COVID-19 risks exacerbating skills mismatches in Australia. This chapter explores recent evidence on firm hiring trends in light of COVID-19. It also looks at available evidence on how skills mismatches and job polarisation were affecting Australian regions before COVID-19. As Australia recovers from the pandemic and prepares for the future of work, action on both the supply and demand side of the labour market will be crucial to ensure workers can make good transitions into new and emerging jobs.
Preparing for the Future of Work Across Australia
OECD Reviews on Local Job Creation
3. Job polarisation and changing skills needs at the local level in Australia
Abstract
In Brief
COVID-19 has affected labour demand in Australia as across the OECD, however Australia has proven resilient. Job vacancies began recovering in Australia as early as August 2020, following a historical decline in hiring. The initial drop in vacancies reflected the immediate impacts of the COVID-19 pandemic and the associated restrictions on people and businesses.
Prior to COVID-19, recruitment difficulties and skills mismatches were prevalent across the Australian labour market. Looking at the available evidence before COVID-19, Australian workers report skills mismatches at a higher rate than the OECD average. Many states and territories have large qualification mismatches which demonstrate that more can be done to better ensure that the training system is meeting employer demands.
Over the past decade, the Australian labour market has polarised, primarily shifting towards high-skill jobs. 37 of 89 regions (or 42%) experienced a decline in middle skills jobs, whereas all 89 saw an increase in high skilled jobs. Looking at the state level, the decline in the employment share of middle-skill jobs was sharpest in Victoria, where it amounted to about 4.4 percentage points, while it was less pronounced in the Northern Territory (-0.7 percentage points). The employment share of high-skill jobs increased by about 3.8 percentage points in Victoria, the largest increase recorded across Australian states and territories.
Skills development and flexibility will be more important than ever in a post-pandemic world of work. Action on both skills supply and demand are needed. Digital skills are at the heart of transversal competences needed for workers to broaden their employment opportunities. While developing skills and being flexible is critical, those skills also need to be effectively deployed and used. Australian employers generally make good use of workers’ skills in the workplace, but there is an opportunity to further promote the emergence of high-performance work practices (HPWPs) in Australia.
Introduction
COVID-19 has impacted labour and skills demand in Australia as it has elsewhere. Labour shortages and skills mismatches, alongside timeliness issues in implementation of new technology, were some of the factors hampering productivity in Australia prior to the pandemic. Shortages and mismatches are emerging alongside job polarisation whereby some local labour markets are shedding middle-skill jobs and shifting mainly towards high-skill jobs. Developing digital skills will be critical to meeting demands from emerging job opportunities. Employers will also have to ensure the available skills are put to good use in the workplace to maximize productivity gains. Section 3.1 of this chapter highlights recent trends in labour demand and hiring across regions in Australia. Section 3.2 overviews evidence on how labour shortages and skills mismatches were affecting local labour markets in Australia prior to the pandemic. Sections 3.3 and 3.4 delve into local trends in job polarisation, highlighting which regions are gaining or losing low, middle, and high skilled jobs. Finally, section 3.5 highlights actions needed on both the skills supply and demand sides to prepare workers for the future of work, with a focus on digital skills and skills use in the workplace.
3.1. Labour demand in Australia bounced back quickly after being hit by COVID-19
3.1.1. Many Australian regions experienced a significant drop in hiring as a result of the initial COVID-19 shock
COVID-19 hit some Australia regions hard with a significant drop in overall hiring. Looking at Burning Glass (BG) data between January and April 2020, Victoria experienced the sharpest drop in vacancies, which almost halved. On the other hand, Tasmania saw an overall decline of only 10%.
This being said, looking at just regions in Australia does not reveal how some jobs and occupations experienced an even sharper reduction in hiring due to COVID-19. The drop in vacancies was sharpest for hospitality, food, and tourism jobs in Australia, with a reduction of 54%. The least impacted were jobs in science and research which can increasingly be performed through teleworking, and jobs in healthcare including nursing. The demand for hospitality, food, and tourism jobs dropped the most significantly in Australian Capital Territory (-76%), followed by New South Wales (-56%), and Victoria (-66%). Online job vacancies in healthcare including nursing increased by 39% in Tasmania, and by 25% in New South Wales.
