SA Major Projects & Workforce Impacts - FTH Skills Council

SA Major Projects
& Workforce Impacts
“future-proofing”
our workforce needs
SA Major Projects & Workforce Impacts

Creating Awareness
In late 2006 the Industry Skills Boards in South Australia
saw the need to make industry and government aware of
the workforce impact of major projects, and to encourage
industry and government to focus resources to solve the
skills and labour shortages in a holistic manner across the
industries and the state, rather than acting independently.
Key major project proponents were contacted
directly to discuss the employment needs of
their projects. This proved extremely difficult
and it was obvious that many of these industry
contacts did not have a clear picture of the
direct workforce and employment needs
of their projects and little understanding of
the indirect needs or impacts. This led to a
number of recommendations for industry and
government which are explained in detail in
the Workforce Impact SA Report.
The nine Industry Skills Boards which represent
all industry sectors in SA, created a small
collaborative project with the Department
of Further Education Employment Science
and Technology (DFEEST) and the Australian
Institute of Social Research, based at Adelaide
University to:
• identify major projects and their workforce
impacts
• identify the indirect implications such as
transport, power, housing infrastructure
and community services
• provide recommendations to facilitate a
whole-of-government and appropriate
industry response
• develop a simple analysis and reporting
format tool that can be repeated annually.
Due to the significance of the recently
announced major mining and defence projects,
the State Government has created separate
skills institutes in these areas. These are the
Defence Skills Institute (which is incorporated
in the Defence Teaming Centre), the Maritime
Skills Centre and the Mineral Resources and
Heavy Engineering Skills Centre.
Major projects were identified initially, based
on the 2006 Major Developments Directory
produced by the Department of Trade and
Economic Development. This list was added to
by using the Industry Skills Boards networks,
the projects known to the Construction
Industry Training Board and the regional
knowledge of the DFEEST Employment
and Skills Formation Network, which has
representatives operating in each of South
Australia’s 17 regions. It became evident in
this process that there are a large number
of projects under consideration that will
significantly add to the list in the near future,
making the need for action on the workforce
and skills impact of the projects even more
critical.
It also became obvious to the Industry Skills
Boards Representative Group that one of the
keys to facilitating industry and government
response was to create a matrix of major
projects. Businesses are encouraged to
consider where they fit by industry and region,
and to think about and plan for the workforce
(and other) impacts of major projects. The
matrix will be available for industry and
government. It is recommended that the
matrix is updated regularly as a valuable
tool for “future-proofing” South Australia’s
workforce needs.
Graham Oades
Project Manager,
SA Industry Skills Boards Joint Project
SA Major Projects & Workforce Impacts

Workforce Impacts
of Major Projects
Typical Major Project Employment Creation
Employment
Project Employment
Indirect Employment
The Workforce
Challenge
Population growth in South Australia has been well under 1% this
decade – one third of the 1960s growth. Within ten years, one
third of the state’s workforce will be approaching retirement. The
number of people of working age will start to reduce from 2011
and currently for every young person entering the workforce
there are seven people over 45 years of age. Estimates suggest
that between 2005-2006 and 2013-2014 there will be 338,100
job openings created by retirement. (Source: Centre for Policy
Studies 2005)
South Australia has over 200 approved major projects across
all 17 regions. The combined value of these projects is
more than $30 billion. Approximately 90 of these projects
($12 billion) are currently in the construction phase, some
nearing completion. Added to this, there are at least twenty
major projects under consideration that will shortly be
approved or become public. The 200 plus major projects
span all industry sectors with major concentrations in mining,
defence and construction. Approximately $200 million worth
of projects such as school expansions and energy projects
have multiple locations across regions that do not have
individual values. These projects are included in the matrix
and highlighted as “multi regional”.
The direct and indirect workforce (employment) and other
impacts of major projects will be felt most strongly in the
regional areas of South Australia that have a disproportionate
value of these projects in relation to their population. The
regions also have less infrastructure, housing and transport
capacity to deal with the flow-on impacts of the projects.
Planning Phase Construction Phase Operational Phase
Time
The diagram shows the impact major projects have on indirect employment.
The indirect employment impacts are rarely considered or analysed, except for
extremely large projects such as Olympic Dam and the Air Warfare Destroyer
projects.
