CEAV ForumSkill Shortages – Myth or Reality?

23 April 2009Michael Taylor – Policy and Projects Manager

Australian Industry Group

Overview …

an introduction to skills shortages the state of the economy business skilling intentions green skills skills shortages and schools

Definitions ?

Skills shortage is:“a situation in which there are unfilled vacancies

in positions where salaries are the same as those currently being paid to others of the same type and quality”

OR“a market disequilibrium between supply and

demand in which the quantity of workers demanded exceeds the supply available and willing to work at a particular wage and working conditions at a particular place an point in time”

Key Definitions – Skills Shortages

employers are unable to fill, or have considerable difficulty filling, vacancies for an occupation (or specialised skill needs in the occupation) at current levels of remuneration and conditions of employment, and reasonable location

typically for specialised and experienced workers can coexist with relatively high overall unemployment

in the occupation an occupation may be assessed as in shortage even

though not all specialisations are in shortage occupations may be in shortage in some regions and

not in others

Key Definitions: Recruitment Difficulties

employers have some difficulty filling vacancies for an occupation

may be adequate supply of skilled workers but employers are still unable to attract and recruit sufficient suitable employees

difficulties due to characteristics of the industry, occupation or employer

- relatively low remuneration - poor working conditions - image of the industry- unsatisfactory working hours - location hard to commute to - ineffective recruitment - firm-specific and highly-specialised skill needs

Key Definition: Skill Gaps

occur where existing employees lack the required qualifications, experience and/or specialised skills to meet the firm’s skill needs for an occupation

may apply to new employees, where employers are unable to find suitable applicants for an occupation and recruit workers who need further training and/or experience to meet the firm’s skill needs for the occupation

Classification of Skills Shortages

Level 1Shortage

Few people with essential technical skills not using them and long training time to develop skills.

Level 2Shortage

Few people with essential technical skills not using them but short training time to develop skills.

SkillsMismatch

Sufficient people with essential technical skills not already using them but not willing to apply for vacancies under current conditions.

Quality Gap

Sufficient people with essential technical skills not already using them are willing to apply for vacancies but lack some qualities employers consider important.

Causes of Skill Shortages

general under-investment in skills development

rapid structural change combined with low levels of overall unemployment

cyclical surge in employment in part of the economy

particular weaknesses in the training system

Increased Supply of Skill

increasing the hours worked per workerincreasing proportion of qualified workers to

actually work in the occupationincreasing the intensity of work and efficiency

of use of scarce skill

* Increasing the number of people recently trained in the skill is only one way to increase supply.

Skills Shortages ‘Lists’

National Skills Needs List (NSNL)Identifies trades deemed to be in national skill shortage based on DEEWR research

Migration Occupations in Demand List (MODL)DEEWR advice to the Department of Immigration and Citizenship re categories for skilled migration

Trade Training Centre Guidelines

3.2 Eligible training qualificationsSchools must only submit applications to deliver the

Program’s eligible training qualifications in order to receive Program funding.

Eligible training qualifications for Trade Training Centres with the highest priority under the Program are the following Australian Qualifications Framework (AQF) qualifications:

– AQF Certificate III or above qualifications in traditional trade occupations experiencing skills shortages;

– AQF Certificate III or above qualifications in emerging industries; and

– other eligible AQF Certificate III qualifications as outlined in Sub-section 3.2.3.

Importance of skills to remain competitive World Class Skills for World Class Industries Report, May 2006

Inability to secure exportmarkets

Poor innovation culture

Inability to retain skilledstaff

Insufficient domesticmarket growth

Insufficient labour flexibility

Competition from domesticproducers

Competition from lowcost countries

High cost of skilled labour

Inabilty to secure skilled staff

0 10 20 30 40 50 60 70 80

Percent of sample agreeing

74

70

63

59

57

47

46

23

20

Qualifications for jobs and the qualification profile

Potential qualifications pathways for jobs % of employment

• Jobs that currently and potentially have

a university pathway 24.0

• Jobs that currently and potentially have

a VET pathway 62.3

• Jobs not requiring qualifications 13.7

Current qualifications profile of the population % of 15-64 population

• University qualifications 20.0

• VET qualifications 29.9

• No qualifications 50.1

Fastest Growth Areas

Managers and administrators % of total employment 7.85% Growth in past 2 years 1.07%

