Working Paper No. 09-04

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Working Paper No. 09-04

A 21st Century Solution to Skill Shortages in Australia

Victor Quirk

November 2009

Centre of Full Employment and Equity
The University of Newcastle, Callaghan NSW 2308, Australia
Home Page: http://e1.newcastle.edu.au/coffee
Email: coffee@newcastle.edu.au

Abstract and outline.
This paper argues for specific, major, institutional reforms capable of building a highskilled internationally competitive labour force in Australia. It argues for replacing the current policy of maintaining labour underutilisation as a productivity driver, with a national system of counter-cyclical public sector employment (Job Guarantee) and skills formation infrastructure, organised on a regional basis. The first section introduces the issue of Australia‟s deficient skill formation capacity. Sections 2 & 3 summarise deficits in key labour market institutions, the Job Network and the tertiary education sector. Section 4 highlights the chronic failure of the private sector to provide supervised opportunities for novices to undertake skilled work . Section 5 argues that the state has a unique responsibility to act, while section 6 proposes necessary components of an institutional framework. The conclusion addresses the political question of opposition to full employment.

1.

Australia’s deficient skill formation capacity.

Skills shortages are now well recognised by Australian industry as compromising their ability to innovate and compete in global markets (AIG 2008, KPMG 2008). 68.1% of CEO respondents to an Australian Industry Group survey published in April 2008 said skills shortages had impacted on their business in the preceding year, and estimated that it would require 180,000 to 240,000 extra skilled full time employees to meet their needs (AIG, 2008:22-23). 60.2% of the firms reportedly affected by skills shortages said they were restricting their capacity to innovate (AIG, 2008: 28). Given that a minimum of 9% of Australia‟s willing labour force has been consistently unutilised since the 1970s, with considerably higher peaks during periods of recession, the problem is one of insufficient skills formation. Skill formation is a challenge that Australia, along with other countries in the AngloAmerican and neo-liberal mould are clearly failing to meet. When we look to societies with a high skills formation capacity, we see their success underpinned by institutional arrangements that place national, collective interest at the forefront. The provision of a high standard of skills formation and diffusion in Germany, for example, can be partly attributed to the existence of an institutional framework where the state requires employers and unions to share decision-making over vocational training content (since 1969), ensuring skills portability for workers and thus wide skills diffusion throughout the labour force. Peak employer bodies also exert authority within their industries to reduce inter-firm poaching of skilled workers (free-riding), while the availability of „patient capital‟ through local banks creates longer timeframes for return on training investments (Gough, 2005). Other high-skill countries such as Japan and Singapore have other institutional arrangements, but each includes a significant role for the state in creating the social underpinnings of high skill formation, including:



Social cohesion and cooperation among societal players,



Value-adding rather than competing on the basis of cost reduction,



Continuous investment in new skills and particularly skills of communication and problem solving that support collaboration and innovation,



Coordination to produce system coherence,
2



High skills diffusion throughout the labour force rather than a polarisation of high and low skilled workers,



Social inclusion in the benefits of a high skilled society (Brown et al, 2001)

Australia performs poorly in most of these areas. Indeed, successive...
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