SA Major Projects & Workforce Impacts - FTH Skills Council

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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
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SA Major Projects & Workforce Impacts - FTH Skills Council

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