In consecutive AICD Director Sentiment Indexes, boards have been consistently concerned about the impact of skills shortages on business operations and the broader economy, making it a critical topic for strategic discussions and policy development. We hear from leaders addressing the pressing issue of talent gaps in Australia, who describe what boards can do within their own organisations and what can be achieved on the national stage.
Professor Barney Glover AO MAICD
Commissioner Jobs and Skills Australia
It’s not so much a volume issue in the sense of a shortage of people, it’s a shortage of people with the right skill set and a need to revisit that. To give you a sense of the challenge, in the 2023 skills priority list (SPL), 36 per cent of occupations assessed were in shortage — that’s 332 out of the 916 — and five percentage points higher than in 2022.
In those occupations that are gender-skewed — more than 80 per cent male or more than 80 per cent female — you see much higher levels of skills shortage. In the non gender-skewed, it’s only 25 per cent in shortage.
Improving gender balance in occupations should be of concern to all directors. We want to see greater involvement of males and females right across our occupation list. If we can bring about that, we’ll actually go somewhere towards addressing the skills shortage.
In some other areas, we may have enough people with the right qualifications, but the employers aren’t hiring them. In that case, it looks as if maybe our short-term and long-term training requirements are not meeting the needs of the industry sectors.
We need to then have a look at our education and training capability and say, “Well, can we uplift the qualifications and the competencies? Can we make sure that the training packages are aligned with the needs of the industry sector? Can we help to co-design them in the context of higher education?”
It might be a problem of retention. We’re not keeping people. In that case, supply might be overall sufficient to meet demand, but employees are leaving their jobs. It’s happening in aged care, childcare, nursing and personal care. It might be related to the quality of the workplace. It could be around the type of work or it could be around remuneration.
Gabrielle Trainor AO FAICD
Chair and interim Chief Commissioner of Infrastructure Australia and chair of BuildSkills Australia and the Construction Industry Culture Taskforce
In construction, skills shortages are acute. Infrastructure Australia tells us we need about 214,000 skilled workers, double the present supply, to fill the existing $230b pipeline of committed infrastructure projects over the next five years.
In housing construction, the same order of magnitude applies in an industry where in NSW, 61 per cent of workers are considering leaving and the main reason cited is the pressure of the hours worked. The response of the construction industry to the need for people has been to make those they have work harder and longer. This has become a vicious and unsustainable cycle, especially given that women are overwhelmingly not attracted to construction.
Increasingly, both young men and women have different expectations of their working lives, especially their expressed need to have time and flexibility for family, interests, study, rest and wellbeing. The expectation to work on Saturdays, common in construction, is increasingly a turn-off and the latest research suggests many workers find Saturdays “not worth it”.
Directors need to focus deliberately on making their firms and their industries workplaces of choice. This goes beyond remuneration and can require some fundamental people-centric rethinking. Hours of work, settings for employment, encouraging diversity and flexibility, being a company that stands for something and cares about its place in society can help create a place not only to attract and retain talented people, but where they can thrive.
One initiative beginning to prove its potential in attracting and retaining more people in infrastructure is the implementation of the construction industry culture standard in procurement. A collaborative approach to addressing culture in an industry that has plateaued in productivity for decades is demonstrating significant benefits.
Christine McLoughlin AM FAICD
Chair of Suncorp Group and a non-executive director of Cochlear Ltd
There has been a failure in Australia to continuously reskill workforces. Historically, we’ve tended to rely on bringing the needed skills in from the outside rather than reskilling and repurposing the existing workforce.
Organisations know they need to reskill workforces. Employees know that they need to reskill and upskill — but then the employees have to have the time to do that. Part of the issue is, we haven’t necessarily created that reskilling and upskilling time in the workplace. We need to make this part of the job, otherwise, it won’t surprise you to know that the first to miss out will be women and people with caring responsibilities.
At Suncorp, we have always spent quite a lot of time looking at what further education people might need. We’ve got targeted reskilling programs in place recognising this whole piece in terms of technology reskilling. Insurance is quite a specialised sector, so it’s actually to our advantage to reskill and re-educate people who understand insurance and the fundamentals of insurance.
If we create time for people to reskill and give them incentives to do so, then it’s actually more effective for the organisation rather than the cost of going out to market and finding new skills — if you can find them — onboarding people, helping them understand the nature of your industry, building their own network in the organisation.
We need to be crisp around identifying those skills we will need as a nation and then working with education organisations — whether that be TAFE, universities or schools — to ensure we have curriculums aligned with a future workforce.
