TAPPING INTO WA’S LOCAL LABOUR RESOURCES

By Rebecca Todesco, Assistant Editor, Mining Magazine

Skills shortages are an unwelcome yet often anticipated symptom of a growing and dynamic economy, with economic growth usually expected to create at least temporary skills shortages, as adjustment to demand is not instantaneous. Western Australia is no exception to this, and the latest report by Curtin University’s Bankwest Curtin Economics Centre (BCEC) offers a fresh perspective on the issue and the ways the state can work towards filling workforce vacancies.

Tight labour markets, historically low unemployment rates, and years of economic growth have resulted in labour and skills shortages in Australia. These shortages have been felt most acutely in Western Australia, with the state having been at the forefront of the country's economic growth over the last few decades.

Unfortunately, significant growth such as that demonstrated by Western Australia often gives rise to job vacancies and skills and labour shortages.

These shortages have contributed to the state’s economic volatility and have had an impact on sectors ranging from agriculture and major resource and construction projects, to the childcare and aged care sectors, extending throughout regional and remote Western Australia.

A different kind of report

BCEC’s Population, skills and labour market adjustment in WA report was released in September 2022 and is the 16th report in BCEC’s Focus on Western Australia Report Series.

This is not the first time a report on skill shortages has been published and it certainly won't be the last. However, the BCEC’s latest report attempts to differentiate itself by offering a conceptual reconsideration of skills shortages and presents new evidence in the hopes of promoting improved longer-term policy settings instead of offering short-term solutions as other reports do.

In the report, the BCEC explores why Western Australia is more prone to labour and skill shortages than other locations around the country, as well as highlighting ways that taking advantage of the state’s untapped domestic workforce instead of relying on immigration might be the solution.

Additionally, the BCEC unpacks what a labour and skills shortage actually means.

As one would expect, employers prefer to have more skilled workers available to them than less, and would prefer to pay less, rather than more, for the service of these skilled workers. This means that employer reports of difficulties recruiting skilled workers is not enough proof of a shortage.

For this reason, a condition for there being a skills shortage is the existence of a barrier of some sort preventing the optimal allocation of labour. The BCEC report also investigates what these barriers could be.

Western Australia’s workforce

Home to around 2.7 million people, Western Australia is the largest state in the country and encompasses 2.65 million square kilometres – roughly 1km2 of land per person. The state itself is rife with natural resources which are in increasingly high demand by a rapidly growing world economy and global population.

In terms of natural assets, it is estimated that Western Australia is home to some 28 per cent of the world’s crude iron ore reserves, ten per cent of the world’s identified reserves of gold, and possesses substantial shares of both lithium (21 per cent) and zircon (65 per cent).

As well as being a location with significant natural energy production resources like solar and wind energy, Western

Australia also generates services exports, such as tourism and education, and significant agricultural output – including more than one per cent of the world’s total annual wheat harvest.

When this abundance of marketable assets is weighed up with the state possessing a mere 0.034 per cent of the world’s population, it’s easy to see why workers are in such high demand in Western Australia.

Factors contributing to Western Australia’s skills shortage susceptibility

The BCEC report identified three unique characteristics of Western Australia that make the state more prone to labour and skills shortages: the state’s isolation, its resource-based economy, and the resulting volatility.

With Perth taking the crown as the world’s most isolated capital city, Western Australia’s geographical location itself negatively impacts the state’s ability to draw on interstate labour, with many citing the high relocation costs and isolation from family and friends as symptoms of the state’s remoteness.

The common borders and proximity of the eastern seaboard states, as well as South Australia and Victoria, allow for crossborder commuting and easier interstate migration – something that is not possible for Western Australia.

The BCEC report highlighted that of all the states, only Northern Territory residents displayed a preference for moving to Western Australia, with residents from Victoria and Queensland the least likely to make the move.

The state’s resources-based economy – particularly the strong mining and agricultural sectors – mean that many of the state’s available jobs are directly associated with the land and the location of natural resources, often meaning areas outside of major cities.

The Australian Bureau of Statistics (ABS) estimates for the June 2022 quarter showed that the mining and agriculture, forestry, fishing and hunting industries’ claim of more than 12.2 per cent of total employment was almost four times the proportion for the rest of the country.

The BCEC’s report explored place of enumeration data from the 2016 ABS Census which showed 8.5 per cent of Western Australia’s workers were in locations that could be classified as remote or very remote. This figure was only exceeded by workers in the Northern Territory, and were compared with the next highest state – 3.8 per cent for South Australia – and just one per cent in aggregate for the large three eastern seaboard states.

Adding to this, attracting workers to live remotely or for the fly-in-fly-out (FIFO) lifestyle also presents challenges in filling workforce vacancies.

The volatility of Western Australia can also be accredited to its intrinsically-natured economy, and how it results in more regular shifts in industrial composition. These shifts are due to the boom-bust cycle driven by commodity price swings, the immense scale of many resource developments, and fluctuating labour demand during the various stages of those developments.

Despite these factors, Western Australia still relies heavily on interstate migration to mitigate the effects of the skills and labour shortage.

