The Stats Guy: How your industry will handle the skills shortage

You cannot afford to underestimate the severity of the looming skills shortage.

You cannot afford to underestimate the severity of the looming skills shortage. Photo: TND/Getty

In a previous column I discussed the prolonged skills shortage that Australia is facing in the coming decade and argued that this alone will guarantee the continuation of the current high migration scenario. Today we are exploring this issue from a slightly different angle.

Let’s start with a quick analysis of how important foreign-born workers are for each of the 19 industries above. Industrywide one in three workers was born outside of Australia. Agriculture employs the lowest share of foreign workers (21 per cent) while finance is the most international sector (40 per cent).

Anyone suggesting Australia should switch to a low migration approach must pick and choose from which industries workers should be withheld. Lobbyists for all industries are concerned about the skills shortage – don’t bet on any future government to slow migration down.

I am not getting tired of pointing out just how fast Australia will age in the coming decade.  We need to grow our aged care workforce quickly. If you’ve been in an aged care home in the last decade, you know that we will need to import these crucial care workers from overseas.

International construction workers will have an easy pathway into Australia in the near future. Both major parties agree that adding more housing stock is the politically safest approach to tackle the housing affordability crisis.

The lack of skilled tradesmen is an embarrassment for our educational system. Even as we offer more TAFE courses free of charge to our young people, we simply won’t have enough young people in the pipeline. Here too, workers will need to be imported. We don’t have a choice, considering the steep retirement cliff and the imminent withdrawal of millions of Baby Boomer workers.

We could continue this analysis with all other 17 industries, but you’ve got the idea already. It is simply hard to let industries shrink as long as the economy and population keeps growing.

Sure, every industry must embrace automation and technology (AI included) to tackle the lack of workers but ultimately the need for human labour will continue to grow across the board in the coming decade.

If there is systemwide competition for workers, how do industries compete with one another? The chart above shows the average annual incomes for full-time employees across all industries.

As the adage goes: ‘If you can solve a problem by throwing money at it, throw money at it’. Just pay juicy wages and the worker bees of Australia will pick your industry over other sectors.

That’s exactly how the market works. We reward education (the higher educated you are the more money you earn) and to a degree we compensate you for putting your body on the line.  Of course, the most lucrative industries will always have enough money to pay competitive wages.

How do we know which industries are lucrative? The ABS uses a measurement called Industry Gross Values Added (IGAV) to quantify the contribution of different industries to the gross state product (GSP). The GSP in turn measures the production of goods and services in dollar terms. Throw all GSPs together and you get the GDP (Gross Domestic Product).

We see instantly that mining is the most economically productive industry as it creates close to twice the economic output of the second-placed healthcare industry.

That is quite remarkable considering that healthcare employs 2.2 million workers while mining employs a humble 0.3 million people: twice the economic output with a seventh of the labour input. You can be assured that the mining sector will always get all the staff it needs.

By combining the IGAV data with the total employment figures we can calculate the economic contribution of the average worker in every industry. A mining worker contributes more than a million dollar to the national economy.

That’s three times more than folks working in the overstretched real estate sector, and four times more than finance workers contribute.

I would suggest that this last chart can be read as a rough indicator for how worried an industry should be about the prolonged structural skills shortage.

The higher up an industry is on the chart, the less worried they need to be about a lack of workers. Industries where each worker adds a lot of economic value can more easily increase pay if need be. At the bottom end of the chart things look differently.

Finding staff here is a challenge – especially if the costs for necessities (housing, food, transport) remain high. Workers will simply gravitate towards sectors that make it easier to pay the bills.

If your industry is in the bottom third of the chart, I would be extremely worried and would commission big pieces of work regarding my future staffing strategy. I’d also work very close with training and educational facilities, and I would want to gain a deep understanding of what makes the young Gen Zs tick.

You cannot afford to underestimate the severity of the looming skills shortage.

The industry worrying me the most here is healthcare as staffing shortages have direct and very grave impacts on the nation’s health and wellbeing.

Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His latest book aims to awaken the love of maps and data in young readers. Follow Simon on Twitter (X), FacebookLinkedIn for daily data insights in short format.

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