This major projects “good news”, dominated by mining and
defence, is enhanced by the prediction of strong ongoing
general economic activity and the availability of investment
capital. With lowering unemployment and the mass retirement
of baby boomers, the focus needs to move to the impact
on the available workforce and whether it has the right skills.
Major projects will accelerate the workforce challenge South
Australia is now facing.
New indirect jobs
The BHP Olympic Dam project and other major mining
projects are examples of how significant the direct, indirect
and workforce impacts of a major project can be. Between
2006 and 2014, as many as 18,000 new indirect jobs may
be created from mining projects. This figure is close to
half of South Australia’s current unemployment numbers.
The estimate increases to between 2500 and 3000 new
jobs per year over the next eight years when the indirect
impacts of the defence projects are added.
The workforce solutions to this issue must involve
the unemployed (approximately 40,000 people), the
underemployed (those who would like to work more hours)
and those discouraged jobseekers who are not participating
due to a lack of the right opportunity, incentives, skills and
a host of personal and societal reasons. Estimates suggest
that the current total number of South Australians who could
realistically be drawn into the workforce is over 100,000
people. From an economic point of view, it is critical that
this group is assisted into employment as openings become
available. If this does not occur it is estimated that within ten
years the labour demand may exceed supply by between
10,000 and 12,000 people per year. Inter-industry transfer will
be generated as workers move from lower paying industries,
creating significant pressure on high labour cost and low
margin industries. Some analysts are predicting this may
restrict further economic growth from 2014 by 40%.
SA Major Projects & Workforce Impacts

Current Workforce Skill Level
Percentage of the Workforce
Yr 10 Trade Degree
Future Workforce Skill Needs
These graphs show the need to upskill South Australia’s workforce to meet
the higher skills levels required to keep businesses globally competitive.
The skills demanded across the economy are changing.
There is a greater call for higher skill and qualification levels
and for more specialised positions to be filled. The graphs
above show how the workforce skill levels must increase
to meet the demand of these projects. Businesses must
be aware of the need to begin planning and changing
organisational culture to minimise the impacts of the
workforce challenge facing the state.
Percentage of the Workforce
Yr 10 Trade Degree
Supply and Demand
Conservative estimates suggest the demand for labour
(workers) in South Australia will outstrip supply within ten
years. In its most simple terms this means there will not be
enough people to do the work! South Australia’s ageing
population is one of the key reasons for this problem.
Australian Bureau of Statistics (ABS) and other government
data show that SA has the oldest population of all states and
is aging more rapidly than the rest of the nation. This problem
is being faced in most developed nations around the world.
Projected Demand and Supply of Labour in South Australia
People Required 000’s
900
800
700
2007 2025
2017
Demand
Labour “Gap”
Supply
Arrow indicates how major projects
increase labour demand and reduce
the time to demand exceeding supply
The graph (based on DFEEST 2007 estimates of ABS and Monash Centre of Policy
Studies data) shows how new major projects may shorten the time before demand
outstrips supply.
The SA Major
Projects Matrix
The Workforce Impact SA Major Projects Matrix is a snapshot
of the major projects in SA by industry sector and by region,
as at April 2007.
The matrix includes projects nearing completion as
well as those approved, but not yet commenced. Each
project is listed with their dollar value in millions, with an
indication of whether it is likely to have a major impact in
the areas of employment, skills and training, construction,
accommodation and housing, transport, infrastructure, health
and community services, and power. The impact of a project
can be much greater in a regional area where services and
infrastructure are constrained.
Industry and businesses can use the matrix to consider the
impact of major projects from a positive (business generating)
point of view and also from a risk management perspective.
The matrix provides policy makers and government agencies
with an overview to best focus regional resources, and
enables training and education providers to pinpoint projects
and regions where skills and employment are going to be
in the greatest demand. The population and employment
figures included by region also give a good understanding of
some of the labour supply issues. Comparing the variation
in unemployment from 2.2% on Kangaroo Island to 8.3%
in Northern Adelaide (with 50 times the population) is
enlightening when considering labour pools for projects.
It is also hoped the matrix will be used as an educational tool
in schools, in further education and by universities as well as
a tool for job hunters, consultants and contractors who may
target a project or region.
During this project the Industry Skills Boards became aware
of at least 20 projects under consideration that will shortly be
approved or become public. It is likely that local councils and
regional businesses have access to information regarding
other major projects which may need to be included.