There’s also always the need to recognise that individuals will have their own desires around what career paths might be an option. So are we creating a supportive enough environment to encourage people to think as broadly as they can about what their career paths might look like?
Graeme Russell FAICD
Chair Australian Manufacturing Industry Skills Alliance
In the manufacturing sector, we don’t have a sufficient labour force for the jobs we have — and we don’t have sufficient skilled labour across a whole range of industries. We’ve got an ageing population, an ageing workforce and a relatively low birth rate. There are more people retiring than are coming into the workforce. Migration is helping to fill some of that gap, but not all of it. In manufacturing, we’re competing with construction, which is competing with infrastructure projects, which are competing with the mines.
This is going to get more difficult if we don’t solve the problem, because there’s government focus and priority in a number of manufacturing sectors. The clean energy transition is going to require a lot of skilled workers. The establishment of an advanced pharmaceutical industry in Australia, including mRNA production, will require a bunch of skilled workers.
Manufacturing has a PR problem. If you stand up in front of a bunch of young people and say, “How would you like a job at a factory?” you’ll get one response. If you ask, “How would you like a job working with computers and robots all day?” you’ll get a different response.
The average completion rate for apprenticeships in Australia is around 50 per cent. First of all, some young people haven’t quite understood what the trade they’re entering actually involves, and find it’s not for them. So we need to get better at making sure they understand what it involves. In some environments there’s not enough of a support network for young people. For most apprentices, this is their first job, their first workplace experience, so they need to be supported, nurtured and developed.
Jennifer Westacott AO FAICD
Chancellor of Western Sydney University, chair of Western Parkland City Authority, and a non-executive director of Wesfarmers
Tasks are changing rapidly through technology and other things, therefore jobs are changing rapidly. But the skills system — by that I mean at the tertiary level, universities and TAFE — is not fast enough to respond.
It’s the absence of a more nimble system, with micro-credentialing, work-integrated learning, all the things people want to reform the system, but we’ve been very slow to do that. So employers have either had to do that themselves — but that means you’re not credentialing people — or we just have these big skills deficits.
The other thing that has caused the skills deficit is a lack of planning. There will be many who say, you can’t plan for this. Well, you can — you can plan for skills, you can’t plan for jobs.
They’re going to need the skills related to the formation of changes in the nature of work and changes in the nature of industrial formation. You can’t say that your job will be a particular thing, but we should have been able to see that we were going to need some of these foundation skills — computational analysis, data analytics, artificial intelligence, autonomous design — and we should have been able to predict for that [by starting] to skill people up accordingly.
It’s incumbent upon directors to ask, “Do we have an understanding of our workforce needs into the future?” By that I mean our skill formation needs, not just our number of employees. It’s incumbent on people to encourage management to think about that long-term, to be investing in it, to be partnering with universities and TAFEs to develop skills, and to be thinking about reskilling programs.
The great Australian skills deficit
This research round-up highlights the essential insights directors need on the skills shortage, across priority sectors in Australia and internationally.
Australian priorities — JSA
The Jobs and Skills Australia 2023 Skills Priority List reveals a significant increase in occupation deficits across Australia, reflecting the persistent tightness in the labour market. The report identifies 36 per cent of occupations as being in short supply, a rise from 31 per cent in 2022. This increase is driven by continued recruitment challenges and labour market constraints following the COVID-19 pandemic, impacting sectors such as health, ICT (information communication technology) and construction.
Among professionals, nearly half of the occupations are experiencing deficits, with health and ICT being the most affected. Specifically, 82 per cent of health professional occupations and 69 per cent of ICT professional occupations have gaps, attributed to the growing demand for health services due to an ageing population and increased digitalisation across industries.
Technicians and trades workers are also heavily impacted, with 50 per cent of these occupations in short supply. Construction and food trades workers face particularly acute deficits, with all construction trade roles consistently lacking sufficient candidates due to chronic issues in the sector. The fill rates for construction-related roles have declined significantly from 54 per cent in 2020–21 to 29 per cent in 2022–23.
Community and personal service workers have seen an increase in deficits, particularly in health, care and support sectors. Roles such as aged or disabled carers, childcare workers and personal care assistants are persistently lacking sufficient candidates, highlighting long-term challenges in these fields. The report underscores that low staff retention and poor working conditions are significant factors contributing to these gaps.
The report also highlights gender imbalances in the workforce, noting that occupations with a strong gender skew are more likely to be in short supply. For instance, 54 per cent of occupations dominated by males (at least 80 per cent of the workforce) and 40 per cent of those dominated by females are experiencing deficits. This gender skew is prevalent in both male-dominated trades and female-dominated care roles, suggesting that addressing these imbalances could help mitigate the shortages.
