Where have all the workers gone?

The new global malady, post-Covid is a shortage of labour. But that’s not necessarily bad news.

Looking for workers is a common global activity.

In Italy, they complain of the lack of “stagionali” – the seasonal agriculture workers and wait staff; in the UK, the lament is for the shortage of Eastern European builders and hospitality workers; and, in Germany, chaos at its airports last months prompted plans to bring in several thousands workers, mainly from Turkey. A dire shortage of key workers is the new global malady, post-Covid.

In Australia, the “where the bloody hell are they?” refrain continues with an unemployment rate of 3.5 per cent, the lowest in almost 50 years. The extraordinary figure means there is about one unemployed person for every vacancy – a dramatic tightening since before the pandemic, when three Australians chased every vacancy.

Leading economist Professor Jeff Borland, of the University of Melbourne, says there’s no mystery about the shortages.

“Where have all the workers gone?” he says.

“They’re all in jobs. We put on an extra 88,000 workers between May and June. The (story) isn’t where the workers have gone; it’s boy, haven’t we created a lot of jobs.”

Borland notes our labour force participation has increased from 65.9 per cent in March 2020, before the pandemic, to a June seasonally adjusted figure of 66.8 per cent. That extra percentage point translates to an extra 370,000 people.

Borland sees no evidence in Australia that workers have opted out of the market – unlike the US where there is more evidence of a “Great Resignation” and older people retiring early because of Covid-19. Instead, he argues, shortages here are largely a result of the dramatic growth caused by government stimulation of the economy during the pandemic.

Borland says that, while border closures “supercharged” shortages in some sectors that employed a high proportion of temporary visa holders, “the really big thing in Australia is just that the economy has run so strongly, and we’ve created so many jobs that, even though we’ve drawn extra people into work, it just hasn’t been enough”.

He says it’s hard to know if the shortages have peaked but suggests we will not see an extended period where the unemployment rate keeps falling, given the impact that higher interest rates will likely have on job creation.

Borland, who has done extensive work on job readiness of workers argues that the low unemployment rate is proof that we have a pool of good workers well able to fill vacancies.

He agrees there is a continuing need to help more long-term unemployed people become “job ready” but says: “On the other hand, it’s been pretty amazing – our capacity to bring unemployed people who’ve been out of the labour force into work. The fact we could draw 88,000 extra people into work last month coming off a period of really good employment does show there’s more good quality there to fill jobs in the way employers want.”

One of the sectors desperate for workers is tech, a point made strongly this week as Ed Husic, the federal Industry and Science Minister launched a report from the Tech Council of Australia and the Digital Skills Organisation that argues we need an extra 650,000 people to join the sector by 2030.

It highlighted as a key problem the “flatlining” of enrolments in VET (vocational education and training) and called for an Australian Digital Apprenticeship as an effective alternative to tertiary study.

Tech Council CEO Kate Pounder says huge structural changes are behind the shortages.

Says Pounder: “We have 860,000 people working in tech jobs today in Australia and those tech jobs have grown 66 per cent since 2005, while the average growth rate across the whole economy was 35 per cent.

“So it’s been pretty close to double that growth rate for pretty close to a decade.”

The new jobs are not just in software companies but in banks, mining companies and government, for example.

“It’s just a huge, huge jobs boom across the economy and we’ve been playing catch-up in terms of training people at the rate required to fill those jobs,” Pounder says.

“We’ve made some progress. We’ve seen a big uptick in the number of tertiary ICT completions since 2018 but we haven’t seen any change in VET completions.”

The tech gap is not a uniquely Australian problem but Pounder says it’s worse here because digitisation has lagged some other countries, so we are now particularly short of people with at least 10 years’ experience.

The proposed digital apprenticeship would train workers in digital trades – a section of tech that will need about 223,000 people by the end of the decade. The apprenticeship would produce business analysts, technicians, software developers and junior data scientists – jobs that don’t need university courses, says Pounder.

Pounder says it’s the most effective way to train people for those jobs and is important from an equity point of view given most Australians don’t go to university but need pathways into tech.

She says immigration will not solve the problem other than in highly skilled jobs needing more experienced people. The report urges government to streamline migration for high-salary, experienced technical roles, and provide tech workers with pathways to permanent residency.

