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Skills crisis at tipping point | by Tony Featherstone
BeLOw: Sydney Harbour: The new government has committed to upgrading ferry wharves and expanding services west of the Harbour Bridge Canberra’s commitment is to a different project. Last year, Prime Minister Julia Gillard promised $2.1 billion in federal funding to complete the $2.6 billion Parramatta to Epping Rail Link (PERL) during the federal election campaign. Now, O’Farrell wants that project deferred and the Commonwealth’s funding re-allocated to the North West Rail Link plan he took to the state election.
So far, the Commonwealth Government has stuck to its guns on PERL, arguing that the funding is not transferable, but the issue featured in the first meeting between Prime Minister Gillard and Premier O’Farrell, with O’Farrell reportedly taking heart from the discussion.
For her part, Berejiklian says the state government is continuing to negotiate with Canberra. ‘This project is so critical for the future of our public transport needs,’ she says. ‘We have a population the size of Canberra’s in the north-west of Sydney and, regrettably, there are inadequate transport services there to support those people. By putting the rail line to the north-west of Sydney, it not only assists those people who don’t have those public transport options, but obviously takes thousands of cars off the road, which helps all of us in getting to work and home with less congestion on the roads.
‘We have said from the outset that what is in the best interest of the people of New South Wales is construction of the North West and South West rail lines. We have made that position very clear. It’s not only what the government is saying; it’s also what the transport experts have been saying for a long time.
‘We don’t want to see public transport politicised; we want to see the dollars go where they are most needed. That’s certainly the strong case we will be outlining to the Federal Government.’
So does the government have a Plan B if the Feds don’t budge? It’s a scenario Berejiklian isn’t prepared to contemplate. ‘We don’t really want to engage in a hypothetical on this. We have been very strong on where we think the dollars should go and where the public transport priorities are,’ she says.
For Berejiklian, it’s very much one strategic step at a time. ‘Restructuring is only the first step, it’s going to take some years to build the type of system we want, to get the type of system people want to use,’ Berejiklian says. ‘Regrettably, it’s not something that’s going to happen overnight. The new structure is the first step and we believe very strongly that the new structure is absolutely necessary to start building a transport system that a global city like Sydney deserves.’
Skills crisis at tipping point
Skills crisis at tipping point
By Tony Featherstone
‘Bigger Australia’ has to be the long-term answer, but more can be done now.
Basic skills seem a world away from complex billion-dollar infrastructure projects. But skills and related labour force productivity are vital pieces of a labour puzzle that is threatening Australia’s economic momentum. Left unchecked, Australia’s skills shortage will drive wages higher, reduce the pool of labour for critical projects, cause delays and compromise quality in the nation’s infrastructure programme.
Industry is pursuing a range of initiatives to cope with the skills challenge. Over the long-term, this must include a much stronger and sustained focus on encouraging students into science and mathematics disciplines from early school age. In the immediate term, industry is also bringing a major focus to better recognition of previous skills to fast-track qualifications – and to broadening the pool of potential employees for infrastructure projects, especially women and older workers. Governments have also partnered with industry to renew federal and state government training initiatives.
All are worthy and smart initiatives, but none offer a game changer to the immediate demand for skills that is growing by the day. In the short term, temporary skilled migration holds a key – and over the longer term, we will need to accept the requirement for a bigger Australia to counter an ageing workforce and lower participation rate.
A Treasury briefing to Prime Minister Julia Gillard last year said strong future immigration was ‘probably inescapable’ – a position questioned in the lead-up to last year’s federal election when both major parties argued variations on the theme that the country ‘should not hurtle down the track
towards a big population’. Any small population position is a gamble. Business is under intense pressure to find enough skilled workers – at the right price – to deliver infrastructure and mining projects that will drive the next leg of Australia’s economic growth and prosperity. And these pressures show no sign of abating in the medium or long term without reform. Business is acutely aware of the skills risk. Leighton Holdings Chief Executive David Stewart earlier this year described the shortage as one of his company’s greatest challenges. Wesfarmers Chief Executive Richard Goyder has said parts of that company were losing staff to higher-paying jobs in Queensland and Western Australia. Transfield Services Chief Executive Peter Goode said in March that his company was becoming more selective about taking on national contracts, amid concerns it may not have enough staff to complete them. WorleyParsons Chief Executive John Grill says his engineering service group was bringing people to Australia using 457 visas, which allow companies to recruit skilled overseas workers for up to four years. The latest CEO survey by the Australian Industry Group (Ai Group) found skills shortages remain a major problem, and that companies expect shortages to intensify over coming years. Ai Group Chief Executive, Heather Ridout, said, ‘We remain very concerned about skills shortages and their likely impact on companies. Estimates that our Business is economy will be 240,000 skilled people short are in line with the feedback we are receiving from acutely aware of enterprises.’ Continued on page 20 the skills risk.
