations and Education References Committee report ‘Bridging the Skills Gap’ notes:

The major factors are the decline in trades training associated with the privatisation of public utilities and ‘mean and lean’ strategies of large private enterprises, which previously provided a steady pool of skilled labour for small and medium enterprises. (EWRERC, 2003: 17).

Whereas the easiest job vacancies to fill are those including building associates, school teachers, and social and welfare professionals and is available throughout the country. Furthermore, recruitment of labour is also a difficult proposition because of new technology and geographical locations of areas such as Darwin, Regional Western Australia, and Regional Northern Territory are the hardest locations to recruit as skilled labourers of these areas look for better job opportunities in other parts of the country where there is better facilities provided and given to them. So to recruit fresh people in these areas requires lot of time, cost as well as training to fill the positions as very less people turn up for the process involved. Likewise, the easiest locations to recruit are areas such as Adelaide, Brisbane, and Regional South Australia as these are the developed regions and resources are easily available thereby making the recruitment process fast and easy. To make their work easy in Australian labour market in raising production of goods the temporary work or skilled visa subclass 457 is allowed for the migrants to come to Australia and work for an approved business for up to four years. This also creates a kind of shortages of skill as lot of people find themselves competing for limited number of vacancies. This is the reason for skill shortages in the labour market.  The main purpose of this report is to get to some short of understanding about the possible skill shortages in Australian market and to provide some suggestion to overcome shortages and also to study main areas where skill shortages most reported, business companies mostly associated with skill shortages and the relation between skill shortages and responses of the firm or companies.

Conclusion

After going through deep analysis about the possible causes and reasons that leads to skill shortages in Australia it is found that lack of specialized knowledge is the major factor. Similarly, recruitment process is too slow, on the top of this is the lack of availability of required trainers, geographical locations and mismatch of business firms, unsure of long term demands for products and services and last but not the least salary and wages is very high for the business. In response to the skills shortages research throughout Australia various common issues that came to be observed were the major factor that causes skill shortages in Australian labour market. These are—existing workforce worked longer hours, terms and conditions on the salary and other incentives increased, internal training of the staff by the employer etc. so, as part of a suggestion to avoid skill shortages in the future the Australian government and the concerned business officials need to improve and provide training and education from the grass root level to give a strong foundation to support the market labour production for the future. 

  

References

AIG (2004) Australia’s Skills Gap: Costly, Wasteful and Widespread. A report on the nature and depth of skills shortages in manufacturing, Ai Group Economics, Australian Industry Group.

Australian Bureau of Statistics, available online at < http://www.abs.gov.au/ > 

Attewell P (1990) What is skill? Work and Occupations 17(4): 422–448.

CLMI (2005) Coffee Labour Market Indicators, Centre of Full employment and Equity, University of Newcastle. Available at:  http://e1.newcastle.edu.au/coffee/

Department of Education, Science and Training 2000, ‘The nature and causes of skill shortages: Reflections from the Commonwealth National Industry Skills Initiative Working Groups’, DEST, Canberra. 

Department of Employment and Workplace Relations website, viewed 10 July 2006, <www.jobsearch.gov.au/joboutlook/default.aspx?pageId=Information#JobProspect>.

DEST (2002) Nature and Causes Of Skill Shortages Reflections: From The Commonwealth National Industry Skills Initiative Working Groups, DEST, Canberra. 

DEST (2005) National Skills Shortage Strategy website, available at: http://www.skillsinitiative.gov.au/skillshortage.htm

EWRERC (2003)Bridging the skills divide, Employment, Workplace Relations and Education References Committee, Department of the Senate, Parliament House, Canberra.

Grugulis I (2007) Skills, Training and Human Resource Development: A Critical Text. London: Palgrave Macmillan.

Keating, M. (2005) ‘Increasing Employment Participation In Australia And How To Finance It Centre For Public Policy’ paper presented at: Transitions And Risk: New Directions In Social Policy Conference, Centre for Public Policy, University of Melbourne, February 2005.

Lansbury, R. D. and Wailes, N. (2011) ‘Employment Relations in Australia’ in G. J. Bamber, R. D. Lansbury and N. Wailes eds.  International and Comparative Employment Relations: Globalisation and Change, Sydney, Allen & Unwin: 117-137.

Leggett, C (16 oct 2012) A Review of Australian Industrial Relations: International Doctoral School, university of Bergamo. 

----. (in press 2013) ‘Workforce Development and Employment Relations’, Employment Relations Record (13) 1: 2-12.

Nelson, B. (2004) A New Approach To Tackling Skills Shortages In Trades, Media Release, The Hon Dr Brendan Nelson, Minister for Education, Science and Training, 6 / 4 / 2004.

The Australian, national daily newspaper