14 November 2023 — Skills and labour shortages go hand in hand, and it is often difficult to disentangle them from each other. Skills shortages exist when employers are unable to fill or have difficulty filling vacancies for an occupation at current levels of remuneration. Labour shortages occur when there are no job seekers available to fill vacancies, even though these jobs may be entry-level and/or do not require specialist skills.
A key conclusion is that while skills and labour shortages in Ontario and New South Wales (NSW) were exacerbated by the global pandemic, they were also a problem pre-pandemic. In the immediate post-pandemic period, the confluence of historically strong employment growth – combined with a lack of net overseas migration – led to severe skills and labour shortages.
In both Ontario and NSW, employers continue to report recruitment difficulties more generally – particularly for occupations requiring higher skill levels and qualifications. The situation in Ontario has eased to some extent and this is predominantly because of falling job vacancies and increased net overseas migration.
In NSW, labour markets remain tight with the Job Vacancy Rate at extremely low levels. There are now tentative signs in NSW that falling employment levels and job vacancies are easing skills and labour shortages. The easing of skills and labour shortages is not, however, a cause for joy. This is because the current key driver is each country’s central bank’s policy of controlling inflation by raising interest rates, thereby slowing economic growth and employment.
As inflation is brought under control and monetary policy settings return to a more neutral position, it can be expected that more severe skills and labour shortages will return. Accordingly, it is likely that labour and skills shortages in key sectors will continue to be an issue into the future.
A number of clear policy implications arise from this paper. Governments should consider investing more in education and training to resolve skills and labour shortages, including programs to lift participation in skilled trades by under-represented groups (for example, women, persons with disabilities, and Indigenous peoples). As a priority, more should be done to improve youth participation through programs that improve school completion rates, build employability skills, and promote apprenticeships.
Malcolm Cook is an economist with extensive experience in labor market policy and analysis. Malcolm was a Lecturer in Economics at the University of New England and Southern Cross University and has authored over a dozen refereed publications on labor statistics, Australian economic history, economic policy, and health economics. After leaving academia Malcolm worked as an employment policy adviser in the Australian Public Service, contributing to the development of Australia’s employment services model, including Job Network, Job Services Australia, jobactive and the Remote Jobs and Communities Program. He now works with Angus Knight researching labor market trends and advising on employment policies.
