Labour shortages will be an ongoing issue despite the government’s prediction of a jobs boom

We’ve all heard stories of restaurants unable to reopen due to lack of staff. Or reports of consulting firms advertising thousands of vacant jobs. As Australia emerges from lockdowns, labour shortages have been a serious concern for businesses across the country.

Based on the mid-year budget update released last week, the government expects the labour market to tighten significantly: MYEFO predicted that unemployment will fall to 4.25% in coming years. Crucially, it sees participation as remaining at historically high levels — 66% and above — into the mid-2020s. On the basis of this jobs boom, the government is expecting a big tax haul that will allow for even bigger spending.

But the government’s prediction of massive jobs growth relies on some crucial assumptions, including that the right people with the right skills are available to fill these jobs. And with so many uncertain factors impacting labour, it’s anyone’s guess what will happen next.

Why are there shortages?

Countless factors are causing shortages in different industries, but all signs point to COVID-19. Border closures have prevented migrant workers from entering Australia. Lockdowns have led to resignations in industries that became unreliable such as hospitality and tourism. Certain industries, such as consulting and legal practice, have had labour shortages based on booming business resulting from Australia’s economic recovery. In that instance, so much work is coming through the door that firms are finding it difficult to hire enough people to meet demand.

But the long predicted “great resignation” didn’t eventuate in the way experts expected. There is evidence of post-COVID career hopping, which saw 26% more company movement than in the same period in 2019. These movements are exacerbating experiences of labour shortages in the short term, but predicting human behaviour is tricky business. And if it turns out COVID-19 is not as “over” as we hope, ramifications for the labour market will be ongoing.

What’s being done?

The government expects that a massive influx of migrants will address much of the labour shortage: it has doubled its forecast of net migration for next financial year and sees over 200,000 people entering Australia on a net basis each year through to 2025. International students, who provide hundreds of thousands of workers for low-skill jobs, are on their way back, though it’s yet to be seen how many will return and how quickly. The government’s assumption that COVID-19 is sorted and borders will never close again could yet prove optimistic.

But unusually, even business groups are admitting that opening the doors to temporary migrants won’t solve everything — Australia will have to compete with other countries for skilled workers, and with other higher education systems for foreign students. Employer groups are calling for more upskilling and training — though that’s a longer-term fix.

In the shorter term, reports suggest businesses have been offering pay rises and other incentives in attempts to hold on to staff, including in unskilled positions. But with the ever-present threat of a serious resurgence of COVID, inventive policy solutions may be needed to address the issue domestically in the longer term.

And maybe it’s time for a broader reflection. As Crikey has reported, wages have been stagnant for years now, as the cost of living grows at a rapid rate. With labour retention being an ongoing issue, employers should be collectively contemplating taking the plunge and further investing in their workers.