Labour shortage predicted to hamper Australian economy

Updated August 05, 2014 08:22:51

One of the world's biggest management consultants is warning that Australia could face a severe labour shortage by the end of next decade.

Boston Consulting Group has released a report predicting a shortfall of 2.3 million workers by 2030.

The firm says Australia's economic growth risks losing momentum in the years ahead unless the country can find ways to plug the gap.

With Australia's unemployment rate at an 11 year high of 6 per cent, it may seem like a strange time to be talking about a shortage of people looking for work, but Brad Noakes from Boston Consulting Group says it is a prospect worth taking seriously.

"It is a bit of a surprise and bit counterintuitive given what many people experience today," he acknowledged.

"One of the primary things we looked at was historical growth rates, and if we look back across the last 10 to 20 years for Australia, look at how we've grown - and it's been between 3 and 3.5 per cent GDP per year - if we project that forward, then Australia is going to be facing a labour shortage, and it's going to hit pretty badly by 2030."

Mr Noakes says Australia's workforce participation rate - the proportion of people working or actively looking for work - is high by international standards.

"But, unfortunately, it's not enough. One of the challenges is we, for a number years, have had quite a low fertility rate, below replacement rate, and that eventually plays through into the economy in terms of the number of workers that are available," he said.

Audio: Boston Consulting Group warns of severe labour shortage by 2030 (The World Today)

That number of workers is also being diminished by Australia's ageing population, something that the Government is trying to remedy by raising the retirement age to 70 by 2035.

"That would be one of the levers, and it would help to address that, but it wouldn't fully address the shortfall because there is an interplay between the official retirement age that countries put in place and the effective retirement age - that is the age at which people actually retire," he responded.

"So it definitely would help, but it wouldn't address the entire shortfall."

Boston Consulting Group sees a range of solutions to ensure Australia's future economic growth is not threatened by an undersupply of workers.

They include boosting skills training to lift productivity, as well as extending the Government's skilled migration program.

"If immigration was the only lever that you pulled then you would need to increase the rate of net immigration of new workers into the economy to fill that shortfall between now and 2030 - so effectively 2.3 million workers," he said.

"But that would be spread over you know the 15 or so years between now and 2030.

"So the actual increase in the rate of immigration of workers would be modest over what we are taking into the country today."

Skills development key

However, not everybody is concerned about a shortage of workers in the decades ahead.

University of Canberra labour economist Phil Lewis is not prepared to make any predictions about the state of Australia's labour market 16 years from now.

"I wouldn't be as silly as to do that," he retorted.

"What I would say is that, I think as long as we can find a solution to these people who are poorly educated, left school before Year 12, if we can get them skilled up to basics, generic skills, people skills, numeracy, literacy et cetera, that will go a long way to reducing unemployment."

Professor Lewis says Australia is just coming out of a period in which there was an unusually high demand for workers.

"I don't think we really need to bother too much about shortages of labour because we have had a period in the mining boom where there were quite significant labour shortages and we managed to weather that quite well," he observed.

"I think our major problem is unemployment in Australia, is not a general problem, it's very specific to a particular group of disadvantaged people."

Topics: economic-trends, work, unemployment, australia

First posted August 04, 2014 16:11:11