Risks and opportunities in labour market shift

This article was originally published in the The Australian on December 7, 2021.

The challenges in Australia’s labour market have emerged as one of the more significant economic impacts of the COVID-19 pandemic. The impact of the latest omicron variant on borders and people movements and the time it will take for the logistics of international travel and migration to return to something like normal mean this is likely to be a topic of discussion for some time to come.  

Australia is not alone in this respect with countries around the world experiencing significant dislocations in their labour markets that are colliding with big lifts in demand for goods and services as lockdowns lift and pre-pandemic lifestyles return. There is upside in terms of falling unemployment, but also challenges for businesses unable to attract the employees, skills and experience they need. The countries that manage all of this effectively will likely emerge as winners in this global competition for talent. 

Employers are waiting to see if the rumours of a “Great Resignation” in the United States will shift to our shores. At the very least we should expect a “Great Reshuffle”, and in 2022 we are likely to see a growing chasm between companies who continue to attract and retain talent and those that struggle to do so. We are seeing clear signs that our younger generation of workers are looking for employers who offer purposeful careers, are serious about their commitment to ESG issues, and are open to workplace flexibility, including working from overseas locations for extended periods to enable them to spend time with family and friends not seen for years. 

The clear message from discussions with CEOs is that turnover rates have increased with many reporting a doubling over the past 12 months, and that specialist skills shortages are leading to project delays in the areas of IT, infrastructure and auditing among others.   

Vacancies and higher turnover rates are increasing pressure on existing staff who are covering gaps as well as managing the onboarding of new employees. Anecdotally, businesses are also reporting that departing employees are moving into far more senior roles than those they are leaving with significant salary uplifts. All of this raises concerns about whether current performance is ‘masking’ underlying weaknesses that may make it harder to lift and maintain performance as business activity recovers further in the year ahead.

Faced with this environment, prioritising learning and development and wellbeing is challenging. However, there is a silver lining: the pandemic showed us that we can be a lot more flexible in how we work. It seems we will need to use all that we have learned through the pandemic to permanently improve flexibility and inclusion. Improved education, training and development must play an important role in ensuring we sustain the lowest possible unemployment rate in Australia while also addressing critical long-term skills needs. But skilled migration will also need to play a significant part in dealing with both near and longer-term workforce challenges and opportunities. 

The rapid digitisation of our economy through the pandemic has turbo charged the demand for those who can help organisations embed quickly adopted digital technologies in their business processes and leverage further opportunities, and these trends are only set to continue.  

Digitisation is changing the shape of our organisations and the skills we need. As Commonwealth Bank CEO Matt Comyn explained at a recent CEDA event, CBA now employs more coders than tellers – illustrating how consumers now engage with their bank online rather than through local branches. CEDA’s recent Business Investment Survey also reveals that 95 per cent of Australian CFOs surveyed intend to increase their spend on digital technology over the next two years compared to pre-pandemic levels. 

As we re-open our borders to skilled migration our systems need to be able to quickly and effectively adapt and respond to emerging and evolving skill needs.   

There are a number of things that can support this objective. At a tactical level, one example is the streamlined approval of skilled visas for multinational company transfers. These kinds of initiatives can be achieved quickly and drive real momentum, particularly in the tech sector where multinational companies dot the industry.  

At a macro-level, the recalibration of Australia’s migration policy is a broader opportunity - we need cohesion between our immigration system and our domestic skills development and a considered and sustainable approach to long term workforce challenges like that in the aged care sector.  

We have a once in a lifetime opportunity to push unemployment below four percent. However, this is not an opportunity that will simply be achieved by chance. We need good policies in play and an overarching strategy that both meets the needs of business and sustains community support. 

If there is one clear theme to emerge from the pandemic it is that the unprecedented shifts in Australia’s labour market present risks and opportunities. Labour mobility will not quickly return to what it was pre-pandemic, vacancies and turnover are likely to remain high and we should expect to see this eventually reflected in the aggregate wages data. Business will need to adapt to this and they are, but so too will our migration systems and settings in support of sustained recovery.