Getting Skills Right: Australia

OECD

• Publisher: OECD
• Year: 2018
• eBook ISBN: 9789264306677
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Chapter 1. Skill imbalances in Australia

Global trends like rapid technological change, increased globalisation, and demographic developments, are transforming the nature of work and the demand and supply of skills in particular. These trends have already contributed to a change in the skill profile of employment across OECD countries, and these changes are expected to continue. In this context, there is a critical need to assess current skill needs and to anticipate future skill needs.

This chapter provides an overview of skill imbalances in Australia by focusing on skill mismatches and skill shortages. It discusses the cost of skill imbalances to individuals, firms and the economy as a whole; and sets the scene for a discussion about how skill assessment and anticipation (SAA) exercises can be powerful tools in responding to them.

The skills and jobs in demand in the workplace have altered considerably in recent decades as a result of major global trends: rapid technological innovation, increased globalisation, and ageing populations, among others. These trends have led to the emergence and expansion of some sectors and occupations at the same time as others have contracted. Even within existing occupations the tasks performed by workers and the skills needed to perform them have undergone significant change. These changes contribute to imbalances between the demand and supply of skills. While some degree of skill imbalances is expected in any dynamic economy, persistent imbalances in skills can be costly for individuals, firms and the aggregate economy.

To understand skill imbalances, and to devise appropriate policy responses, high-quality information about the needs of the labour market is needed. This chapter reviews the evidence on current skills imbalances in Australia, and sets the scene for a discussion about how skill assessment and anticipation (SAA) exercises can be powerful tools to respond to them.

Note that for most of this report, the term “skills” is used in a wide sense (i.e. to include qualifications, fields of study, and cognitive and non-cognitive abilities). However, in certain parts of the report, a distinction will be made between “skills” in this wider sense and “skills” in a narrower sense, i.e. to refer to the set of competences mobilised to perform the tasks related to a job. For example, this distinction will be made in Chapter 2 to frame the recommendation that Australia develop better proxies to measure skill needs, since most of the country’s available intelligence around skill needs focuses on qualifications and occupations, rather than skills, per se.

Box 1.1. Defining “skills”

Despite the key role that skills play in the labour market, there is little agreement as to how to define the concept. The term “skill” can refer to general cognitive and non-cognitive abilities (e.g. information-processing skills, teamwork, and problem-solving) as well as to knowledge and abilities that are specific to a particular job, occupation or sector (e.g. accounting or hair colouring) (Becker, 1962[1]). In practice, the terms skills, knowledge, abilities, competences, and education are often used interchangeably.

Source: Adapted from OECD (2017) Getting Skills Right: Skills for Jobs Indicators.

1.1. Main Findings

• Evidence from international analyses, as well as the Department of Jobs and Small Business’ research agree that skill shortages are currently low in Australia relative to the historic trend, and on par with the global average. Similarly, the OECD Skills for Jobs database finds that while several types of skills are in shortage in Australia, the intensity of the shortages of most skills is relatively low.
• According to the Skills for Jobs database, the most acute shortages are in knowledge of education and training, health services and mathematics and sciences. Apart from knowledge of manufacturing and production, and physical abilities like fine manipulative abilities, control movement, and physical strength, relatively few skills are in surplus. This profile of skills in shortage and surplus in Australia largely reflects global trends, like the rapid development of new technologies.
• Over-qualification is higher in Australia compared to the OECD average (20% versus 17%), with vocational education and training (VET) graduates better matched to their jobs than graduates from higher education. To some extent, qualification mismatch in Australia is only apparent, as most workers who are over-qualified to their jobs are well-matched in terms of literacy skills. This discrepancy illustrates the low capacity of qualifications to accurately signal the quality of skills acquired.
• While field-of-study mismatch is on par with the OECD average (33% versus 32%), the overlap between field-of-study and qualification mismatch is relatively high (40% versus 33%). To the extent that these workers must downgrade to a job that requires a lower level of qualification, they could face wage penalties of up to 20% relative to those who are well-matched.
• Skill imbalances entail large costs for individuals, firms and the aggregate economy in terms of lower wages, lower job satisfaction, increased employee turnover, and lower productivity. Skill shortages are particularly costly for small and medium-sized enterprises, which make up 70% of employment in Australia. Gaps between the skills that job seekers have and those that employers are looking for also contribute to persistent and elevated unemployment.
• Existing skill imbalances in Australia have both demand-side and supply-side influences. On the demand side, the end of the mining boom has been coupled with an ongoing decline in the manufacturing industry, particularly in the automotive sector. Meanwhile, there has been growth in construction and the services sector, particularly in healthcare, social services and public administration, as well as professional, scientific and technical services.
• On the supply side, rising educational attainment has occurred in tandem with a shift away from vocational education and training (VET) and towards higher education. Australian adults also have strong literacy, numeracy, and digital problem solving-skills. However, there are pockets of la...

Table of contents

• Title page
• Legal and rights
• Foreword
• Acronyms and abbreviations
• Executive summary
• Chapter 1. Skill imbalances in Australia
• Chapter 2. Building tools to assess and anticipate skill needs in Australia
• Chapter 3. Uses of skills assessment and anticipation information in Australia
• Chapter 4. Governance and stakeholder involvement in SAA in Australia
• About the OECD