Figure 3.1. Online job postings in light of COVID-19 have varied across Australia
Percentage change in online job postings since January 2020
Source: Calculations based on data from Burning Glass Technologies.
Box 3.1. Using Burning Glass Technology for regional labour market analysis
The BG data is a tabulation of all on-line job postings collected by software company Burning Glass Technologies. The information available in the dataset includes job title and description, location, time of posting, occupational codes, (broadly defined) required skills and some other attributes.
Burning Glass Technologies uses a web crawling algorithm to collect information on vacancies from online sources in real time and aims to include the universe of online job postings. The algorithm parses each job announcement into text categories and applies semantic analysis to standardize text entries. The resulting dataset contains around 70 entries for each announcement including job title, date of posting, location, identifiers of occupation and industry, job requirements, employer’s name, salary and job type. Location variables include region, city and geographical coordinates (if available) and are based on the finest locational detail specified in the job ad. For example, if an ad specifies a city, the name of the city is used to fill data fields for geographical coordinates, city and region. If the most granular location specified is a district within a city, the geographical coordinates are then based on the district.
The advantages of the BG data are its detailed content, granularity, timeliness and the coverage. The data can be successfully used to study how the demand for occupations and skills changes over time and within researcher-defined units of analysis, from firms to countries. The limitations of the BG data for empirical analysis arise from two sources: how employers use Internet for job announcements and how the BG algorithm processes the ads. The non-standardised nature of the collected information may also complicate analytical work, as meaningful groupings of the data may be a challenging and time-consuming task in certain circumstances.
Source: Knutsson, P., A. Tsvetkova and A. Lembcke (forthcoming), “Using Burning Glass data for regional analysis: Opportunities and caveats”, OECD Publishing, Paris.
3.1.1. Job vacancies have rebounded from the pandemic
The significant reduction in job vacancies between February-May 2020 reflected the immediate impacts of COVID-19 and associated restrictions on people and businesses. The pandemic resulted in an overall decline of 42.4% in hiring according to Australia’s Internet Vacancy Index (IVI), which was a much steeper decrease in overall job vacancies than previous downturns in Australia. For example, the largest single quarter decline in the 1980s recession was 18.6% (in May 1982) and 26.7% in the 1990s recession (in November 1990) (Australian Bureau of Statistics, 2021[1]).
However, by October 2020, labour demand exceeded pre-pandemic levels across Australia. Job vacancies increased by 74% (68 000 vacancies) in Australia between May 2020 and October 2020. Job vacancies were added for 13 consecutive months between May 2020 and May 2021 with a total gain of 150 000 vacancies, before dipping down slightly in July 2021 (-9 000 vacancies since May 2021). (Australian Bureau of Statistics, 2021[1]).
Figure 3.2. Job vacancies have recovered in Australia, following a significant drop at the beginning of the COVID-19 pandemic
Number of job vacancies (Internet Vacancy Index)
Source: Australian Government Job Vacancy report, July 2021.
Figure 3.3. The extent of job vacancy recovery have varied across states and territories
Number of job vacancies across Australian states and territories
Source: Australian Bureau of Statistics, July 2021.
3.1.2. COVID-19 has had different impacts across the skill distribution
COVID-19 has highlighted inequalities in the labour market, with some workers more vulnerable to job losses. Most low-skilled, low-wage workers, and young people have been hit particularly hard by the pandemic, as they tend to work in the sectors most at risk, are less likely to hold jobs allowing them to telework, and are more likely to be on temporary contracts. While these groups have been hit hard by the pandemic, some of them have actually led the way in terms of economic recovery. The Social economy could play an important role in helping the most disadvantaged groups.
