Skills Shortages

Strong growth in the Australian economy has seen unemployment rates drop dramatically over the last decade. This decline in unemployment rates has seen the pool of surplus labour disappear with the economy recently in a position of near full employment. Contemporary surveys of business confidence report that the availability of suitably qualified employees has remained a major constraint on business expansion.

Skills shortages occur for a variety of reasons:

• Strong economy with low rates of unemployment combined with the nature of the business cycle and the cyclical nature of employment;
• Growth of new industries with few ready-skilled trades people available;
• Location/relocation of new industries or projects into different regions including rural areas with a different skill base;
• Lack of interest in particular industries among job seekers
• Technology changes within an industry, especially production, resulting in new methods and therefore new skills needs which are not being successfully incorporated in existing training;
• Growth in demand for new skills or work practices, associated with the pressure of globalisation, international competition and structural change;
• The aging workforce and reduction of new entrants to the workforce and the impact this will have on the future supply of skills.

In all likelihood, the shortages currently being experienced across Australia are a consequence of all of these factors.

Fact sheet: Skill & Labour Shortages: A Critical Issue for Queensland Business (PDF)

Skills and labour shortages, by definition, exist to varying degrees, with employers experiencing one, or a combination, of the following:

1.    Skill shortages exist when employers are unable to fill or have considerable difficulty in filling vacancies for an occupation, or specialised skill needs in the occupation, at current levels of remuneration and conditions of employment, and reasonably accessible location.

Shortages are typically for specialised and experienced workers, and 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.

2.    Recruitment difficulties occur when employers have some difficulty filling vacancies for an occupation. There may be an adequate supply of skilled workers, but employers are still unable to attract and recruit sufficient suitable employees.

The recruitment difficulties may be due to characteristics of the industry, occupation or employer, such as: relatively low remuneration, poor working condition or image of the industry, unsatisfactory working hours, location hard to commute to, ineffective recruitment advertising and processes or organisation-specific and highly-specialised skill needs.

3.    Skill gaps are where existing employees lack the required qualifications, experience and/or specialised skills to meet the firm's skill needs for an occupation. Skill gaps 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.

Relevant literature lists several major implications of skills shortages. These consequences include the production of lower quality output, lower productivity of workers and machinery, higher wages and the economy settling into a low-skill equilibrium. Most significantly, skills and labour shortages result in lower economic growth as the economy misses out on opportunities for expansion.

Maximising the potential of our workforce is vital to meeting the labour needs of Australia in the future. Australia needs to ensure people who are of working age and capable, are provided with training to gain the necessary skills to find suitable and rewarding employment.