Associate professionals % of total employment 12.7% Growth in past 2 years 0.24%

Professionals % of total employment 19.18% Growth in past 2 years 0.76%

Tradespersons and related workers % of total employment 12.61% Growth in past 2 years (0.16%)

Current Economic Picture as reported in the National Accounts …

Manufacturing

-3

-2

-1

0

1

2

3

Mar

-200

5Ju

n-20

05Se

p-20

05D

ec-2

005

Mar

-200

6Ju

n-20

06Se

p-20

06D

ec-2

006

Mar

-200

7Ju

n-20

07Se

p-20

07D

ec-2

007

Mar

-200

8Ju

n-20

08Se

p-20

08N

ov-0

8D

ec-0

8

Qua

rterly

% c

hang

e

30

35

40

45

50

55

60

Diff

usio

n in

dex

National accounts Monthly diffusion index

Construction

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

Mar

-200

5Ju

n-20

05Se

p-20

05De

c-20

05M

ar-2

006

Jun-

2006

Sep-

2006

Dec-

2006

Mar

-200

7Ju

n-20

07Se

p-20

07De

c-20

07M

ar-2

008

Jun-

2008

Sep-

2008

Nov-

08De

c-08

Qua

rterly

% c

hang

e

20

25

30

35

40

45

50

55

60

65

70

Diffu

sion

index

National accounts Monthly diffusion index

Services

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Jun-

2005

Sep-

2005

Dec-

2005

Mar

-200

6Ju

n-20

06Se

p-20

06De

c-20

06M

ar-2

007

Jun-

2007

Sep-

2007

Dec-

2007

Mar

-200

8Ju

n-20

08Se

p-20

08No

v-08

Dec-

08

Qua

rterly

% c

hang

e

35

40

45

50

55

60

Diffu

sion

index

National accounts Monthly diffusiuon index

Employment is forecast to fall, pushing unemployment to beyond 6% in 2009 …

Annual change in manufacturing employment

-8

-6

-4

-2

0

2

4

6

8

10

1990

/91

1991

/92

1992

/93

1993

/94

1994

/95

1995

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1996

/97

1997

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1998

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1999

/20

2000

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2009

Ann

ual %

cha

nge

Annual change in construction employment

-8

-6

-4

-2

0

2

4

6

8

10

12

1990

/91

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/200

020

00/0

120

01/0

220

02/0

320

03/0

420

04/0

520

05/0

620

06/0

720

07/0

820

09

Annu

al %

cha

nge

Annual change in services employment

-1

0

1

2

3

4

5

6

7

1990

/91

1991

/92

1992

/93

1993

/94

1994

/95

1995

/96

1996

/97

1997

/98

1998

/99

1999

/200

020

00/0

120

01/0

220

02/0

320

03/0

420

04/0

520

05/0

620

06/0

720

07/0

820

09

Annu

al %

cha

nge

Business Skilling Intentions for 2009

Ai Group’s latest survey results: 250 companies Manufacturing, Construction, Services $21.1 billion turnover in 2008 48,000 staff in 2008

