As WA continues its resources-led economic recovery, businesses are searching for solutions to the encroaching skills shortage.
FIVE years ago, Western Australia’s mining industry employed half the number of people as the manufacturing sector; this year, mining has overtaken manufacturing to become the second-largest employer in the state.
This turnaround illustrates the growing prominence of WA’s mining sector, which directly employs 85,700 people, led by international conglomerates like BHP Billiton, Rio Tinto and Chevron, as well as the locally based Woodside Petroleum and Fortescue Metals Group.
About 28,000 full-time jobs were created in the mining sector in the year to August, according to the Australian Bureau of Statistics.
The surge in mining and petroleum projects has not only provided a direct boost to jobs growth, it has fuelled the expansion of the construction sector, which is the state’s largest employer with 110,400 jobs.
Construction companies such as Leighton Holdings and BGC are major forces in both the Pilbara, where they are building railways, roads and wharves to service resources projects, and in Perth, where they are also proceeding with major infrastructure projects.
Another fast-growing area is the professional, scientific and technical services sector, with full-time positions increasing by 39 per cent. This sector includes many professions, from engineers and geologists to lawyers and accountants, who are in high demand.
Employment growth has not, however, been strong across all sectors of the economy.
The retail sector, while remaining one of the state’s biggest employers, was up only 8 per cent due to sluggish sales and continued low consumer confidence.
The information media and telecommunications sector shed 30 per cent of jobs in WA last year, with Telstra’s decision to axe almost 1,000 positions nationally a contributing factor, with more cuts expected during the next three years.
Other shrinking sectors included manufacturing (down 10 per cent), health care and social assistance (down 15 per cent), and agriculture, forestry and fishing (down 19 per cent).
The net result is that WA’s unemployment rate has been around the 4.5 per cent level for the past 12 months.
In fact, it has risen over the past two months to 4.7 per cent, but that still gives WA the lowest unemployment rate of the major states, and compares to a national figure of 5.4 per cent.
The still low unemployment rate, coupled with the economic recovery, mean the risks of a return to pre-GFC labour shortages are increasing.
September’s Outlook report from the Chamber of Commerce and Industry WA reported that 30 per cent WA businesses are already describing labour as “scarce”, with the same percentage expecting the problem to worsen during the December quarter.
It’s a long way from the height of the boom in 2008, when 70 per cent of businesses were struggling to find staff, but the trend is definitely upward.
CCIWA expects employment to grow by 3 per cent in 2010-11 and 2011-12, and a further 3.25 per cent in 2012-13.
The chamber’s October report found that almost a quarter of WA businesses are planning to recruit staff from interstate and overseas, while a Hudson report for the same month indicates that 44 per cent of WA businesses have plans to hire this quarter, the strongest sentiment in the country.
CCIWA chief economist John Nicolaou said a labour shortage could have far-reaching implications.
“Failure to address current and future labour requirements not only limits the capacity of business to grow, but has economy wide implications by raising prices and interest rates,” he said.
“We only have look back two years ago prior to the emergence of the global economic slowdown to gain an insight into the demands and pressures that the local economy is set to face.”
As labour tightens, a raft of measures is being implemented across individual businesses, industry bodies, and all levels of government to ensure the WA economy can continue to grow without being stifled by a dearth of skilled labour.
These measures include salary rises, staff development, training and a more targeted approach to migration.
The latest report from human capital consultants Aon Hewitt shows that organisations across Australia are raising their 2011 salary budgets by an average of 3.8 per cent in an effort to attract and retain talented employees.
WA employers have already moved on salaries, with CCIWA announcing in September that local wages were up 6 per cent on the previous year and, at an average of $1,362.40 per week, were the second highest in the country.
Hudson WA general manager Andrew Tomich said the tightening labour market had put salaries back on the agenda.
“The skills shortage has returned, without a doubt, and it hasn’t taken long, the GFC only hit us two years ago,” he said.
“The number one reason that people are leaving is still career development, but it’s followed closely now by financial considerations, so salaries are playing a very big part of people’s decisions to move.”
CCIWA agrees the pressure on wages will only intensify, with labour shortages becoming more apparent as businesses try to attract and retain staff.
Unable to pay the salaries offered on the mines, many businesses outside the resources sector have struggled to retain staff in recent years, and now they are focusing on career development to entice workers to stay.
Mr Tomich agrees that career development is one of the most important aspects of retaining staff.
“Not everyone is actually able to pay more money, so for your high performers, engage them in some projects or some other career development opportunities within the organisation,” Mr Tomich said.
“Re-engage with your staff through career development, because that is the number one reason people are leaving.
“So have those discussions with people to find out what their motivations and what are they looking to do. Really drill down to each person’s individual requirements.”
Jody Elliott is a human resources consultant for the oil and gas industry, and also runs employment information website The Resource Channel.
She said there was no magic answer to retaining staff, but there was widespread agreement that career development and variety were vital.
Ms Elliott said many big companies had tarnished their brand and lost employee loyalty after being quick to cut jobs during the economic downturn, and would now struggle to recruit a similarly skilled workforce.
While the large resources companies already had policies in place to train workers, the construction industry would again be hardest hit by a skills shortage as the competitive tendering system left little room in the budget for training.
The lack of resources for training was also reflected in the latest Commonwealth Bank – CCI Survey of Business Expectations, which found that, although a quarter of local businesses are planning to re-train their existing staff to address labour shortages, only 3 per cent of the average business’s budget has been allocated to training.
The shortage of skilled workers is also being addressed by peak industry bodies, with Master Builders Western Australia last week holding its inaugural Skills Summit, and forming a steering committee that will advocate policy change.
Recommendations from the summit included: the promotion of WA jobs interstate and in New Zealand; the establishment of overseas training centres; a bond system between employees and employers to discourage poaching from other sectors; and an overhaul of the apprenticeship system to create a more targeted industry training regime.
Both the state and federal governments are also focusing their attention on training.
Last week it was announced that former Woodside Petroleum executive Keith Spence would chair the $200 million Critical Skills Investment Fund, which will co-fund industry partnerships in training and employment projects across the resources, construction, renewable energy and infrastructure sectors.
Mr Spence already heads up the West Australian State Training Board and is a member of the Skills Australia Board.
The state government is currently preparing Skilling WA, a workforce development plan designed to rapidly increase skilled labour.
Five briefing papers covering different sections of the issue have been released, and the government is currently consulting with stakeholders, but so far no date for a decision has been set.
The reforms will be implemented by the Department of Training and Workforce Development, which was formed in August last year as the latest move in the state’s continuing efforts to fight the skill shortage.
Mr Nicolaou said it was vital that the state government take action to prevent a return to labour shortages.
“Business is implementing a range of their own measures to try and avoid labour shortages, but government must take a leadership role to address the significant bottleneck which is rapidly emerging,” he said.
Also last week, the federal government announced changes to the skilled migration test, which it says will create a more tailored and responsive migration program.
The changes, which subject to parliamentary approval will take effect from July next year, include a greater focus on English skills, work experience and high-level qualifications.
The government says the changes will address a perceived imbalance in skilled migration intake.