Strategies needed to ease labour shortage

BY 2014, an additional labour force of 26,000 skilled workers may be needed on resource projects around Western Australia, particularly in the Pilbara, Mid West and Goldfields regions.

In 2020, according to the Chamber of Commerce and Industry Western Australia, the state is likely to require an additional 488,500 skilled workers. There is expected, however, to be a shortfall of 210,000 workers.

The ongoing expansion and development in regional Australia, especially north-west Australia’s Pilbara and Kimberley regions, underlines their long-term economic significance to the national economy.

The regions’ critical infrastructure is a vital part of Australia’s current and future prosperity.

The Pilbara, with a resident population base of 45,000 people, can be considered one of the most productive regions in the nation.

In 2006-07, the region delivered $7.1 billion to the Commonwealth in taxes and royalties. It also provided 20 per cent of total national merchandise exports, with the value of its exports in 2007 exceeding $33 billion.

Between 2002 and 2007, skills shortages were identified, alongside export bottlenecks, as a capacity constraint. The significance is that the shortages led to Australia losing global market share in eight mineral commodities, including coal and iron ore.

In 2010, skills shortages remain a threat to the confidence and capacity of Australian businesses, especially resource projects in the Pilbara. According to CCIWA, by 2020, the Pilbara will experience a shortfall of 10,000 workers.

Regional Australia needs a skilled workforce. A lack of skilled workers in the Pilbara will constrain the region’s capacity to grow. Therefore, can Australia afford to ignore the challenge of skills shortages facing the Pilbara region?

Skills shortages

Industry, state and local governments are all pursuing policies to make the Pilbara and its key regional centres become a place of choice, where people choose to live, work and raise families. Port Hedland and Karratha are slated to become major cities of the future. Whatever the economic situation, the Pilbara must become a sustainable region that can endure tough times and capitalise on the boom periods.

As the region becomes economically more important to the nation, there will be a greater need to tackle core problems, which may place a brake on future growth. Labour and skill shortages are an important element that must be addressed to ensure the region’s future growth and development.

According to the Western Australian Chamber of Minerals and Energy, the development of WA, and in particular the Pilbara, is subject to the key growth enablers of people, energy and water.

In the post-GFC environment, the CME identified that, in the short-term, access to capital is the ‘more likely growth constraint rather than access to people, energy or water’. Over the long-term, however, it is limits on the so-called growth enablers that will continue to have an adverse impact on the ability of the Pilbara to capitalise on future growth.

The CME says skilled labour demand remains a critical issue. Strategic initiatives have been suggested by the CME to address this issue. The chamber advocates ‘an increased commitment to education and training’ and ‘continued support for the skilled migration scheme’.

Such measures provide industry with the required number of suitably qualified people to work on projects. The CME also notes that skilled workers are required in the construction and housing sectors.

A CME survey in 2008 of minerals and energy companies regarding their expected workforce demand through to 2020 found that the period of highest demand across WA would be 2008-2014, with the projected peak demand in 2012 when the minerals and energy sector’s labour demand will be about 38,000 workers.

This demand for labour in the Pilbara has its implications. To attract and retain workers it will have to face competition from other regions across WA, which will also be seeking more workers.

According to the CME, the highest growth regions are expected to be the Mid West, Goldfields/Esperance and the Pilbara.

In 2014 alone, the additional demand for workers in those three regions (over 2007 figures) is estimated to be 60,000, 3,000 and 14,000 respectively.

The unevenness of demand for labour and skills across sectors, including the minerals and energy sector, will create gaps and lags across various occupations and skills. This is especially likely to occur during the construction phases of projects in the Pilbara region.

The Pilbara Industry’s Community Council report of April 2010 said the projected construction activity generates construction employment reaching over 22,000 in 2010. Nearly all of these additional workers are expected to be fly-in, fly-out, depending on the location of the project.

The reliance on FIFO will have an impact on regional communities, especially if the workers are flown in from regions well outside those where mineral and energy operations are conducted.

Confidence in the long-term viability of the Pilbara region could wane if an outside workforce is flown in and out to conduct lucrative work, at the expense of locals and others willing to consider living permanently in the north-west of Australia.

A 2010 Commonwealth Bank of Australia Economic Utility Report indicated that many FIFO workers who earn their money in the Pilbara spend it elsewhere.

Many local government authorities in the Pilbara appreciate that mining companies decide to use FIFO based on economic reasons.

Many LGAs, however, claim that FIFO arrangements undermine the long-term viability of developing sustainable communities in regional Australia.

It is necessary to look at options that create and support regional workforces that live close to where there is demand for their labour.

Possible solutions

Increasing indigenous participation and employment in the resource sector is just one element in addressing that situation. The minerals industry claims to be the largest private sector employer of indigenous people, with 5 per cent of its direct workforce identifying as being indigenous Australian. As the mining, resource and energy sector grows, it will continue to play an important role in the employment of indigenous Australians.

Another element is the dedicated creation of regional workforce plans. They could focus on the specific needs of a particular region, factoring in the particular geographic and workforce requirements, and coordinate a response across government to provide assistance to industry and the local community.

The Australian Institute of Mining and Metallurgy (AusIMM), which represents minerals sector professionals, claims that supply constraints can be addressed immediately by adding a host of jobs for mining professionals to the Skilled Occupations List. Other issues addressed include taxation reform, improving funding to universities, creation of courses for industry outcomes, as well as dedicated geotechnical engineering training at the undergraduate level.

AusIMM also argues that there is an urgent need to address the lack of women working in the industry. Suggestions include closing the gender pay gap, improving workplace cultures within the resource sector, and making childcare expenses in rural and regional Australia tax deductible.

Overall, strategic initiatives and policies must be implemented by government to provide the right training, employment and investment conditions for the resources sector. Continued and improved engagement by government with industry and stakeholders is essential.

The long-term viability of resource projects in the regions, especially the Pilbara, is dependent on a ready supply of skilled workers to allow access to the economic advantages such developments will bring to the national economy.

• Gavin Briggs is research manager of the ‘Northern Australia research program’ for Future Directions International. This is an edited version of an FDI analysis paper on skills shortages in the Pilbara.