Despite these challenges, employers have shown reluctance to adjust wages to attract candidates. Instead, they have preferred to re- advertise vacancies and seek applicants through different channels. This approach, combined with the tight labour market, suggests that more strategic and long-term solutions are needed to address the skill gaps effectively.
The global view — JSA
The International Labour Market Update from Jobs and Skills Australia offers a detailed analysis of global labour market trends as of May 2024. The report highlights the persistence of tight labour markets in advanced economies, despite easing conditions. The International Monetary Fund (IMF) attributes this to a decline in job vacancies, worker supply and stable, low unemployment rates. The UN notes that labour turnover has decreased since the mass resignations during the COVID-19 pandemic, yet shortages persist in sectors like healthcare, hospitality and retail.
Demographic shifts are impacting labour force participation rates, with the IMF predicting a decline due to ageing populations. The share of the global population aged 65 and above is projected to rise from 10 per cent in 2022 to 16 per cent by 2050. Migration and technological progress are seen as mitigating factors, potentially alleviating labour shortages and automating physically demanding tasks.
Unemployment rates are projected to rise in 2024 for many advanced economies. The report indicates that the unemployment rate for OECD countries is expected to increase to five per cent by December 2025. Despite these challenges, labour force participation rates in advanced economies have seen higher than expected growth, particularly due to increases in the foreign- born labour force.
Migrant workforce — CEDA
The Committee for Economic Development of Australia (CEDA) report, Making Better Use of Migrants’ Skills, highlights critical insights into the economic contributions and challenges faced by recent migrants in Australia. CEDA estimates that aligning migrant wages with those of Australian- born workers could unlock $4b annually, enhancing both national productivity and migrant wellbeing. The report recommends expanding access to occupation-specific English language training, improving the recognition of international qualifications through direct competency assessments, and addressing labour market discrimination through targeted initiatives. These measures aim to better integrate migrants into the workforce, leveraging their skills to address Australia’s productivity challenges and skill shortages.
Currently, despite high education levels, the research shows recent migrants earn significantly less than Australian-born workers, with a wage gap exceeding 10 per cent for those in the country for two to six years. This disparity has widened over the past decade, indicating systemic issues in the labour market. Notably, female migrants with postgraduate degrees earn 31 per cent less than their Australian-born counterparts, exacerbating gender and educational inequities.
Key factors contributing to these outcomes include poor recognition of international qualifications, language proficiency barriers and employer discrimination. Migrants often work in roles beneath their skill levels due to restrictive licensing and biases favouring local experience. For instance, nearly 23 per cent of permanent skilled migrants are in jobs below their qualifications 18 months after arrival, limiting their economic contributions. The wage gap for highly educated migrants remains substantial, with recent arrivals with postgraduate education earning 30 per cent less than similarly educated Australian- born workers.
Business continuity — Ai Group
The Ai Group Centre for Education and Training conducted a comprehensive survey of Australian businesses to identify key workforce and skills challenges anticipated over the next two years. The survey revealed that 71 per cent of businesses expect supply chain disruptions and rising input costs to significantly impact their operations, while 59 per cent cited slowing economic growth as a major concern. Additionally, 57 per cent of businesses anticipate that customer demands for environmentally sustainable products will influence their activities.
Small businesses are primarily concerned with immediate pressures, with 21 per cent identifying supply chain issues as a key factor, compared to 15 per cent of large businesses. In contrast, 37 per cent of large businesses and 49 per cent of medium-sized businesses foresee digital transformation impacting their operations, versus only 14 per cent of small businesses. This indicates a divide in focus, with larger firms more attuned to long-term technological impacts.
The survey also highlighted job impacts, with 26 per cent of businesses expecting customer demands for environmentally sustainable practices to result in net job increases. Similarly, 22 per cent anticipate job growth from socially sustainable practices. However, slowing economic growth is expected to negatively impact headcount, while digital transformation is seen as both a job creator (25 per cent) and a disruptor (33 per cent).
Director sentiment
The Director Sentiment Index survey 1H 2024 showed significant concerns about skills shortages. A substantial 85 per cent of directors acknowledge a shortage in the Australian workforce, a key issue impacting business operations. Furthermore, 32 per cent of directors believe that the implementation of AI systems and workforce automation could alleviate these shortages, despite increasing awareness of associated risks. Skilled migration levels are also highlighted as insufficient to meet labour demand, with 64 per cent of directors expressing concerns over its impact on growth.
This article first appeared under the headline 'Licence to Skill’ in the July 2024 issue of Company Director magazine.
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