ApprenticeThe economy can be a tricky beast, with so many factors influencing the ebb and flow; the availability of natural resources, infrastructure, immigration policy, consumer confidence levels and susceptibility to shifts in international markets all have a marked affect on local economic conditions. At the core of any nation’s financial system is the workforce and while it may be the one constant, it too is exposed to constantly changing conditions.  Is Australia doing all it needs to prepare for the future? Are we committed to training and up-skilling in order to future-proof ourselves, or is it now just a dreaded case of all talk, no action?

In politics, things can certainly change a lot in a few very short years. Back in 2008, the Federal Government launched Skills Australia, an independent statutory body that provided advice to the Minister for Tertiary Education, Skills, Science and Research. The body was formed to assess current skills needs and critically, to work with industry stakeholders to determine future requirements. It was part of the Rudd Government’s Skilling Australia for the Future program, under which $1.9 billion was allocated to address existing skills and labour shortages and to deliver 630,000 additional training places over a five year period.

Fast forward to 2012 and Skills Australia was replaced by the Australian Workforce and Productivity Agency (AWPA), expanding on the remit of its predecessor and reporting instead to the Federal Minister for Industry. In addition, the AWPA was responsible for determining and advising on the strategic direction and priorities of the Government’s National Workforce Development Fund (NWDF).

The NWDF was part of the Gillard Government’s $15.6 billion ‘Building Australia’s Future Workforce’ package and pledged support to the tune of $700 million via direct industry investment over five years. Under the scheme, businesses were able to identify shortfalls in skills and apply for funding assistance to support training and additional workers.

Funding fall-out

In what can only be described as a blow for business, the NWDF has now been discontinued. Warning shots were fired in March this year, when the Department of Industry advised that it would not be accepting or processing applications or requests for funding extensions ahead of the May 2014 Budget. Confirmation that the scheme had ceased to operate was made clear once the Coalition Government’s budget was handed down. So, in the space of six years, we have had two separate ‘five-year’ designs go the way of the dodo; one due to a party leadership change and one to an entirely new government. It doesn’t exactly incite confidence, but that’s politics for you.

Be that as it may, the findings of Skills Australia and the AWPA are alarming. Both bodies determined that Australia will suffer a serious skills shortfall as early as 2015. Our economy is transforming; the resources boom has drawn skilled workers from other sectors and we additionally have significant insufficiencies in potential sectors of growth including clean energy, advanced manufacturing and services. These gaps effectively stymie our ability to remain competitive and resilient on the world market.

The most recent report from the AWPA (April 2014) focuses on the country’s fourth largest sector, manufacturing. Just under 940,000 Australians work in 90,000 businesses across the industry, a figure that represents around 8 percent of the total workforce. Given the breadth of our manufacturing output and the close links to other sectors such as primary production, utilities and construction, the report suggests that raising skill levels is imperative to long-term survival. Much of regional Australia depends on manufacturing for economic viability and the contribution to exports and at around 34%, is significant.

Recent economic factors including the high Australian dollar and tariff cuts need to be offset by increased innovation and the development of high-end products that provide Australian manufacturers with a distinct competitive advantage. As a nation, the days of heavy industrial manufacturing are behind us and our future focus will be complex, high value-added goods. The report suggests that this will be impossible without commitment to continued skills development, which seems likely enough. It specifically states that government support is required for businesses to develop and up-skill staff adequately.

Forced change

Skill gaps that arise from an undersupply or diversion of labour to other sectors are one thing; but what about when legislative changes, incentives or significant technology improvements create a need for new skills or methods of operation within an industry or occupation itself? In 2011 Skills Australia published a report on the jobs and skills implications arising from energy efficiency initiatives in the built environment, specifically in residential and commercial buildings. The report found that, while some new occupations were created as a result of schemes designed to lower Australia’s energy usage, there was a much greater need for existing workers to develop new skills, which is easier said than done.

In this particular scenario, it was determined that knowledge-blending and an interdisciplinary approach was imperative. The report states; “From the design stage through construction and commissioning to occupation, operation, systems monitoring and maintenance, the building process now demands new understandings in common. Architects, designers, engineers, project managers, builders, building scientists, plumbers, electricians and instrumentation electricians, real estate agents, facilities managers, lawyers and accountants could all require knowledge of energy flows and energy monitoring systems”. That’s a lot of up-skilling.

Beyond the border

In many industries, skills shortages are easily solved by recruiting overseas workers under the Temporary Work (Skilled) 457 visa program. The Department of Immigration and Border Protection recognised in 2012 that applications for 457 visas were growing dramatically, indicating that businesses may be recruiting outside of the principles of the program – ie. without adequately researching local labour availability. This sparked a number of changes enforced from 1 July 2013, in an effort to crackdown on abuse of the program, without any adverse impact on those businesses with a ‘true’ skill shortage problem.

Among the many modifications was a tightening of the requirement to train Australian citizens and permanent resident (PR) workers. Prior to July 2013, potential business sponsors had to provide evidence of ‘recent payments’ to an industry training fund of at least two per cent of the payroll or ‘recent expenditure’ equivalent to one percent of the payroll in the provision of training. Now the requirement is ongoing and enforceable, training records must be maintained and auditable training plans must be provided.

In addition, the requirement for demonstration of a genuine skill need is tougher and visas may be refused if tasks of the nominated occupation do not align with an eligible occupation or the position associated with the nominated occupation is deemed not genuine. Application fees were substantially increased, as were other sponsor-related costs, which cannot be passed on to a sponsored employee. The full impact of the changes is not yet evident, but the Department of Immigration is currently conducting an integrity review of the program and is surveying businesses to inform their findings, so that’s one to keep an eye on.

It’ll get worse before it gets better

The Australian Industry Group (AIG) has published the May 2014 Construction Outlook report in conjunction with the Australian Constructors Association (ACA), which confirms that mining investment is on the way down. In theory this should see the return of workforce members previously sidelined by the resources sector. The report goes on to suggest that engineering and commercial construction levels will decline in the next two years, but it is anticipated that transport and communications projects will bear the load and that commercial construction will pick-up post-2015. The ACA advises that now is the time to focus on re-skilling to ensure there is an appropriately trained workforce in place when the tables turn.

This advice may be sage, but it seems like a tough time to be dispensing such wisdom, when incentives to implement programs for up-skilling, re-skilling and other vocational training initiatives are disappearing. Another victim of the latest budget, the Tools for Your Trade payments system will cease to operate from 1 July 2014. The Government has elected to close the initiative ‘so that it may better target funding to improve apprenticeship completions’. On the upside, financial support will be made available to Australian apprentices under the ‘Trade Support Loan’ scheme, whereby an interest free loan of up to $20,000 over four years is offered and repayable at the same income thresholds as FEE-HELP for uni students.

Critical crossroads

Of course, change in any industry is inevitable – needed the services of a cobbler or a chimney sweep lately? So too, with every Federal Budget we predicably divide into the ‘haves’ and ‘have-nots’, but it feels like a tenuous time to take our collective foot off the pedal when it comes to investing in Australia’s workforce. New schemes will no doubt be developed and run their course…or not, but the current message from the Government is clear; ‘skill development is a shared responsibility’.

That may well be the case but for the sake of our future, let’s not wait for our governments to ‘press the go button’. It looks like industry is going to have to carry the burden for a while, so let’s ensure we invest wisely.