Shortage of Skilled Labor in Australian Industries

The shortage of skilled labor has become a major problem in some industries of Australia, such as construction, hospitality, telecommunication, and health. The vocational education and training sector is blamed for the skill mismatch. Lack of incentives, undervalued teachers, cumbersome training programs, and the central-state conflict are some factors responsible for skill shortage. The direct consequence of labor shortage is on the wage. In order to ensure steady growth of these sectors, serious attention should be given to skill improvement of new and existing labor force.

Running Head: ECONOMICS FOR BUSINESS
Economics for Business
Name of the Student
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Table of Contents
Introduction................................................................................................................................2
Summary of the article...............................................................................................................2
Economic Analysis.....................................................................................................................3
Recommendation........................................................................................................................5
Conclusion..................................................................................................................................6
Reference list..............................................................................................................................7

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Introduction
In the production process four necessary inputs are land, labor, capital and
organization. With changing production technology, the demand for skilled labor has
increased rapidly (Cascio 2018). Lack of human resources has become a major problem in
some industries of Australia. The construction sector of Australia is suffering from a shortage
of skilled labor. It has become harder for sector to find trained workers. The shortage of labor
lead a high wage growth. Persistent lack of human resources pull back the growth of the
concerned sector. The report evaluates demand and supply of skilled labor force based on a
recently published article.
Summary of the article
The chief executive officer of Mead Con, Tim Mead has claimed for not getting
sufficiently qualified workers to do the work. The sector is currently facing massive struggle
for having workers with necessary skills. The construction industry is lagging behind other
industries. The sector no longer needs good old fashioned workers rather is now needs a more
skilled workforce. The skill shortage report of 2017 has revealed that there is a nationwide
shortage of skilled workforce in the building industry (theadvocate.com.au 2018). Lack of
skills have also been realized in automotive, telecommunication and hospitality industry.
In the article, the vocational education and training sector is blamed for the skill
mismatch. Instead of going in line with industry needs, the sector is moving off at a tangent.
There is a lack of incentive to join TAFE after completion of high school. Rather than
becoming a plasterer or carpenter students are more interested to pursue a university degree.
Being frustrated from a substantial skill shortage of workers, the organization has set up an
independent training school. This is a long standing problem that cannot be resolved by one
off industry training program. The latest vacancy report reveals that there is a 17.1 percent

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increase in vacancies for drivers and machine operators and nearly 16.1 percent rise in
vacancies for technician and trade workers (theadvocate.com.au 2018).
The direct impact of labor shortage is on the growth of wages. The director of
Australian Chamber of Commerce and Industry says that the existing wage in the labor
market is above the award. The highest wage increases is realized in health sector. The
funding in the vocational training sector is in a mess making the training program less
efficient. This leads to a steady decline in apprenticeship and training (portnews.com.au
2018). The relation between state and federal government is in a debacle state with
government withdrawing incentives to employers, assistance to students in form of fees and a
sharp rise in wage of the apprentices.
Economic Analysis
The demand-supply balance in the market helps to determine a stable equilibrium
price and quantity. The mismatch between demand and supply scenario causes a deviation of
price and output from stable equilibrium condition. As like the commodity market, the
demand and supply argument holds for input markets as well. In the labor market, demand
and supply of labor determines the equilibrium wage in the market (Mahanty 2014). Factors
causing a change in supply or demand leads to a change in wage.

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Figure 1: Effect of labor shortage on wage
(Source: as created by Author)
The labor demand and labor supply curve are given as DD and SS respectively. A
shortage of skilled labor shift the supply curve to the left raising the wage from W1 to W2
Different industries in Australia such as construction, health, telecommunication and
hospitality are suffering from a shortage of skilled workers. Inefficiency in vocational and
training program is responsible for a shortage of skills in the labor market. The VET sector
has undergone with several weakness. The curriculum of TAFE are underpinned by
concerned training package designed based on the industry standard (Healy, Mavromaras and
Sloane 2015). The cumbersome process of creation and modification of training packages
reduces the effectiveness of such programs. The programs lacks the needed incentives for the
educator to be responsive and innovative.
Another problem in the VET sector is that teachers are considerably undervalued in
the VET sector. For example, in order to be teacher at a primary school a bachelor degree is

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needed. However for becoming a private provider at TAFE only with a certificate four in
VET sector (Webb 2015). The teacher just need to have industry qualification of one level
higher than the level taught.
The status of state and federal relation has appeared as the biggest problem associated
with TAFE. Lack of trust between different levels of government results in unsustainability in
vocational education. As a result, the vocation training system lacking behind other system.
The conflict between federal and state government leads to poor allocation of responsibility
(Weller, 2017).
Figure 2: Labor shortage and sectorial growth
(Source: as created by Author)
The lack of labor input affects the supply in the commodity market (Nicholson and
Snyder 2014). The supply curve shifts upward to S2S2. This leads to reduction in output from
Q* to Q1 indicating a contraction of the concerned sector.
Recommendation

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The continuous labor shortage inhibits growth of major sectors of the economy.
Therefore, the problem needs to be resolved as soon as possible. The vocational training
program should be improved. Sufficient incentives should be provided such that students join
the training program after completion of high school education. The vocational education
sectors should hire well qualified teachers to improve the quality of training.
The conflict between federal and state government should be resolved with proper
division of responsibility. The trainers should be innovative and responsive to the required
skills of different industry.
Conclusion
The shortage of skilled labor has now become a severe problem in Australia. Sectors
like construction, hospitality, telecommunication and health have suffered from a lack of
labor with required skills. The sectors now need workers having new skills set. However, the
vocational education and training sector of Australia has recorded an underperformance in
delivering proper skills. The direct consequence of labor shortage is on the wage. Lack of
incentives, undervalued teachers, cumbersome training program and the central-state conflict
are some factor responsible for skill shortage. In order to ensure a steady growth of these
sectors serious attention should be given on skill improvement of new and existing labor
force.

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Reference list
Bolton, R. (2018). Shortage in skilled tradespeople a long time in the making. [online] The
Advocate. Available at: https://www.theadvocate.com.au/story/5304283/shortage-in-skilled-
tradespeople-a-long-time-in-the-making/ [Accessed 22 Apr. 2018].
Cascio, W., 2018. Managing human resources. McGraw-Hill Education.
Healy, J., Mavromaras, K. and Sloane, P.J., 2015. Adjusting to skill shortages in Australian
SMEs. Applied Economics, 47(24), pp.2470-2487.
Mahanty, A.K., 2014. Intermediate microeconomics with applications. Academic Press.
Nicholson, W. and Snyder, C.M., 2014. Intermediate microeconomics and its application.
Cengage Learning.
Port Macquarie News. (2018). Skilled migration a boon for regional business. [online]
Available at: https://www.portnews.com.au/story/5351667/skilled-migration-a-boon-for-
regional-business/ [Accessed 22 Apr. 2018].
Webb, S., 2015. The feminisation of migration and the migrants VET policy neglects: the
case of skilled women secondary migrants in Australia. Journal of Vocational Education &
Training, 67(1), pp.26-46.
Weller, S.A., 2017. Accounting for Skill Shortages? Migration and the Australian Labour
Market. Population, Space and Place, 23(2).