The council argues that we need to increase the present level of 860,000 tech jobs to 1.2 million by 2030. That means an extra 650,000 people entering the sector, given some will exit.

Brian Wexham, chair of National Skills Week, which runs from August 22 -28, says an ageing workforce, the fallout from Covid and reduced migration have collided with a dramatic growth in digital jobs to create the shortages.

“Cyber security – go back five years, nobody really cared,” he says. “Now it’s top of the tree and we need another 17,000 cybersecurity workers every year.”

Increased use of technology in construction and other areas are changing job requirements and adding to demand, he says.

National Skills Week is designed to dispel negative perceptions about VET and raise its profile, especially among parents who so often aspire for children to go to university.

“University is right for some people, it’s not right for everyone,” says Wexham.

“When you look at the money that universities put into promoting themselves and getting students into courses, those courses don’t necessarily relate to where we have skills needs.”

The problem has been exacerbated, he says, by universities lowering entry scores (ATAR) to attract more local students as they lose overseas students.

“There is a mismatch,” he says. “Three or four years ago, I was told that about 46 per cent of all TAFE NSW enrolments were either university graduates who couldn’t get a job relating to their degree or university students who signed up for the course, and then basically couldn’t complete it, because they don’t have the skills or the desire to do so.

“I think universities have got a lot to answer for in terms of poaching the workforce without actually considering the economic outcome for the country or indeed, and importantly, the benefit to the student.

“Encouragingly, there are some dual-sector universities that do a good job in the VET space, universities such as Victoria, RMIT, Swinburne.”

But parents are a problem.

“You take people who have come to Australia from overseas,” he says. “University is a global word, they all understand the word university.

“We’ve done some work out in the western suburbs of Sydney that shows parents have never heard of tech, never heard of vocational education.

“They aspire for their children to go to university but don’t fully understand the other opportunities that are available to them in the areas where we now have desperate skills shortages.”

He points to the new Baz Luhrmann movie Elvis and says: “All that was filmed and produced on the Gold Coast. Every single one of those skills that went into that production are taught through vocational education. Catherine Martin (the costume designer and co-producer) went to TAFE, she did costume design. (Celebrity cook) Donna Hay went to TAFE and did commercial cookery. (Fashion guru) Nicky Zimmermann went to TAFE. Parents do not understand the opportunities, or indeed the pedigree of TAFE.”

Aaron McEwan, a vice-president (research and advisory) at Gartner says part of the problem is that “workers are less willing to work the way that they used to work” since the pandemic.

“There are definite shortages and some of those shortages have been created by a lack of overseas workers and students coming into the country and all of those types of things,” he says.

“But I think the underlying reality is that people have just been through three years (of Covid-19). They’re exhausted, they’re beaten around, they’ve taken a pretty big hit on their mental health. And they’re also questioning whether the pace of how they were working is sustainable.

“We’ve seen people leaving industries because they became unviable during the pandemic. Look at the airlines – they’re struggling to get people to come back because they made bad decisions about who they let go. Let’s be frank, they let the best people walk away.”

McEwan says the big demand from employers is for “digital dexterity” – the manipulation of emerging technologies. He is seeing companies tackling shortages by hiring people able to use technology rather than creating tech – in effect appointing technically savvy people throughout the organisation rather than simply in the IT department.

He is not a fan of more VET and less university: “What we need for the future is digital dexterity and social creative skills, and they’re the skills you learn in a pure discipline, a liberal arts degree, an engineering degree, mathematics degree.”

Gianni La Cava, research director at the economics research institute, e61, says the skilled migrant story is key to understanding the shortages.

“Even before Covid-19, the gap between vacancies and jobseekers/employment had been steadily rising since the early 1990s recession,” he says. “This suggests that Australia has been increasingly relying on foreign labor to fill any gaps, and now we have been caught out with the border closures.”

Recent e61 research work with the Paul Ramsay Foundation found that, even with shortages, there were limited job opportunities for young people, particularly those from disadvantaged backgrounds and in regional areas.

Says La Cava: “Our research suggested skill training in Australia too often lacks ‘portability’, which makes it harder for employers to re-skill young people to fill skill shortages. It is essential that we are giving young people portable skills that make them work-ready in a modern dynamic economy.”