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    Skills shortages remain elevated

    Analysis of current skills shortages shows that 36% of occupations assessed were in national shortage (332 out of 916) in 2023, 5 percentage points higher than the 2022 Skills Priority List (SPL).

    Shortages were most common for Technicians and Trades Workers, with 50% of occupations in the category assessed as being in national shortage, broadly consistent with findings of previous SPLs. For example, all occupations in the Construction Trades Workers and Food Trades Workers groups were found to be in national shortage.

    Shortages were also pronounced for the Professionals group, particularly Health Professionals. About 48% of the occupations within the Professionals group occupations were in shortage in 2023. A common thread among shortages in these occupations is that they require a high level of skills and knowledge, qualifications and experience.

    Shortages grew amongst Community and Personal Service Workers (to 24% of occupations in 2023). As with the Health Professionals category, shortages for Community and Personal Service Workers in the health, care and support sectors are considerable.

    New shortages have emerged in 2023 but many are persistent

    Comparisons with the 2022 SPL highlight that there were 66 (or 7%) occupations newly in shortage in 2023, concentrated among high-skilled professional occupations – such as Sales and Marketing Manager, Taxation Accountant, Biomedical Engineer and Solicitor. The main drivers included a decrease in fill rates for these occupations and employers receiving fewer suitable and qualified applicants per vacancy.

    There were also 266 occupations (or 29%) that were in shortage in both years. Among these, 47% were professional occupations mostly related to health, engineering, information communication technology (ICT) and science. Another 33% were occupations within various technician and trade roles.

    Three consecutive years of the SPL enables us to make an assessment of the persistence of skills shortages. The overwhelming conclusion from this assessment is how persistent many skill shortages are. In general, the labour market has not adjusted quickly, for example, through real wage increases, to clear these skilled shortages. The standout problem is the persistence of shortages among Technicians and Trade Workers, though there are also persistent shortages in Community and Personal Service Workers, a range of Professionals occupations, and Machine Operators and Drivers (Table 1)

    Table 1: Persistent shortage since 2021 in ANZSCO major occupation groups

    Major Group Description Occupations in persistent shortage Percentage of major group
    1 Managers 3 3%
    2 Professionals 55 17%
    3 Technicians and Trades Workers 67 33%
    4 Community and Personal Service Workers 5 6%
    7 Machinery Operators and Drivers 8 10%

    Source: Jobs and Skills Australia. Note: the number of occupations assessed has changed for each SPL. This reflects both changes in the Australian and New Zealand Standard Classification of Occupations (ANZSCO) framework and the inclusion of skills shortage assessments for ‘not elsewhere classified’ (nec) occupations in both the 2022 and 2023 SPL assessments.

    Occupations that have a strong gender imbalance were more likely to be in shortage

    Jobs and Skills Australia’s analysis reveals that gender imbalance is a feature of many skill shortage areas. Occupations that have a highly gender skewed workforce are significantly more likely to be experiencing shortages than occupations where the gender balance is more even. Male dominated occupations (in the occupation groups of Machinery Operators and Drivers, Labourers, and Technicians and Trades Workers) and female dominated occupations (in the Community and Personal Service Workers occupation group), stand out.

    Skills shortages were more pronounced in regional areas

    In recent times, skill shortages have been particularly acute in regional areas, especially for the highly skilled. The share of employers reporting location as a reason for recruitment difficulties increased with remoteness. In Very Remote areas, more than 80% of employers believed the reason they did not receive many applicants was because of the job location and over 40% of employers had a suitable applicant not take a job offer because of the location. In the Northern Territory, 55% of employers who had few applicants and 25% of employers with an unfilled vacancy listed location as the reason. In Western Australia, these figures were 36% and 20%, respectively.

    Wage growth to address shortages has not responded as expected

    For all skills shortages, conventional economics suggest that increasing wages is one lever that employers can pull to attract more workers. How successful that will be depends on the ‘elasticity of supply of labour’ which is contingent partly on how many people have the skills required.

    The existence of extensive persistent skill shortages in our labour market implies that it is one in which wage adjustments of this kind are not solving the problem. This could be that for some reason, wage adjustments are not being used as much as they could be, or that there are wider issues at play.

    Recent analysis by both Jobs and Skills Australia and the Reserve Bank of Australia highlights that wage adjustments are rarely used by employers as a short-term response to skills shortages. Jobs and Skills Australia’s Survey of Employers who have Recently Advertised (SERA) found that over the 3 years from 2021 to 2023, few employers changed remuneration in response to skill shortages.

    In the 2023 SPL period, around 1% of employers adjusted remuneration to attract skilled workers to fill vacancies. While this is surprisingly low, it was up significantly on the 2022 result when 0.4% of employers adjusted remuneration for this purpose.

    The results are consistent with research undertaken by the Reserve Bank of Australia, which show limited evidence that firms raise wages in response to firm-wide or job-level skill shortages, at least in the short-term (Leal, 2019).

    Further analysis of wage growth over a longer time horizon may shed light on whether wage adjustments are being used as much as they could be, particularly for occupations that have been in persistent shortage.