Skills crisis at tipping point
ABOVe: Welders at offshore oil and gas projects seek substantial remuneration. Continued from page 18
More than one-third of businesses surveyed rate the impact of the skills shortage as high; with almost half expecting skills to bite heavily by 2015. Nearly two-thirds had difficulties filling vacancies in the second half of 2010, and skills shortages were the main reason. Companies reported a lack of specialised skills required for the jobs (59.5 per cent), a lack of applicant skills and experience (54.1 per cent), and the absence of local training options (32.6 per cent).
The most telling factor was that nearly half of the companies surveyed noted a lack of applicants for advertised positions – pointing to a shortage of labour, as well as skills.
Industry feedback finds that companies report vacancies across a wide spectrum of disciplines, including accountants, metal trades, machine operators – and particularly in engineering. But the skills shortage doesn’t just bite in tertiary qualified staff, business groups argue that shortages exist right up and down the skills value chain, from highly skilled through to semi skilled and unskilled workers.
Ai Group’s work confirms that view, finding that companies are working hard to solve the problem, with nearly 50 per cent of firms surveyed giving management of skills shortages a high priority. Almost 40 per cent of companies have responded by upskilling existing staff, 31.2 per cent are outsourcing or sub-contracting work, while 18.3 per cent are redesigning jobs around available skills. Chillingly, 10 per cent of companies report that a lack of available labour is hampering production – directly impacting on national economic productivity.
Skills shortages are also affecting transport infrastructure projects. Rodd Staples, recently appointed to lead the New South Wales Government’s North West Rail Link project team, told Future Building: ‘In the short to medium term, the infrastructure industry faces shortages of rail signalling and system engineers, power transmission line engineers, and project managers, engineers and supervisors for major civil construction projects.’
Comments from industry and corporate leaders, and surveys on how business sees skills shortages, are staggering. And they do not yet reflect the full problem, given the skill demands that will follow from natural disasters in Australia and New Zealand during the summer, and Japan’s recent earthquake and tsunami.
The huge rebuilding task in Queensland could not have come at a worse time for a nation already suffering from skills shortages. Queensland Premier Anna Bligh says the damage bill for state-owned assets is expected to top $5.8 billion, as thousands of kilometres of roads and railways, and hundreds of schools and bridges, are repaired. The result, of course, is even higher demand for skilled workers who might otherwise have been available for mining or infrastructure projects.
Staples says climatic events tend to have shortterm effects on the skilled labour market because the recovery process is often about rebuilding, remediation or maintenance, and not a complete
Skills crisis at tipping point
design or construction task. ‘However, the floods and cyclones will draw heavily on skilled trades, such as electricians, plumbers, carpenters and others,’ he said.
Yet even the significant impact of Queensland’s rebuilding efforts is small, relative to the mining boom’s rapacious demand for skilled labour. With a record $130 billion of mining projects on the drawing board, resource and mining services companies are desperate to find workers to build these mines, while global demand and prices remain strong.
The Age newspaper recently reported welders at offshore oil and gas projects are seeking remuneration of more than $400,000 per annum, while cleaners in remote mining projects are earning six-figure wages. Sky-high pay packets in the mining industry will become an even bigger magnet for skilled workers from other industries. The risk is that without a safety valve on skills and labour, the valuable resource industry could crowd out other important sectors, including infrastructure.
And the challenge is further complicated by an increasingly globalised and mobile workforce. A big unknown is how the massive reconstruction required in Japan and ongoing development across the Asia Pacific might further complicate Australia’s domestic skills shortages.
Regional demand for highly qualified Australian workers is part of a worldwide trend in which highly skilled technical personnel are becoming a global commodity – with skills readily transferable. Rodd Staples says, ‘It is now not uncommon for highly skilled personnel to follow work beyond opportunities from one state to another, as well as across the Asia-Pacific region and beyond, including the Middle East.’