Economic shocks can lead many employers to permanently raise skill requirements as they retool their operations to become more competitive and viable, making many jobs further out of reach for some job seekers (Austin and Hershbein, 2020[2]). Within Australia, job advertisements had fallen across all skill level groups in 2020, but started to rebound in August for some categories of workers. Skill Level 2 occupations (corresponding to Advanced Diploma or Diploma level education) recorded the largest decrease over 2020, down by 29.4% (4 900 job advertisements) since August 2019. Job advertisements increased across the two highest skill level groups in August 2020. The strongest increase was recorded for Skill Level 1 occupations (commensurate with a bachelor’s degree or higher education level), with job advertisements up by 5.3% (or 2 600 job advertisements) over the month of August (National Skills Commission, 2020[3]). On the other hand, recruitment for the three lower skilled occupational groups (Skill Levels 3 to 5) continued to decline in August. The largest decrease was recorded for Skill Level 3 occupations (corresponding to Certificate IV or III education level), with job advertisements down by 2.8% (or 490 job advertisements) over the month (National Skills Commission, 2020[3]). Although by April 2021, these indicators surpassed their pre-pandemic levels, such a shock will still leave a lasting impression on the labour market and likely to cause many employers to raise skill requirements for certain jobs.
Box 3.2. Changing labour market skill requirements amidst transition to net-zero emissions
Policies to reach net-zero greenhouse gas (GHG) emissions as targeted by many OECD countries for 2050 will inevitably reshape local labour markets. There will be both job gains and losses due to the net-zero transition. Relative employment gains are estimated to be the largest in renewable power production and recycling of materials. Policies to promote renewable energy and other low-carbon activities will create demand for new service jobs. Overall, renewable energy is expected to be more employment-intensive than the fossil-fuelled energy it replaces.
Sub-sectors of mining and manufacturing will face relatively higher risk of job losses. And while agriculture is not a sector that can be broadly identified as being subject to employment risks, it will be subject to important transformations, for example with respect to agricultural practices to reduce fertiliser use and carbon sequestration, including through afforestation. Australian regions which depend on these sectors will likely undergo major shifts in the labour market as pre-existing trends towards automation and digitalisation will further change skill requirements for jobs. As labour markets across Australia and the OECD transition from low-skill to higher-skill jobs, there will be greater demand for workers with strong digital skills. Expanding skills needed to address these challenges will need to be a place-based priority for helping workers transition to the labour market of the future.
Source: OECD (2021[4])
3.1.3. COVID-19 has also changed employers’ future recruitment intentions
COVID-19 has led not only to job losses but also changing hiring requirements among firms. The National Skills Commission’s Recruitment Experiences and Outlook Survey shows that in the four weeks leading up to November 13, 2020, some 47% of employers surveyed were currently recruiting or had recruited in the past month. The rate of employers recruiting has increased markedly from 24% recorded in the four weeks up to June 26, 2020. Some 43% of recruiting employers reported having recruitment difficulty, with this rate remaining relatively steady since the end of September 2020. The most commonly reported reasons for employers’ recruitment difficulty were a lack of suitable applicants, and a lack of applicants in general.
COVID-19 has had an impact on employers’ staffing expectations. While at the beginning of the 2020, employer surveys conducted by the National Skills Commission were showing that the majority of employers were expecting their staff to increase in the following months, this changed when Australia closed borders due to the pandemic. By late April 2020, 21% of surveyed employers were expecting to decrease their staff in the near future. Only 3% were expecting staff to increase. Employer expectations about staffing have improved as of the end of April and throughout the following weeks. By 6 August 2021, the proportion of businesses expecting to increase staff in the coming months stood at 19% while the proportion looking to decrease staff stood at 4%.
Figure 3.4. Employers’ staffing expectations increased after the initial COVID-19 shock
Percentage of employers that expected to decrease/increase staff, April 2020 to July 2021
Source: Recruitment Experiences and Outlook Survey, National Skills Commission, Australian Government.
3.2. Skills mismatches were a challenge in Australia before COVID-19 hit
3.2.1. Before COVID-19 recruitment difficulties have been an issue in Australia with different impacts across sectors
Finding the right talent and skills has been a longstanding challenge among Australia firms. For example, about 34% of employers in Australia reported that they could find the talent they needed, according to the 2018 Manpower Group Talent Shortage Survey. The number was higher for medium-sized organisations (50-249 employees), standing at 43% in 2018. The share of employers reporting shortages was lower in Australia than around the world on average, where it stood at 45%. In addition, this share has been declining in Australia over the past decade, from a high of 61% of employers in 2007. In 2018, it was however still higher than in 2006, when it stood at 32% (ManpowerGroup, 2018[5]).