SA Major Projects & Workforce Impacts

The matrix also does not show the impact of regulatory
decisions such as the recent changes to crowd control (security)
licensing that has created a labour shortage of many hundreds
of licensed security workers across the state. It also does not
include redundancies or rationalisations. These issues need to
be considered in addition to the impacts shown on the matrix.
Prompting Workforce Planning
The current SA workforce challenge is not going to be
solved solely by government policy. It will require action
by businesses to protect themselves and adapt to the
changing workforce environment. For those businesses
in high labour cost, low wage rate and mature workforce
environments the challenge will be the most critical.
The key message that businesses should take from the SA
Major Projects Matrix and Workforce Impact SA Report
is the urgent need to understand the risks of impending
skills and labour shortages and how to deal with them.
Businesses need to take this opportunity to assess the
need to change their workforce management practices.
This will be key to attracting and retaining staff.
The Talent War
It’s clear there is already a “war for talent” in SA in key
skills areas. This “war” will eventually become a battle for
labour across the whole Australian economy. Recruiting and
retention in lower paid employment will become extremely
difficult as employers compete for labour. The employment
demands of major projects will exacerbate this. Shortages
in skilled jobs relating to mining, defence and construction
are already evident and, in some cases, are causing wage
increases in the region of 10% pa. At a recent CEDA
conference, a BHP spokesman commented that the eventual
labour cost of the Olympic Dam project (in billions) would be
influenced by the salaries being paid in the mining industry
in Western Australia, which is an alternative and benchmark
for potential employees and contractors in SA. Regional
shortages will be the most extreme, as existing businesses
see mass staff movement to high paying projects.
Possible 5% Wage Inflation Impact on Profits
100
Profit 12%
Loss 2%
% Profit
% Loss
% of Business Turnover
50
0
Payroll 50%
Other Costs 38%
Payroll 64%
Other Costs 38%
Now Possible 2012
% Payroll
% Other
This graph illustrates that over a 5-year period of labour
shortage-generated wage inflation (5% net increase
compounding), a company with high payroll costs could
have its profit wiped out. This is a possible scenario in
South Australia within the next ten years if businesses and
industry sectors do not plan to deal with the likely labour
shortage issues. Competitive industries with high labour costs
and low wages will be the most vulnerable. It may lead to
rationalisation in many industry sectors, especially those with
a large ‘small business’ base. Many companies may have to
review their business models.
Impact on Your Business
Current Australian Institute of Management figures suggest
replacing a person costs $20,000 and average small business
labour turnover is now 18% per annum. There are critical
workforce planning and business questions SA companies
should be asking such as:
• What is my annual labour turnover? (number of workers
who have left in the last year divided by the total number of
normal workers multiplied by 100) Has it been increasing?
What is this labour turnover costing my business?
• What will the labour requirements of my business be
in five years? Can my current workforce meet these
requirements? Will they have the skills? Do I have a plan
for meeting the workforce needs?
SA Major Projects & Workforce Impacts

• Are the pay rates and working conditions competitive with
other industries? How does my business and industry
compare to my competitors and other industries for pay
and conditions? Will major projects in my region have an
impact? Will this impact be positive or negative?
• How many of my employees are likely to retire in the next
five years? What can I do to prevent potential retirees from
leaving?
• Have I considered what to do if key staff leave? Do I have
a succession plan? Do I have the training in place in case I
lose a key staff member? Am I willing to look at wider pool
of labour such as mature aged, the underemployed (job
sharing etc), indigenous and migrant groups?
• Do I and the other managers have the skills and
knowledge to be able to get the best of my staff? Do I
provide enough leadership? Are the roles of my workers
clear? Have we undertaken a skills and training audit of the
current business requirements? Can we extrapolate this to
the next five years and recruit and train for the likely gaps?
• Do we understand the cultural and lifestyle expectations
of our workers? Can we offer better work/life balance,
flexibility, recognition, security, promotion opportunities and
personal challenges within the constraints of the business?
The Need for Workforce
Impact Assessments
The graph below clearly indicates that South Australia faces
the biggest workforce challenge in Australia. The “Forecast
Reduction in Average Annual Employment Growth (% of
baseline employment growth rate) due to population ageing,
by State and Territory, 2004-05 to 2009-10” predicts that
employment growth in SA will be restricted by 40% due to
aging-related labour shortages and pressure.