Abigroup Managing Director David Jurd sees the skills shortage as a key issue for his business. ‘We are sailing into the next infrastructure boom and with the peak at late 2012 or beyond, the skills shortage is certain to worsen,’ he says.
He argues that better coordination between governments and industry holds a key to managing the call on resources.
‘To the extent that this boom is driven by public sector spending, a visible and reliable pipeline of projects is crucial to plan and manage resources. We would encourage an expanded mandate for Infrastructure Australia, and are encouraged by the establishment of Infrastructure NSW,’ he says.
John Holland’s Executive General Manager of infrastructure, Chris Evans, has a front-row view of the effect of skills shortages. ‘Before the global financial crisis, we found it difficult to get skilled and unskilled workers in some sectors. Some of that pressure was relieved when the GFC struck in 2008, but it is rapidly building again. I wouldn’t say we are quite at that preGFC pinch point with skills shortages, but we are getting closer by the day,’ he says.
‘The competition for skilled talent is extraordinary, and one of the ways that it is manifesting is in higher wages. This skills shortage is already affecting infrastructure projects that need to compete for these workers, and I expect to see this problem worsen this year and next. Some infrastructure projects that were previously red-hot could be significantly impacted if they cannot keep or find enough skilled workers. Infrastructure projects work on tight margins and timelines, and this industry has a “peaky” nature. The projects will suffer under conditions of wage instability or project delays brought about by worker shortages.’
Evans says one solution is better recognition of previous experience. ‘Australian industry and government must look at ways to accelerate apprenticeships and traineeships. We need to Continued on page 24
More than you’d imagine…
Leighton Contractors has undergone rapid growth and diversification over recent years. Evolving from a construction focused business, our markets now encompass the resources, energy, telecommunications, infrastructure and facilities management sectors.
This has been an exciting time for the company but it hasn’t been without the challenges that accompany maturity and change.
Today, we’re restructuring for future growth and leveraging our strengths to position Leighton Contractors at the forefront of our target sectors. This is creating further efficiencies within the business and will ensure our people are equipped not only to succeed, but to be integral to our clients’ success. As we continue to grow and diversify, it will be our values that firmly anchor our culture and drive ongoing success and sustainability.
We are proud of our values; our commitment to people, to our client and industry relationships, to the environment and communities where we operate and, above all, to safety across all our clients’ work. These values are integral to the way we do business; they articulate what we expect from our people and from our industry partners.
With a footprint across many major industries and with solid relationships with world-class clients and partners, we are proud of where we’ve been and the journey we are on. We look forward to continuing to be a part of the development of infrastructure to support the growth of Australian industries and the ongoing prosperity of our communities.
New Royal Adelaide Hospital
A Leighton Contractors consortium has been selected as preferred proponent to deliver South Australia’s new Royal Adelaide Hospital. The facility will be the largest and most technologically advanced hospital ever built in Australia, and one that will be recognised as a benchmark internationally.
With a design on track to meet a Greenstar 4-star rating, facilities will include all single inpatient rooms and garden outlooks, 40 technical suites and a commercial precinct – establishing it as a world-class social Public Private Partnership and health facility.
Gorgon LNG
Leighton Contractors is currently delivering two packages valued at almost $2 billion on behalf of Chevron Australia at the iconic Gorgon Project in Western Australia.
Being the largest single natural gas project in Australia, Leighton Contractors will be drawing on our years of experience and local resources to help develop Australia’s energy needs in line with sustainable economic development and with safety as the number one priority.
Macarthur Wind Farm
Leighton Contractors is investing significantly in exploring a range of options for alternative energy across the country in collaboration with our clients and technology partners, including Vestas and the AGL Meridian JV.
Proposed as the largest wind farm in the southern hemisphere, the $1billion Macarthur Wind Farm will generate up to 420 mw of electricity – enough to power around 220,000 Victorian homes each year.
Hills M2 Motorway Upgrade
Leighton Contractors is proud to bring its skills and experience to deliver this major Sydney arterial road on behalf of Transurban.
The upgrade will reduce congestion during busy morning and afternoon periods and improve access to north west Sydney and the growing residential and business centres in Macquarie Park.
