Untapped local labour resources crucial to easing skills and jobs shortages

— WA prone to skills shortages due to isolation, remoteness of worksites and volatility of resource industry and economy —
— At least 40,000 Western Australians unemployed each month and number of vacancies over 60,000 –
— WA’s economy has highest growth rate of all the States and Territories this century, more than doubling in size —

Released today by the Bankwest Curtin Economics Centre, the ‘Bridging the Gap: Population, skills and labour market adjustment in WA’ report has found large untapped pools of domestic labour, in complement to a skilled migrant strategy, are the key to addressing skills and labour shortages impacting many sectors and extending throughout regional and remote Western Australia.

The report found WA was highly prone to skills shortages due to unique characteristics such as the isolation of its capital city, remoteness of mining and agricultural worksites and volatility of its resource industry and therefore economy.

Co-author and Bankwest Curtin Economics Centre Principal Research Fellow Professor Michael Dockery said skills shortages were a normal feature of a dynamic and growing economy, however, what was important was the ability of the labour market to respond to such shortages.

“While the call for more immigration has dominated addressing the skill and labour shortages, as heard at last week’s Jobs and Skills Summit, there are large, unharnessed sources of local labour and skills that we should also consider drawing on,” Professor Dockery said.

“The current period of low unemployment has seen at least 40,000 Western Australians unemployed each month, while the number of vacancies employers are seeking to fill is running at over 60,000.

“Unemployment and disengagement from the domestic labour market by those who would like to work has long-term economic and social costs, including negative mental health impacts and the fact that the longer people are out of work the less work-ready they become and the less efficient the entire labour market becomes.”
Co-author and Bankwest Curtin Economics Centre Principal Research Fellow Associate Professor Astghik Mavisakalyan said better workforce diversity had a number of benefits beyond simply addressing the current skills and labour shortage.

“In the case of women and people living with a disability, there are also compelling equity and social justice considerations. Another benefit is that drawing on existing, latent sources of labour does not add to pressure in the housing market.”

Associate Professor Mavisakalyan said the report explored the causes of lower employment rates of women relative to men and found family and childcare responsibilities posed significant constraints on female participation in the labour market, while men’s participation was relatively unaffected by those same factors.

“The cost of accessing suitable childcare is a major contributor, with nearly 60 per cent of those people who are considering using paid childcare believing the cost is a problem to some degree,” Associate Professor Mavisakalyan said.

“Gender biased norms on attitudes to women and work are an additional barrier constraining female workforce participation, suggesting closing the gender gap in labour force participation needs to start with addressing gender stereotypes that are formed from an early age.”

The report also found WA’s current tight rental market and the lack of availability of affordable housing was likely hindering migration flows from overseas and interstate needed to help ease skills shortages.

Key findings:

WA LABOUR MARKET IN CONTEXT

• WA had the highest growth rate of all the States and Territories this century and more than doubled in size between 2000 and 2021.
• Queensland, WA, NT and ACT are states that have combined relatively high rates of employment and population growth.
• With the exception of Queensland, these growth states have also exhibited relatively low unemployment rates.

WA PRONE TO SHORTAGES

• WA highly prone to skills shortages due to unique characteristics such as the isolation of its capital city, the remoteness of mining and agricultural worksites and volatility of its resource industry and therefore economy.

VACANCIES AND UNEMPLOYMENT

• Compared to Australia, WA generally needs about twice as many vacancies per worker to drive unemployment down.
• Persistently high numbers of vacancies per worker and per unemployed person suggest substantial skills shortages in WA and evidence of an inferior process of matching vacancies to available workers.

A SKILLS OR LABOUR SHORTAGE

• The current period of low unemployment has seen at least 40,000 Western Australians unemployed each month, while the number of vacancies employers are seeking to fill is running at over 60,000.
• There are substantially more positions to be filled in WA than there are unemployed persons.
• Workers with a university education consistently experience unemployment rates below 4 per cent, whereas those who did not complete Year 10 typically face rates of around 14 per cent.

FEMALE LABOUR FORCE PARTICIPATION

• More than 62 per cent of women aged 15 and over were in the labour force in 2022 compared to under 52 per cent participation in 1992.
• Labour force participation rates are 64.5 per cent for women and 74.9 percent for men in Western Australia – a difference of 10 percentage points.
• The share of employed women has risen by 4 percentage points over the past 5 years, reaching nearly 61 per cent in 2022.

CULTURAL CONTEXT OF FEMALE LABOUR FORCE PARTICIPATION

• Nearly 44 per cent of men and 33 per cent of women surveyed in 2019 agreed that a working mother can’t establish as good a relationship with her children as a mother who does not work for pay.
• The perceptions of trade-offs between work and parenthood appear to constrain the labour force participation of women but not men.

LABOUR FORCE PARTICIPATION FOR PEOPLE WITH DISABILITIES

• There is a pressing moral and equity case for the promotion of inclusiveness of people living with a disability in our workplaces, as recognised in Australia’s commitment to the United Nations’ Convention on the Rights of Persons with Disability.
• The report estimates that a concerted commitment to inclusivity in Western Australian workplaces could reasonably be expected to bring at least 9,000 people into the workforce.

INDIVIDUAL LABOUR MOBILITY

• A one percentage point increase in a state’s unemployment rate relative to the national rate, increases the chance a person will move out of that state by 14 per cent.
• Because housing prices tend to fall when unemployment is high, this typically negates around 40 per cent of the incentive to move out of a state in response to rising unemployment rates.
• The evidence on mobility patterns is indicative of poverty traps, in which the unemployed lack the resources to move to respond to changing regional employment opportunity.

DYNAMICS OF LABOUR MARKET ADJUSTMENT IN WA

• WA was one of three Australian states and territories having a positive net interstate migration in 2021.
• Overseas migration reduced significantly in all states and territories after the COVID pandemic.

UNDERUTILISED MIGRANT WORKERS

• Around 35 per cent of employed migrants from a non-English speaking background in Australia and in WA are working in occupations for which they are overeducated.
• There appears to have been surprisingly little upward occupational mobility for migrants from non-English speaking backgrounds during WA’s ‘skills crisis’ of 2008.

UNDEREMPLOYMENT RATES

• Typically, around 16 per cent of Australian workers report they would prefer to work more hours.
• On average, full-time workers would like to supply just 0.7 extra hours per week (0.9 hours for men and 0.3 hours for women), and part-time workers an average of 4.4 extra hours (6.4 hours for men and 3.6 hours for women).

UNTAPPED LABOUR SOURCES

• Migration to fill skills and labour gaps should be considered in combination with strategies to invest in potential sources of domestic labour.
• Unemployment and disengagement from the labour market by those who would like to work has substantial long-run economic and social costs.
• In May 2022, there were around 64,000 Western Australians in their ‘prime’ working ages of 25-54 years who were outside the labour force and would potentially like a job, and a further 15,500 persons aged 55-64 years who would like to be working.
• Over half of these potential workers were skilled, with a Certificate Level III/IV or higher qualification, including around one-quarter who held a university degree.