Migration’s role in addressing skills shortages

It is common, in times of labour shortages, for employers and business groups to call for increases in migration to meet excess demand for workers and skills.

In recent decades, Western Australia and Queensland have been the two fastest growing states in the country. But where Queensland’s population has been assisted by a significant net interstate and overseas migration, Western Australia has placed excessive dependence on overseas migration to inject economic and population growth.

In terms of interstate migration, both New South Wales and South Australia have experienced net outflows. Western Australia’s interstate migration has instead fluctuated between periods of net inflows and outflows, with a sustained period of net outflows from around 2013-15 up until the COVID-19 pandemic.

Overall, interstate migration made a small net positive contribution to Western Australia’s total population over the last four decades.

According to the report, instead of interstate migration, Western Australia’s main source of population growth has been international migration. Since 1980-81, international migration has contributed to growth of just under one per cent of Western Australia's population annually, hitting a peak of more than two per cent in 2008-09 and 2011-12.

When it comes to attracting overseas skilled workers, Western Australia is in competition with the other states and territories, with the State Government maintaining a Skilled Migration Occupation List (WASMOL) to prioritise workers interested in migrating to Western Australia, with a similar Skills Priority List also maintained by the National Skills Commission.

However, heavy reliance on immigration to boost the state’s skilled workforce exposes other factors that need to be taken into consideration, including the cost and availability of housing.

The report explains that when a state’s labour market is strong, housing prices tend to rise, and a high unemployment rate will result in lower housing costs. This means that for the unemployed, the incentives to move to a state or territory with a lower unemployment rate are largely nullified by the disincentives created by higher relative housing costs in those areas.

With Western Australia’s tight rental market and scarcity of affordable housing likely to hinder migration flows to the state to combat skills shortages, the BCEC report highlighted the need for the State Government to weigh the reliance on immigration against alternatives like investing in the untapped skills of the domestic labour force.

The underutilisation of domestic talent

Where previous reports have encouraged migration as a way of mitigating a labour and skills shortage, the BCEC report encourages a look within, where there remain substantial pools of untapped sources of labour and skills.

Studies and surveys carried out throughout 2022 indicate that there is a wealth of untapped skills in the domestic labour market in Western Australia, including detailed quarterly estimates from the ABS Labour Force Survey that indicated that there were 627,000 people aged 15 and over in Western Australia who were not participating in the labour force in May of 2022.

The BCEC report introduces the idea that the current pool of unemployed in Western Australia represents only a proportion of the potential labour supply, with many more people outside of the labour force who may be willing to supply labour to some degree under the right conditions.

The BCEC report, using the national data figures from May 2022, strove to determine the number of persons in Western Australia by age and qualification who were not participating in the labour market for that same month.

The estimates show there were around 132,000 potential skilled workers in Western Australia – those with a Certificate III or IV level qualification or higher – who were of working age (15-64 years) but not participating in the labour force in May of 2022. Of these Western Australians, almost half (57,900) held a university degree or higher qualification.

Based on the typical responses from those non-participants by age, the BCEC report estimates there were around 64,000 Western Australians aged 25-54 outside the labour force who would have potentially liked a job, and a further 11,000 aged 55-64. Over half of these individuals are considered ‘skilled’, including around one quarter who hold a university degree.

Barriers to employment

Among the untapped sources of skills and labour are the disproportionate numbers of women, older people and those with a disability who are not participating in the labour market.

The BCEC report takes an indepth look at potential factors contributing to women's lower participation in the labour market when compared to men, finding that the majority of non-participants in the labour market below the age of 50 are, in fact, women.

The report explored two main factors that may be hindering women’s participation in the workforce. Firstly, family responsibilities and a lack of affordable childcare pose significant constraints on female participation, while men’s participation is largely unaffected by those same factors.

Additionally, gender norms on attitudes towards women’s work present an additional challenge for female labour force participation, with the BCEC report stating that addressing the gender stereotypes formed from an early age are the first step to closing the gender gap in labour force participation.

Recent estimates (Jackson, 2022) suggest that engaging Australian women in paid work at the same rate as men could lead to an additional one million full-time skilled workers in Australia.

Addressing skills shortages across the country

Despite feeling the effects more acutely, Western Australia is not alone in facing skills shortages and ways to mitigate the effects are in place around the country.

As such, boosting women’s participation in the workforce and increasing the skilled migration cap were highlighted as key actions to address the skills shortages in the leadup to the National Jobs and Skills Summit in September 2022.

Additionally, the Federal Government has allocated more than $400 million over the next four years to establish Jobs and Skills Councils (JSCs) in efforts to help address skills shortages and broader workforce challenges.

The new JSCs will have a strong connection to Jobs and Skills Australia, aligning with the Australian Government’s vision for new industry engagement arrangements and will bring all parties to the table to find solutions to the workforce challenges and skills needs currently facing industry sectors across Australia.

When a location experiences significant growth, oftentimes that growth comes hand in hand with skills shortages, and Western Australia is no exception to this. The BCEC’s Focus on Western Australia Report Series has taken an indepth look into the state’s labour and skills shortages and the 16th report in the series has offered a fresh perspective on how the state can unlock the domestic workforce and decrease dependency on international migration to mitigate the shortages.