Skills crisis at tipping point
Continued from page 21 ensure that people are properly trained, but also that unnecessary rules are not counting against people who have developed skills in other areas. We need to remove any obstacles that slow the flow of people into the workforce.’
Broadening the pool of skilled workers is just as important, Evans says. ‘We have to look at workforce diversity. For example, female participation in the construction industry is very low; we have to make careers in engineering or the trades more attractive to women. And we must think about retaining and recruiting mature-age workers in the infrastructure industry. That is certainly a focus of John Holland, which has a Flexible Futures program to help older employees work with the company to think creatively about how they can stay in the workforce and have more flexibility. This program has been very successful for us in keeping mature workers with all that experience in the workforce.’
Evans says the Federal Government should streamline the 457 visa process for recruiting skilled workers from overseas. ‘It is inevitable that higher migration of skilled workers to Australia will be needed to solve skills shortages in coming years.’
More flexible labour agreements would also help, he says. ‘As they stand, labour agreements in the infrastructure industry are a long and difficult process. We have to work with government and industry stakeholders to make these agreements more efficient, while recognising a strong commitment to training, safety and rewarding workers for productivity increases. We also have to think more about organisational culture in infrastructure firms.
‘We must ensure that the infrastructure industry is an attractive employer for skilled workers, who want a relationship with their employer that is about more than just money. We often lose sight of the non-tangible benefits, such as training, safety, working near your family, long-term employment, and contributing to important projects that build the nation’s infrastructure.’
Ridout says more efficient skills training is also needed. ‘The Commonwealth Government has introduced some new targeted funding programs, which include an industry co-contribution (for training), and these have been taken up enthusiastically by industry. But the solution is not in one-off projects. Skilling arrangements in this country need to be overhauled. Current arrangements remain complex and bureaucratic.’
Staples says governments are becoming increasingly aware of the problem of skills
shortages, and need to work as a team with industry to create solutions. ‘There is also a need for clear, transparent and reliable planning processes to allow industry to assess the current state of demand and to accurately forecast demand from major projects in the development pipeline,’ he says.
‘Solutions that can be derived from a collaborative approach between government, industry, schools and our tertiary institutions are most effective in a global, highly mobile economy. This work has already commenced, with some encouraging results through a range of state and federal initiatives over recent years, including a renewed focus on apprenticeships and internships. An important starting point will also be greater attention to mathematics, physics and science in secondary schools, to ensure the talent pool can easily transition to tertiary study in the next decade.’
The trouble is, Australia’s infrastructure sector needs more help now – not just in coming years or decades – to address short-term skills shortages.
Ridout says Australia needs a new approach to the development of workforce skills, and argues that population strategy is a key consideration. ‘The task is enormous, and all options need to be on the table,’ she says.
The critical question is whether workforce skills can be developed quickly enough during a mining boom and at a time when new infrastructure is required to serve a growing population, while playing catch-up on the existing backlog of road, rail and social infrastructure projects. Plenty of anecdotal evidence suggests it cannot.
Unaddressed, the long-term damage from the skills shortage could be significant. Former Treasury Secretary Ken Henry gave a chilling glimpse of the effect that declining labour force participation will have on the economy over coming decades, in a speech last year that drew on the 2010 Intergenerational Report.
Henry said the proportion of the workforce with the highest rates of labour force participation (aged 15 to 64) will fall from 83 per cent in 2010 to 73 per cent in 2050. A fall in labour participation was a factor behind Treasury’s projections of average annual GDP growth of 2.7 per cent over the next 40 years, compared with 3.3 per cent over the previous 40 years. Many will suffer if significantly slower economic growth becomes a permanent feature.
The solutions are obvious: a small-population country such as Australia needs higher levels of skilled immigration and a bigger population to offset falling labour participation rates in coming decades. Better education and training will improve Australia’s pool of skilled labour by upskilling the existing workforce. But that alone will not offset sharply lower labour force participation from the country’s most productive workers in coming decades.
The long-term solution requires a blended response that includes early attraction of talent into badly needed trades and professional disciplines – as well as a sustained programme of skilled migration to reduce the impact of an ageing population and declining participation rate.
But in the short term, Australia must look at an increased, expedited and streamlined use of 457-style migration programmes to capture Australia’s share of the global workforce.
Tony Featherstone is a former managing editor of BRW magazine.