Forecast reduction in average annual employment growth
(% of baseline employment growth rate) due to population ageing,
by State and Territory, 2004-05 to 2009-10
SA
ACT
TAS
VIC
NSW
AUS
QLD
WA
NT
17.4
17.1
20.3
0 10 20 30 40 50
This is why careful consideration of the workforce needs and
impacts of a major project are more critical now than they
have ever been before. Most major projects are required to
carry out Environmental Impact Assessments, but only a
small portion of major of projects are carrying out a detailed
public or private workforce impact assessment. During the
Workforce Impact SA project, when major project proponents
were contacted, most of them did not know the likely
direct employment outcomes of the project and had little
understanding of the indirect impacts.
24.7
26.5
27.4
34.7
36.1
Percent of baseline employment growth rate
Source: Centre of Policy Studies, MONASH model forecasts
42.9
A workforce impact assessment for each major project
should be based on a consistent template that is demanddriven.
This information will help build up a knowledge base
to make indirect impact modeling more accurate in the future
A suggested template would include:
Major Project Workforce Impact Assessment Template
Information provided by
the project proponent
Company Details
– key company contacts
Project Details
Location, industry, $m value,
planning, construction&
operational timelines
Workforce Requirements
Direct company employment
during each project phase
Breakdown of qualification
levels of employment
Breakdown of employment
duration
Indirect Project Impacts
Project requirements for
transport, accommodation,
power,
infrastructure, training,
key resources & suppliers etc
Competitive Impacts
Known positive or negative
impacts on competitor or
industry employment
Government input &
assistance that may apply
Government
contact officer(s)
Project is added to the
Major Projects Directory
database
Industry sector skills
replacement analysis is
undertaken
Define what government
assistance may be provided
Provide links to relevant ISB,
ESF network(s)
Assess the need for/arrange
impact modelling
Link to relevant departments
to clarify requirements and
impact
Provide general economic
growth analysis
SA Major Projects & Workforce Impacts

The workforce impact assessment will act as an early warning
for the business and for government regarding the project. It
should allow the application of known workforce solutions to
problems generated by the project. The level of government
input would depend on the nature and scale of the project
and its region.
Recommendations
The Workforce Impact SA Report has made a number of
important recommendations suggesting options for the
future to allow the proper assessment of the impact of major
projects on employment, skills, infrastructure, housing etc.
These are that:
1. The major projects matrix is widely distributed each year
and updated on a website every three months. This could
be in the form of an online tool associated with the current
Major Projects Database.
2. A workforce impact assessment template is agreed by this
project’s stakeholders. This will create a consistent base
for analysis of projects and provide an aid to businesses
undertaking major projects.
3. All significant major projects go through a workforce
impact assessment process with the assistance of the
appropriate SA government or Industry Skills Board
representatives.
4. The South Australian Government adopt a consistent
model (Such as the RISE model) to analyse the indirect
employment impacts of major projects.
5. The South Australian Government commission a
comprehensive industry workforce consultation every two
years to identify and plan for critical employment and skills
needs.
6. Other indirect impacts of major projects (in addition to
workforce impacts) are also accurately assessed by
government and this information is made public. This
information could also form part of the online tool in
Recommendation 1.
Issues and Comments
A number of issues arose from discussions during the
Workforce Impact SA project that can form the basis of
further thinking and planning. These include:
1. Information gathered from major project employment and
skills demand, via the major projects database and the
analysis of the projects, must be linked to labour supply
information regionally, with the assessment of available
labour by skills and qualifications. This should drive
resource and funding allocation to resolve regional skills
shortages in a more analytical manner.
2. Local councils should be involved in the workforce
planning process and be aware of the major projects
database and its implications. They have a significant input
in early warning for major projects.
3. TAFESA, schools, universities, business associations and
training organisations are provided with access to the
major projects matrix to aid their workforce planning and to
help with educational and career activities.
4. To help businesses understand and engage in more effective
workforce planning a simple resource explaining how to do a
workforce impact analysis should be created, marketed and
provided to businesses and other stakeholders.
5. Further work is undertaken to gather data from Western
Australia where the impact of skills and labour shortages
is several years in advance of South Australia. This will
provide valuable information on the likely impacts and
methodologies for dealing with them.
