Extract from ABC News
Analysis
By business editor Ian Verrender
Repetition is a powerful weapon when it comes to psychology. Say something often enough and eventually it becomes accepted as truth, or at least the conventional wisdom.
Last week, right on cue, as our unemployment rate dropped yet again, the same old arguments were trotted out about what ails our workforce.
Australian workers, we are told, lack the required skills to get our economy back on track and hurtling into a new era. What's required is a renewed intake on a mass scale of skilled workers from offshore to plug the gap.
The shortage of empirical evidence to back up these claims seems irrelevant. And, while you are at it, ignore the logic that tells you it simply can't be true.
If it really is the case that skilled labour is in such short supply, why aren't wages being bid into the stratosphere by desperate employers? In fact, the opposite is true. For most of the past decade, wages growth has been the slowest on record. And they are showing no sign of recovery.
Stagnating wages is the single biggest factor behind the Reserve Bank's inability to fire up the economy. The RBA has failed for almost six years to get inflation off the mat, into the sweet spot between 2 and 3 per cent, primarily because of weak wages growth.
And if our workplace skills really are so poor, what does that say about our education system? How could it possibly have failed so comprehensively at a primary, secondary and tertiary level for more than 20 years?
That begs another question. If our education system is so appalling, why do legions of foreign students fight to get a place in our universities and colleges and pay through the nose for the privilege?
So many unanswered questions. So inconvenient.
The easy fix
In 2002, the Howard government ordered an inquiry into skills shortages, labour demand and education requirements to equip the economy for the new millennium.
Submissions from key business lobby groups the Australian Industry Group and the Business Council of Australia complained of immediate skills shortages, a lack of quality applicants, long-term shortages of key skills, an ageing population and the need to train and upskill existing workers.
The Australian Chamber of Commerce and Industry added that skills shortages had been "a major concern for Australian industry for most of the past decade."
The Department of Employment noted skills shortages in some trades going back to 1994. In particular, pastry chefs, mechanics, upholsterers, boilermakers, sheet metal workers and panel beaters were hard to find.
Amongst the professions, accountants, a wide range of health professionals, specialised engineers and even secondary school teachers were listed.
The report goes on and on in its examination with a wide range of recommendations.
Twenty years later, however, and we're told we are still facing the exact same dilemma, particularly when it comes to fruit pickers and restaurant workers, if they are considered key skills.
But here's a thought. Labour markets operate in much the same way as capital markets. Labour, like capital, will gravitate towards the area where it will earn the highest return.
That's an academic way of saying this: There's an easy fix to skills shortages — pay higher wages.
Instead, the push has been on to import large numbers of extra workers.
There are two reasons why. The first is to depress the price of labour. And the second is that rapid expansion of the population results in a bigger economy and a larger potential market which makes it easier for businesses to make more money without any need for innovation.
The skills crisis that wasn't
As a country's economy grows and evolves, industries become more mechanised, requiring fewer workers, and new industries replace older ones.
The demand for new skills can cause temporary shortages and a free flow of global talent that can fix short-term problems should be welcomed. But if those new industries offer higher salaries, potential employees will train up to meet the new demand for the long haul.
Three years ago, the
Reserve Bank tried to figure out exactly why wages weren't growing
given we were in the grip of the Great Aussie Skills Shortage. While
it found shortages in some locations and industries, the graph below
illustrates how the "crisis" largely was a confection.
From the turn of the century until the global financial crisis, there was an unambiguous rise in skills shortages.
This was the era of unfettered greed in the financial sector, which attracted an influx of workers into banking, a huge lift in demand for skills in information technology, a big lift in construction and, of course, the mining boom which saw legions of eastern states workers up-stumps and head west.
Since then, however, skills shortages don't appear to have been much of a problem.
You can clearly see the recession of the early 1990s. And just check out those years at the turn of the century when the Senate inquiry into skills shortages was called to urgently examine the "crisis". There was hardly a problem at all, let alone one stretching back years.
Skilled migrants out of work and overlooked
The tales are heartbreaking. Engineers and medical specialists picking up any work they can, delivering takeaways, driving Ubers.
It
is a common story and community groups often complain that skilled
migrants do not land jobs in their chosen field and often are overlooked
by Australian employers.
During the past 70 years, Australia has welcomed more than 7 million migrants, which has greatly added to social fabric and the nation's economic vibrancy. But the pace has lifted dramatically in recent years. One million of that total arrived in the past decade alone.
A 2019 study by University of Adelaide academics Andreas Cebulla and George Tan found that the skilled migration program – which took in 178,000 migrants in 2017/18 – "failed to achieve its full economic potential, dashing personal dreams in the process".
While their survey focussed on South Australia, it found that while the new arrivals were significantly better qualified than the state average, the unemployment rate amongst them was twice the state average, with a further 15 per cent saying they were not working enough.
And while the flood of new arrivals by definition has made the economy bigger, that too has come at a cost.
Policy ruse?
If you strip out the effects of population to measure what's known as per capita GDP, our GDP performance hasn't been anywhere near as spectacular as we've been led to believe. Rather than 30 years of uninterrupted growth, we've experienced several recessions.
On that measure, we had one in 2018, 2005 and in 2000 with near misses in 2008 and 1995.
Not only that, the reluctance of governments to invest in infrastructure to cope with the rapid increase in population has hurt our productivity. Always happy to take the kudos for having a bigger economy, our pollies baulk when it comes to ensuring our cities work.
The Organisation of Economic Co-operation and Development — now led by former finance minister Matthias Cormann — last week delivered its latest assessment of our progress and while the report was glowing in some respects, there were several concerning aspects.
Per capita GDP was 9 per cent lower than the OECD's best performers and our productivity was 15 per cent below the star performers.
Our problem isn't so much a skills shortage as a policy ruse.
We've bodgied up the numbers to make it appear we are world leaders when it comes to economic growth. But in the process, we've squeezed wages, living standards and productivity.
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