Skills warning not labouring the issue

THERE may be many advantages in Western Australia’s isolation, but the state’s distance from a pool of available labour is not one of them.

As the economy revs up again, the same issues from the last boom period are resurfacing, with local economists highlighting the shortages of skills and labour as the number one concern on their horizon.

A year after WA’s unemployment peaked at 5.7 per cent, last month it had fallen to 4.6 per cent in a downward trend that is expected to drop to 3 per cent by the end of the 2012-13 financial year, according to the Chamber of Commerce and Industry WA.

That projection returns WA to early 2008 when unemployment dipped to 2.8 per cent, then considered virtually full employment, amid an economy screaming for people and feeling the wage inflation that resulted.

Leading economists have highlighted the issue, which, importantly, is arising at a time of low immigration compared with two years ago.

“Tightening labour market conditions will pose a significant challenge for WA businesses as they look to expand operations,” CCI said in its September outlook.

“However, labour shortages are not yet as severe as that experienced in 2007 and 2008, when more than 70 per cent of firms were consistently struggling to find staff.”

The result, CCI predicts from the findings of its Commonwealth Bank-CCI Survey of Business Expectations in September, is rising wages pressure.

“Looking forward, 43 per cent of respondents expect wage costs to rise further in the December quarter,” CCI’s outlook report said

“Thereafter, wage pressures are expected to intensify as severe shortages are expected to resurface, and force business to compete to attract and retain the workers that they need.”

Curtin Graduate School of Management’s Peter Kenyon said training and migration were the obvious tools to deal with skills shortages, but seeking foreign workers to solve the skills issue was more difficult in the present political environment.

Professor Kenyon said the current opposition to population growth among federal politicians limited the ability of migration to solve skills problems in the resources sector.

“I think we’ll get more silliness about population policy,” he said.

“It is not a problem that is just confined to the Greens, a lot of people who don’t understand how economics work also have this idea.”

The Curtin academic is not just concerned at the return of the issue, but also how little has been done to mitigate the risk of the problem arising again through education and training policy.

“It is not just numbers of people that matters, it is also the skills base,” Professor Kenyon said.

“I think we are digging a big hole for ourselves because firms are still not doing enough skills formation.

“That is despite the lessons of the last boom.

“As soon as labour shortages appear again, and it is not that far away, there will be a wages breakout.”

Professor Kenyon said workers did recognise the value of training and would trade wages for skills development, but this was not widely understood by employers.

“Accountants and lawyers are not bad at it but in general industry is terrible at it,” he said.

CCI’s outlook also highlighted the training issue. Its Commonwealth Bank-CCI Survey of Business expectations found that a quarter of businesses were planning to retrain existing staff to address labour shortages.

“The majority of this training will come as a result of on-the-job experience, with businesses allocating 3 per cent of their total budget to education and training,” the report stated.

One of the most pressing political problems of the day, local content, is tied up with the training issue.

The Australian Steel Institute has bemoaned the lack of local content in fabrication, a section of the economy that has traditionally done much of the training of specialist apprentices that the resources sector wants.

The institute claims the fall in manufacturing will exacerbate the skills shortage.