6. A list on non-project related impacts is kept as part of an
adjunct to the matrix. This would include major changes
to laws, regulations etc that will have workforce impacts
similar to major projects.
Note: These recommendations do not imply agreement by the South Australian
Government, or any stakeholder, to proceed with work.
SA Major Projects & Workforce Impacts

Going Forward
The Industry Skills Boards will be progressing the workforce
planning message relating to major projects and also as a
necessary management skill for all businesses. The work
to continue the momentum and awareness created by this
project will involve:
1. Marketing and distribution of the report and matrix via
forums, the Industry Skills Board network and through the
regional Employment and Skills Formation Network. This
should provide coverage of close to 10,000 organisations.
2. Seeking the publication of the matrix and editorial in state
and local newspapers to increase public understanding
and awareness of the need to continue addressing the
state’s workforce challenge.
3. Inviting key project stakeholders to a roundtable to
collaboratively progress the recommendations of the
report and ensure the creation and distribution of the tools
proposed by the project.
4. Integrating the outcomes of this project into a number of
workforce planning and development projects currently in
the pipeline including several major collaborative projects
focused on major project impacts.
5. Continuing to consult with key business stakeholders in each
industry sector to provide expertise and tools to support and
assist with workforce development and planning.
Workforce
Development Links
Industry Skills Board
Industry Skills Boards are a facilitator between industry and
government on skills issues incorporating strategic industry
workforce planning, training and development, particularly
in vocational education and are base funded by the South
Australian Government.
Service Skills SA: www.serviceskillssa.com.au
Food, Tourism and Hospitality Skills Council:
www.fthskillscouncil.com.au
SA Health and Community Services Skills Board:
www.sahcssb.com.au
Manufacturing Skills Board: www.misac.com.au
Business Services Industry Skills Board South Australia
Inc: www.bsisb.com.au
Construction Industry Training Board:
www.constructionskills.com.au
Electrical, Electro technology, Energy
and Water Skills Board: www.eeewsb.com.au
Primary Industries Skills Council: www.pisc.org.au
Transport Industry Skills Board: www.tdtsa.com.au
In addition to the nine Industry Skills Boards, the following
organisations assisted with project information for the Major
Projects Matrix 2007:
South Australian Chamber of Mines and Energy:
www.resourcessa.org.au
Defence Teaming Centre: www.dtc.org.au
ESF Network
Employment and Skill Formation Networks are collaborative
local partnerships between regional development boards,
industry, community organisations, training organisations and
all levels of government. They work to meet the workforce
development, training and employment needs of local
businesses and jobseekers.
For information regarding your local Employment and Skill
Formation Network please refer to the contact details at the
bottom of the Major Projects Matrix for your local region.
For further information follow the regional links on the South
Australian Works website: www.saworks.sa.gov.au/pages/
saworks/regions
Department of Further Education,
Employment, Science and Technology
Refer to www.dfeest.sa.gov.au
The Workforce Development Directorate of DFEEST is the
key government stakeholder in this project. The Workforce
Information Service (WIS) also assisted with this project.
www.workforceinfoservice.sa.gov.au
This project was part funded through the SA Works
Workforce Development Fund.
Other Key Links
Other key links that have been vital for the Major Projects
Matrix 2007 to be developed are:
The Australian Institute for Social Research:
www.aisr.adelaide.edu.au
The South Australian Centre for Economic Studies:
www.adelaide.edu.au/saces
South Australian Works:
www.saworks.sa.gov.au/pages/saworks/regions
Department of Trade and Economic Development:
www.southaustralia.biz/dted/index.htm
South Australia Biz: www.southaustralia.biz
Department of Trade and Economic Development
Major Projects: www.majorprojects.sa.gov.au
Department of Employment and Workplace Relations:
www.dewr.gov.au
Department of Employment and Workplace Relations
Skills Information: www.skillsinfo.gov.au/skills/regions/sa
Skills in Demand: www.workplace.gov.au/NR/rdonlyres/
35D58940-96FF-4260-AB85-23D9BF7CAF64/0/
SkillsinDemandSeptember2006.pdf
South Australian Strategic Plan Website:
www.stateplan.sa.gov.au/
SA Major Projects & Workforce Impacts