Impact of economic downturn on business and skilling efforts

0

5

10

15

20

25

30

35

40

45

50

Very affected Moderately affected Slightly affected Unsure

Perc

enta

ge o

f re

spondents

Planned training expenditure for 2009 compared to 2008

0

10

20

30

40

50

60

Increase trainingexpenditure

Maintain currentexpenditure

Reduce expenditure Unsure

Perc

enta

ge o

f re

spondents

Reasons for reduction in training expenditure

0 20 40 60 80 100

Need to reduce costs

Cost of training

Lack of government incentives

Business now has adequate skills

Uncertainty as to future needs

Staff leaving follow ing training

Lack of relevant training available

Poor quality of training available

Employee resistance

Training not sufficiently flexible

Percentage of respondents reducing expenditure

Skills shortages 2008 compared 2009

0

10

20

30

40

50

60

70

Yes No Unsure

Perc

enta

ge o

f re

spondents

2008 2009

Expected 2009 skill shortages by occupation

0 10 20 30 40 50 60 70

Technicians and tradesw orkers

Engineers

Apprentices and trainees

Other professionals

Labourers and processw orkers

Managers

Other

IT professionals

Clerical andadministrative

Percentage of respondents expecting skill shortages

Approaches to meet skill needs in 2009

0 10 20 30 40 50 60 70

Retrain existing staff on the job

Recruit experienced employees

Reduce staff turnover

Employ & retrain people w ith basic skills

Employ more apprentices & trainees

Redesign jobs

Introduce new technologies

Take-on and train unskilled staff

Employ skilled migrants

No action planned

Shift production off-shore

Percentage of respondents

Skill implications of the green economy…..

Green skills’ required for up to 3.25 million workers in sectors that have a ‘high environmental impact’

Combination of new technology and ‘re- tooling’ for existing technologies

Green skills confidence levels

0

10

20

30

40

50

60

Very confident Moderately confident Not confident Don't know

Perc

enta

ge o

f re

spondents

Occupations needing green skills improvement

0 10 20 30 40 50 60

Managers

Labourers and processw orkers

Technicians and tradesw orkers

Engineers

Clerical and administrative

Apprentices and trainees

Other professionals

Other

IT professionals

Percentage of respondents

Teenagers not engaged full-time

5

10

15

20

'86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08

Year

% o

f 15-

19 y

ear-o

lds n

ot in

ft s

tudy

or f

t wo

rk

Males

Females

Persons

13.8% (or 196,200) teenagers not in full-time learning or work.

It’s Crunch Time: engagement

13.8% of teenagers not fully engaged 22% of young adults not fully engaged 526,000 or 18% of 15-24 year olds not fully

engaged 306,000 or 11% of 15-24 year olds

unemployed, underemployed or marginally attached to work

It’s Crunch Time: attainment

School or Cert III completion rate of 81 percent Relatively static for more than a decade Indigenous completion at half this rate 25-34 yo: 20th in OECD for school completion 46% of school leavers not in post-school study 47% overall traineeship completion rate 60% traditional apprenticeship completion rate Early leavers profoundly disadvantaged in Australia

Skill shortages and school completion ratesSupply of VET qualifications remains the same

as 2005 there will be a shortfall of 240,000 jobs over the next decade

To meet this shortfall net completions need to increase by 2% pa for a decade

Australia’s rates have barely shifted over the last 15 years

Why do schools and industry need to work together?

Key social and economic factors: Globalisation Knowledge economy Skills shortages The need for a new workforce

It’s Crunch Time policy goals

Subject to their ability, every young Australian will:

attain Year 12 or an AQF III qualificationbe engaged in full-time work or learning or a

combination of thesebe provided with the resources,

relationships & integrated pathways to achieve these outcomes

Some Targets

85% of young people leaving school or complete Certificate III by 2011 increasing to 90% by 2015

more than 90% of teenagers (15 – 19) participate in full-time study, full-time work or a combination by 2011

more than 85% of young adults (20 – 24) participate in full-time study, full-time work or a combination by 2011

Final Comments …

Myth or reality? a complicated notion – term is often used without

precision despite this, it is no myth – very real skill shortages can co-exist with increasing levels of

unemployment new employment opportunities emerging in the green

skills economy schools and their programs can have little impact on

skills shortages the focus needs to be more effective support for

young people making the transition to training and the workplace

The U.S. Department of Labor estimates that today’s learner

will have 10-14 jobs . . .

By the age of 38.

According to the U.S. Department of Labor . . .

1 out of 4 workers today is working for a company they

have been employed by for less than one year.

More than 1 out of 2 are working for a company they have worked

for for less than five years.

According to former Secretary of Education Richard Riley . . .

The top 10 in-demand jobs in 2010 didn’t exist in 2004.

We are currently preparing students for jobs that don’t yet

exist . . .

Using technologies that haven’t been invented . . .

In order to solve problems we don’t even know are problems

yet.