One in four employers reported that the lack of suitable applicants was the main reason why they could not find the skills they need. As companies digitalise, automate and transform, finding candidates with the right blend of technical skills becomes more important than ever. Yet, many employers report the lack of required hard skills (e.g., programming) as the driver of skills shortage (21%).
Figure 3.5. The lack of applicants is the main driver of skills shortage in Australia
Source: Manpower Group Talent Shortage Survey, 2018.
3.2.2. Skills mismatches hamper productivity across Australian states and territories
While the skills provided by the education and training system need to correspond to those required by firms, it is also important to ensure that the labour market matches workers to jobs where they can put their skills to the best use. Although there is no universally agreed upon definition, mismatch can be measured with reference to different dimensions, whether skills, fields of study or qualifications. Skill mismatch describes situations in which workers’ skills exceed (over-skilling) or fall short (under-skilling) of those required for their job under current market conditions. Field-of-study mismatch arises when workers are employed in a different field from what they have specialised in. On the other hand, qualification mismatches arise when workers have an educational attainment that is higher (over-qualification) or lower (under-qualification) than that required by their job (OECD, 2017[6]).
Some mismatch is frictional and results from workers accepting jobs in which they are mismatched by field of study as they search for the job that best fits their skills and interests. Mismatch also results from the fact that individuals’ decisions to invest in training were made in the context of an economy that has changed; or from changes in an economy’s or occupation’s skill demand as a result of technological change, the global division of labour, economic cycles and changes in the way firms are organised. The seeming inevitability of mismatch does not preclude countries from developing policies and programmes to reduce it or to limit their negative effects on individuals’ and an economy’s outcomes (Montt, 2015[7]).
OECD research finds that Australia has a high rate of skills mismatch, suggesting that labour resources might be more efficiently allocated (Adalet McGowan and Andrews, 2015[8]). Mismatches between workers’ skills and the demands of their jobs can have negative effects on different levels. At the individual level, they can affect job satisfaction and wages. At the firm level, they can increase job turnover and potentially reduce productivity, and at the macroeconomic level, they can increase unemployment and reduce growth through the waste of human capital and the implied reduction in productivity (OECD, 2018[9]). An increase in job turnover can have the effect of rising wage competition and a more broadly skilled workforce but it can also exacerbate polarisation and leave some workers behind. Australia’s large distances between main population centres play a role in explaining mismatches. Inter-state differences in education and vocational training systems may be hindering labour mobility. OECD empirical work on factors driving skill mismatch suggests Australia would also benefit from making housing supply more responsive (OECD, 2018[10]).
Both field of study and qualification mismatches in Australia are slightly higher than the OECD average (see Figure 3.6). Several individuals enter a field-of-study with the expectation to pursue a career in that field and, if mismatched, workers face the disappointment of unmet expectations. Mismatched workers by field may also be more likely to earn a lower salary compared to their matched peers. They are also less likely to be satisfied in their work. For employers, the consequences that field-of-study mismatch brings on workers translate into lower levels of productivity, higher on-the-job-search for other jobs and, potentially, higher turnover (Montt, 2015[7]).
Figure 3.6. Field of study and qualification mismatch in Australia and the OECD
Source: OECD Statistics, 2016.
Looking more specifically at qualification mismatches, there are strong variations across Australian regions. Qualification mismatches are highest in the Northern Territory and lowest in the Australian Capital Territory (see Figure 3.7). In all states and territories, under-qualification represents a larger issue than over-qualification, with more than 20% of individual workers in each state and territory achieving a lower level of education than the modal level for all workers in that occupation. Under-qualification leads to a negative impact on productivity, as workers lack the qualifications needed to perform the job. Prolonged periods of under-qualification growth can be a sign of increasing skills shortages, as employers do not find workers with the qualifications they need for the job and therefore hire under-qualified staff (OECD, 2017[6]). Over-qualification is highest in Victoria among all states and territories, with about 20.3% of workers who are over-qualified for the job. Over-qualification poses concerns regarding the use of skills in the workplace, as it may affect job satisfaction and ultimately productivity.
