Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Skills formation

Missing from the Wilkins and Wooden analysis of temporary immigration was any recognition of the role that temporary workers play in skills formation. As Fairfax economics editor, Ross Gittins, observed:

“To me the main drawback is not so much that employers may not try hard enough to find local workers to fill jobs, or that the availability of this external supply may limit to some extent the rise in skilled wages, but that it reduces employers’ incentive go to the bother of training young workers.”⁸⁸

Employer justifications for seeking to weaken labour market testing, and indeed their overall preference for seeking to import skilled workers, are founded on an aversion to undertaking skills formation. The historical infrastructure for skills formation in Australia has been steadily dismantled over the last two decades. On the one hand we have seen a proliferation of training markets and private training colleges, as public training providers have lost funding and resources. On the other hand, many of the large public utilities or enterprises which once provided the core of the skilled blue-collar workforce have been privatised and have radically decreased their training commitment. We will comment on training markets and the problems these engender in the next section. The demise of the large in-house training facilities, particularly in former public utilities like Telecom, Qantas, various Electricity Commissions and Water Boards, has left a serious vacuum when it comes to blue-collar skills formation.

This problem has been around for some time, and was well documented in the early 2000s.⁸⁹ More recent data suggests no improvements have taken place and that the provision of work-related education and training in Australian workplaces remains very modest. A minority of workers undertake any work-related education or training over the course of a year, even when they are employed full-time. For male full-timers the percentage is in the mid 30s while for female full-timers it is in the mid 40s (Figure ). For the part-time workforce, the figures drop to the low 20s among the men and hover in the low 30s for women. We noted earlier that employers have increasingly turned to part-time employment over the last decade, which suggests we are seeing a net decline in the overall employer training effort. Figure also suggests an overall decline in male participation in training since 2008, among both full-time and part-time employees.

Figure : Work-related education or training by hours status, Australia 2007–2013

Y axis is the percentage of employees who undertook training during the previous 12 months. Source: HILDA Release 13.
Figure : Work-related education or training by employee category, Australia 2007–2013

Y axis is the percentage of employees who undertook training during the previous 12 months. FT = full-time; PT = part-time; Perm = permanent; Cas = casual; Fixed = fixed term employee. Source: HILDA Release 13.

The lower figures for part-time employees is a pointer to the problems of non-standard employment discussed earlier. We saw that casual employees, in particular, were more likely to rate lower on the utilisation of their skills, as well as their job security. When it comes to the provision of training and education in the workplace, casuals fare poorly, irrespective of whether they are part-time or full-time. The proportion of casuals accessing training was almost half that of the permanent workforce (though this fluctuated considerably among women). For male casuals, in particular, there was a sharp decline in their access to training after 2009, before a recovery in 2012. A similarly sharp decline took place among male part-time employees. While there is some volatility in the data due to sampling variability, as well as volatility in the actual employment of casuals, the pattern for the period around the GFC is consistent with heightened employer uncertainty about the future and a concern to trim workplace costs. Finally, the higher levels of training among the fixed term employees is consistent with the occupational profile of this group of workers, who tend to be drawn from professional and technical areas, and whose overall profile—apart from their lack of permanency—is quite similar to the permanent workforce.⁹⁰

Skills mismatching

The notion that skills formation should be left to the market is particularly problematic. Training markets have been plagued by poor standards and inefficiencies, with regular media exposés of rorting or sub-standard outcomes. More seriously, the ‘skills crisis’ which Australia has faced over the last 15 years has often been a problem of employer recruitment difficulties, rather than genuine industry-wide skills shortages. At the same time, one of the major problems in the workplace has been educational and skills mismatching. Criticisms of an ‘over-educated’ workforce in Australia have been common⁹¹ and this problem is likely to worsen if ‘student demand-driven education’ becomes the norm in higher education and vocational education. Despite the rhetoric of efficient market outcomes, the evidence suggests that major problems are likely to arise in matching educational outcomes with labour market openings.

Problems of mismatching concern not only qualifications but also skills. In a study conducted in 2008, at the peak of the pre-GFC boom, Watson argued that employer association claims of widespread skill shortages were exaggerated. Using data from the skilled vacancy index and from NCVER’s employer surveys for 2005 and 2007, Watson suggested that about one fifth of employers were experiencing difficulty recruiting staff. These difficulties were not the same as ‘skill shortages’, since there can be other reasons for such recruitment difficulties. Using a subset of responses—where employers pinpointed industry skill shortages in their answers—Watson calculated that about 15 per cent of employers faced actual skill shortages. This was an all-industry average, and the mining industry stood out as a glaring anomaly: 34 per cent of employers there faced skills shortages. In the case of the skilled vacancy index, this had largely remained intact from about 2000 onward, with only Western Australian—the home of mining—standing out decisively. As well as skills shortages, Watson also looked at skills gaps, the situation where employees don’t have the required ‘qualifications, experience and/or specialised skills to meet a firm’s skill needs’. This led to the conclusion that the size of the skills gap in Australia was about 5 per cent. By way of contrast, some 37 per cent of employers regarded their employees as having skill levels above what was required.⁹²

Later research by Mavromaras and colleagues confirmed this research by looking at overskilled workers, those who can do more things than their job requires. They found that 12 per cent of employees in full-time employment were ‘severely overskilled’ and that 30 per cent were ‘moderately overskilled’⁹³. In a follow-up study in 2010 Mavromaras and colleagues found somewhat higher levels of severe overskilling. Table , taken from their study, shows the incidence of overskilling by educational qualification which suggested that those with the least formal qualifications were, in fact, the most severely overskilled.⁹⁴ As for the moderately overskilled, this was extensive across all qualification levels.

Table : Reported overskilling in employment (%)

	Extent of overskilling (Row %)
	Well	Moderately	Severely	Col %
	Match-ed	over-	over-
		skilled	skilled
All employed	50.99	30.68	18.32	18.69
Year 10 and below Year	47.39	32.25	20.36	25.79
11–12 Certificates I/II and below	45.19	35.88	18.92	1.73
Certificates III/IV and apprenticeship	62.13	27.88	9.99	21.02
Diploma/degree	62.46	26.33	11.21	32.78
All qualifications	56.06	29.16	14.78	100.00
No. of observations	23,688	12,322	6,245	42,255

Notes: Uses waves 1 to 6 from HILDA.

It is clear that any future scenario for skills formation is likely to see a continuation of current practices. In other words, domestic labour market matching for both skills and qualifications are in a parlous state, while international recruitment of skilled labour simply allows many employers to avoid serious commitments to training. The ultimate responsibility for skills formation lies with adequate public training infrastructure and with commitments by large employers to sourcing their skilled labour domestically by increasing their in-house training.

None of these criticisms advanced above imply that immigration is not worthwhile. It assists with economic growth and does meet genuine employer needs for specialised skills. The problem lies in the extremes into which the situation has descended: a collapse in the domestic skills formation system, poor matching of skills and jobs, and a reliance on immigration to side-step solving these problems. Current moves to weaken labour market testing and the further dismantling of public training provision at the state level can only make the situation worse.