Businesses facing battle for workers and wages ‘arms race’

Australian companies across most sectors are facing off one another in a battle to attract the best talent – a war that threatens to trigger an inflation explosion.

NIB chief executive Mark Fitzgibbon says combating staff shortages is not just about offering higher pay but more flexibility and work/life balance. Picture: Hollie Adams

Businesses are in an arms race to attract the best talent as labour shortages plague most industries, sparking a crisis that threatens to turbocharge inflation and trigger earlier interest rate increases.

From fast-food chains, such as McDonald’s, to high-end white collar jobs, businesses are struggling to attract workers to key ­positions, as Covid-19 upends the century-old nine-to-five work day and workers demand greater flexibility.

A near two-year-long ban on international travel has halted skilled migration and the flow of backpacker workers, hitting sectors across the economy from construction and agribusiness to hospitality and healthcare.

Meanwhile, remote working has allowed businesses greater access to the global talent pool, without workers needing to relocate to different countries and creating greater competition among employers.

The labour shortage comes as the unemployment rate has fallen to 4.6 per cent after spiking at 7.4 per cent in July last year – due to a combination of the government’s $89bn JobKeeper program and the pandemic not being as severe as expected.

ANZ head of Australian economics David Plank said he expected wages growth to hit or breach 3 per cent by the end of next year, citing the labour market’s resilience.

“Adding this to the stronger global inflation pulse means we now see inflation lifting to 2.5 per cent in the first quarter of 2023. This will be the trigger for the RBA to tighten,” Mr Plank said.

The strength of the labour market threatens to accelerate interest rate rises from the Reserve Bank as it seeks to keep inflation under 3 per cent. RBA governor Philip Lowe this week said there was “uncertainty as to how wages growth responds to the unemployment rate being near 4 per cent for an extended period”.

But offering higher pay would not alone solve the problem, according to Mark Fitzgibbon, chief executive of health insurer NIB.

“I don’t think it’s just about money. Although we recognise it’s all important. It’s about people wanting greater flexibility and choice,” Mr Fitzgibbon said.

NIB became one of the first Australian companies to shift to a permanent remote working model, paying staff $1200 a year to help pay for home offices. Since launching the scheme last month, it has taken it one step further, with the Newcastle-headquartered insurer allowing one of its employees to move to Canada and continue working for the company – such is the competition to attract and retain talent.

“We’ve got a top gun employee who’s moving to Canada, with her husband. We want to keep her and we will keep her. She’ll be able to work in Canada because we want to retain her,” Mr Fitzgibbon said.

Closer to home, Mr Fitzgibbon expected remote working to deliver greater benefits, particularly around diversity and inclusion.

“The big challenges around ­diversity inclusion are clearly still around gender, and ethnicity etc. But there’s also a big challenge I think for Australian society: the divide in many quarters between city and country,” he said.

“And providing distributed working is going to allow us to recruit more people in rural areas, and with that, hopefully improve diversity and appreciation of how different communities have different needs and priorities.”

But former LinkedIn chief human resources officer Steve Cadigan, who now specialises in the future of work, said remote working has created another challenge, particularly among employers that need workers on their premises. And it was not a problem Australia faced alone.

Mr Cadigan – who spearheaded LinkedIn’s employment growth from 400 to 4000 in 3½ years – said it should not be viewed as a “recruitment problem”. Like Mr Fitzgibbon, he said the problem could be solved via offering flexibility.

“I deal with so many companies that say ‘we’ve got a recruiting problem’. I said, ‘I’m sorry, but I disagree with you. I don’t think you have a recruiting problem, you have a failure to be creative on how to create value problem’,” Mr Cadigan told a Telstra Ventures webinar.

“I know some people who own multiple fast food restaurants, and they’re like, ‘I can’t hire ­people’. I’m like, ‘well, why are you just hiring for a store? Or why are you just hiring a full-time person? Why are you hiring someone that could work Monday, Tuesday one place to maybe Wednesday mornings at another one?’

“It’s a little more scheduled on your part, but maybe their life habits would be better served, if it was more of a patchwork rather than ‘I need a full-time person’. “Those of us … in the technology sector, we’ve been fighting for decades, and we’ve learned how to get creative. The hospitality industry has got a lot to learn.”

But other sectors, including healthcare, are constrained with how much flexibility they can provide. Before the pandemic struck, Australia was battling a chronic nurse shortage, with some hospital groups recruiting staff directly from the UK and Europe. But the door has closed with international travel bans.

“When I talk to anyone and they ask me what keeps me awake at night, it’s the not just the nursing workforce shortage, but the whole clinical workforce shortage that we’re experiencing,” said Carmel Monaghan, chief executive of the Australian arm of the country’s biggest private hospital provider, Ramsay Health Care.

“And we’re going to continue to experience that. We’ve had negative, no migration for two years, we’ve got negative population growth. That’s the biggest risk we face.”

The pandemic has also heaped pressure on in-demand specialities such as supply chain management and ensuring people can still assess essential goods amid pandemic buying and an explosion in online shopping.

“It’s a real issue,” said Richard Vincent, chief executive of Australia’s second-biggest pharmaceutical distributor and Priceline owner, Australian Pharmaceutical Industries.

“For businesses, there’s a number of dynamics going on. One is people, because they’ve been working from home, are all of a sudden looking for a change for no other reason that they feel they need to change. That’s happening throughout businesses everywhere in Australia.

“And then there are companies that are bouncing out of Covid now recruiting. So there’s a hot market when it comes to subject matter experts, digital people, people who have specialised skills. We know that because we’re also recruiting for similar roles and there is a shortage.”