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Analysis

Finding a way to ease the skill shortages plaguing Australia

Analysis

Our favourite South Australian Business Index speaker and resident demographer argues that automation of many tasks would free up in-demand workers for more essential jobs.

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Wherever I travel these days, business owners tell me crazy stories about the skills shortage.

There is the unnamed and newly renovated hotel that advertised 80 new jobs and received a total of eight applications. There is the fancy unnamed French restaurant that removed half its tables because it didn’t have enough staff. Four of the last eight hotels I stayed in apologised for only cleaning the rooms every third night. One luxury resort offered a complimentary cocktail at the bar if you forwent daily cleaning. I’ve spoken to IT and consulting businesses that don’t even bother advertising for jobs since it’s impossible to find staff anyways. One real estate company outsourced most of its repetitive digital tasks to the Philippines.

Let’s quickly recap why there is a skills shortage in the first place.

Our economy kept growing despite COVID-19, global supply chain bottlenecks and geopolitical tensions. That’s welcome news. The only problem is that we were forced to stop importing workers from overseas.

Pre-COVID Australia took in 180,000 net new migrants every single year. The first year of the pandemic saw a net loss of 90,000 migrants. The trend was weaker in the second year, but you get the gist – tens of thousands of workers that would usually have come to Australia didn’t do so.

At first, this wasn’t a problem. People that were otherwise locked out of the labour market found employment and many labour-intensive industries were still constrained by COVID-19 regulations. Now that restrictions have been lifted, sectors that had to let go of workers temporarily can’t find new workers. Airports and hospitality are probably the most obvious examples.

How do we deal with skills shortages? We will squeeze more productivity out of existing populations, train our young people, encourage more migration and invest in automation.

How do we make our existing workers more productive? Well, you just work longer hours for the same pay – congratulations, economically speaking you are now more productive. We will also tap into parts of the labour market that are underutilised.

This is the time for employment services to shine. Hopefully, the current skills crunch is incentive enough to skill up disadvantaged workers and give them a chance to enter the labour market. This might be a once-in-a-lifetime opportunity to break the cycle of intergenerational unemployment in some families.

The chart below shows that Indigenous people, people with a disability, and people with poor English skills are two to four times as likely than people who don’t fit either category to not be employed or studying. As a nation we must encourage these disadvantaged people into employment – it’s the right thing to do, morally and economically. Isn’t it nice when these two things go hand in hand?

 

Obviously, investing in our young people by pushing as many as possible through universities and, especially through vocational training, will help to improve the tight labour market. This is also a good excuse for me to call for universal free TAFE education in Australia again.

Traditionally, when we wanted to increase productivity, we enticed more women to enter the workforce. Adding an extra income to a household obviously helped families financially and pushed us towards more gender equality, but it was a quick fix to make the economy more efficient.

Looking at recent female workforce participation data, we’d need to conclude that there isn’t much more to be done to entice even more women into the workforce. The biggest lever left would be to make childcare universally free to allow more women to go back to work in a full-time capacity – this works in my home country of Germany but it’s a costly undertaking and I just decided to make TAFE free in the previous paragraph…

The skills can obviously be improved by importing workers from overseas. Remember we got used to having workers delivered to our doorstep in the same way you order UberEats for dinner. Skilled migrants are slowly returning to Australia, but even if we were to reach pre-pandemic levels tomorrow, we are missing two years’ worth of migration intake.

The federal government even increased the number of skilled migration visas that can be handed out every year to 90,000. The skilled visa program tends to help the healthcare, engineering and professional services much more than hospitality or logistics (airports, warehouses).

So far, we’ve decided to tap into existing populations to soften the skills shortage, invest in our young people and encourage more migration.

We’ve got one more suggestion to talk about: Automation.

Many people still fear automation, robotics, artificial intelligence, or algorithms as being job killers that leave society worse off. The thinking goes that if we had more of our work tasks handed to machines and programs, large proportions of the workforce would have nothing to do and end up clogging the social support systems.

I don’t think that’s the case at all. Work, much like life, always finds a way (to fill our days and keep us busy).

via GIPHY

Let’s look at the example of secretaries. There are no young secretaries left in Australia. The below age profile shows that no new workers enter the profession. Obviously so, you might say. Bosses learned to type, and Outlook does the calendar management for you. No more secretaries needed. If this narrative is true, where are the hoards of angry secretaries roaming the streets? They are nowhere to be seen because that’s not what happened at all.

Sure, many of the tasks done by secretaries were taken over by machines and algorithms. But it didn’t lead to the profession of secretaries dying out. Rather, the profession underwent a collective up-skilling and rebranding. Offices today employ personal assistants or office managers rather than secretaries. These women (it’s OK to say women here because over 97 per cent of all these jobs are held by women) now find themselves doing higher value tasks at work, they hold more responsibilities and are paid more.

As predicted by the anti-automation brigade, automation changed the profession of secretaries, but it did so for the better. Work found a way. The result of automating tasks previously done by secretaries transformed them into economically productive and wealthier workers.

I’d be delighted to see many low-skilled jobs become automated. We wouldn’t lose jobs but rather free up workers to enter middle-skilled jobs (that’s where my free vocational education enters the stage again). The beauty of middle-skilled jobs (especially trade, healthcare, and construction jobs) is that we have an almost unlimited demand for them.

Our infrastructure investments are a good 20 years behind where they should be, our poor-quality housing stock needs regular renovation overhauls, and our ageing country needs more healthcare workers.

Automating low-skilled work will not leave people behind, but rather make our economy more productive in the long run. In the short-term, automation will be one lever we can pull to ease the skills shortage.

The skills shortage will be with us for quite some time, we must pull all available levers to improve the situation.

Early-bird tickets to InDaily’s South Australian Business Index are on sale now.

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