    Not all skills shortages are the same

    Jobs and Skills Australia has adopted a typology of skills shortages based on an insightful conceptual framework developed by Professor Sue Richardson. This provides a simplified approach to a complex set of labour market dynamics, and a helpful starting point for analysing both the causes and the potential solutions to the shortages (Table 2).

    It needs to be noted that not all shortage occupations fit neatly in one category or another, and for some occupations assigned to one category, they may have some issues in common with occupations in other categories.

    Longer training gap

    Longer training gap shortages are defined by there being few qualified applicants per vacancy and a long training pathway – a bachelor degree, Certificate IV, diploma or apprenticeship is required by successful applicants.

    This suggests that there is a need to increase the number of available skilled workers but with significant time lags involved in the training process.

    In this category there may be a strong case for increasing the supply or throughput of qualified people either by a larger intake of students or higher completion rates. However, there would be a significant time-lag in creating this throughput. In the short-term, this could be addressed by upskilling people with some of the relevant skills, attracting back people who have left the occupation through improved remuneration and/or working conditions, or migration options.

    Examples of occupations in this category are: Early Childhood (Pre-primary School) Teachers, Occupational Therapists, Physiotherapists, Registered Nurses, and Electricians.

    Shorter training gap

    Shorter training gap shortages arise when there are few applicants per vacancy and a Certificate I to III or less is required.

    A priori, this suggests that there is a need to increase the number of available skilled workers, with shorter time lags involved in the training process.

    This is a category where there may also be a strong case for increasing the throughput of qualified people either by a larger intake or higher completion rates. The time lag would be shorter than for longer training gap shortages, which means it would be fixed quicker if the throughput could be increased. If not, the alternative strategies of upskilling people with some of the relevant skills, attracting back people who left the occupation, or for some occupations migration options may also need to be explored.

    Examples of occupations in this category are Retail Managers.

    Suitability gap

    The suitability gap category is those occupations where there are enough qualified applicants but too many are not hired because they are not regarded as suitable.

    Suitability gap shortages are defined by many qualified applicants per vacancy but few suitable applicants per qualified applicant, which results in many of these vacancies remaining unfilled. Reasons often cited for this suitability gap are lack of employability skills and lack of work experience. Another factor which may be in play is unconscious bias of employers.

    This is a category where simply increasing the throughput of qualified people is a questionable strategy. A priori, it appears that the challenge is to enhance the attributes of qualified applicants through investing in their employability skills and their work experience.

    Examples of occupations allocated to this category are: Advertising, Public Relations and Sales Managers, Construction Managers, and Civil Engineering Professionals.

    Retention gap

    Retention gap shortages are where there is above average job mobility (below average rates of retention) potentially reinforced by low numbers of new applicants per vacancy. A priori, the retention gap category is where low job retention appears to be the core driver of the problem.

    This is a category where simply increasing the throughput of qualified applicants, if it were possible, is unlikely to solve the problem, because of the low likelihood of retaining them in the occupation.

    A priori, it appears that what needs to be explored are ways to enhance the attractiveness of the occupation through improved remuneration and/or working conditions, professional development and clearer career pathways. If attention was paid to that, then increasing the throughput of qualified people would be more likely to pay dividends. Migration options may be another part of the strategy.

    Examples of occupations in this category are: Human Resource Professionals, Chefs, Child Carers, and Aged and Disabled Carers.

    Table 2: Top 20 occupations in demand by shortage type, 2023

    Classification of skills shortage Top 20 occupations in demand

    Longer training gap

    Few qualified applicants per vacancy, bachelor degree, Certificate IV or apprenticeship required

    • Early Childhood (Pre-primary School) Teachers

    • Occupational Therapists

    • Physiotherapists

    • Registered Nurses

    • Solicitors

    • Social Workers

    • Metal Fitters and Machinists

    • Electricians

    Shorter training gap

    Few qualified applicants per vacancy, Certificate I to III or less required

    • Retail Managers

    Suitability gap

    Many qualified applicants per vacancy, but few suitable applicants per qualified applicant

    • Advertising, Public Relations and Sales Managers

    • Construction Managers

    • Advertising and Marketing Professionals

    • Civil Engineering Professionals

    Retention gap

    Above average job mobility (below average rates of retention), potentially reinforced by low number of total new applicants per vacancy

    • Human Resource Professionals

    • Chefs

    • Child Carers

    • Aged and Disabled Carers

    Source: Jobs and Skills Australia, Skills Priority List, 2023 Note: There are 3 occupations in the top 20 occupations in demand – General Practitioners and Resident Medical Officers, Software and Applications Programmers, and Motor Mechanics – which are yet to be categorised. Additional analysis required as they may fall in more than one skills shortage category.

    It can be seen there are likely to be a number of factors that need to be addressed to deal with persistent shortages and the strategy may need to be multi-pronged. For example, increasing training places while exploring migration options in the short-term, combined with higher wages to attract more workers to the roles. Aged and disabled carers are an interesting case in point.