Figure 3.7. Underqualification tends to be more prevalent than overqualification across Australia
Source: OECD calculations based on the 2016 census.
Looking at the occupational structure and skills available in the workforce across regions in Australia shows that most of them are in a high-skill equilibrium, although differences exist (see Figure 3.8). Capital city regions tend to be in a high-skill equilibrium, as they are characterised by a strong supply of skills (measured by educational attainment), high employment shares in high-skill occupations and high earnings. This is the case for example of Sydney – City and Inner South, Brisbane - Inner City, Melbourne - Inner, Adelaide – Central and Hills, Hobart, Australian Capital Territory, among others. On the other hand, more rural and remote regions such as Mackay – Isaac – Whitsunday, Logan – Beaudesert and Far West and Orana, find themselves in a low-skill trap, whereby both the demand and supply of high-skill jobs and individuals are lacking. These regions face a particularly challenging situation, as they lack high-skill jobs and they also struggle to attract higher-skill individuals. Other regions, including for example Hume, Coffs Harbour – Grafton, Riverina, and Shepparton, are in a skills deficit, suggesting that although the demand for high-skill jobs is present, this is not matched by an adequate supply of labour force. Finally, few regions, such as Sydney – Blacktown, Ballarat, and Melbourne – South East, are facing a skills surplus, suggesting that the supply of high-skill individuals is not met by the availability of high-skill jobs.
Figure 3.8. The majority of Australian regions are in a high-skill equilibrium, but differences exist
Note: Few region labels are omitted for readibility.
Source: OECD calculations on Census 2016.
3.3. Job polarisation is shifting labour market dynamics across Australia
3.3.1. The Australian labour market is polarising resulting in an overall decline in middle skill jobs
Labour markets across the OECD have become more polarised over the last decades, with declines in the share of employment in middle-skill jobs relative to jobs with higher or lower skill levels (OECD, 2017[11]). Polarisation has taken place across most OECD countries in recent decades, though these changes have unfolded differently across regions. Across the OECD, polarisation patterns have been especially noted in the United States and United Kingdom since the 1980s (Goos and Manning, 2007[12]) (Autor and Dorn, 2009[13]). In continental Europe, research suggests occupational changes have followed multiple patterns depending on the period analysed and methodology used, though polarisation and upskilling are prominent (Eurofound, 2015[14]; Fernández-Macías, 2012[15]; Goos, Manning and Salomons, 2009[16]; OECD, 2019[17]). As occupational structures are not evenly distributed within countries, however, the OECD has found the relative share of occupations to change differently across regions. Indeed, since 2000, evidence suggests regional variations in the share of low-, middle-, and high-skilled jobs to be as high as 20% in certain countries, such as the United States, Spain and Italy (OECD, 2020[18]).
The Australian labour market has shifted primarily towards high-skill jobs (see Figure 3.9). Between 2006 and 2016, the employment share of high-skill jobs has increased by about 3.4 percentage points, while the share of low-skill jobs has increased by 0.4 p.p. and that of middle-skill jobs decreased by about 3.6 p.p. The shift towards high-skill jobs has been going on for some decades in Australia. Previous OECD work on the 1990s-2010s period had found that employment shares in Australia had shifted towards high-skill jobs, while the share of both middle- and low-skill jobs had decreased. The employment share of high-skill jobs grew by nearly 20 percentage points between the mid-1990s and the mid-2010s.
While there is no universal consensus, digitalisation and automation have been identified as key drivers of job polarisation. According to the Routine-biased technical change theory (RBTC), digitalisation and automation substitute human labour in jobs involving easy-to-codify routine manual and cognitive tasks (Autor, Levy and Murnane, 2001[19]). Jobs that involve routine tasks tend to be found in the middle of the skills distribution. As such, RBTC sees automation as a driver of job polarisation, as algorithms, artificial intelligence (AI) and new technologies progressively replace jobs in the middle of the skills distribution. Such middle-skill jobs include clerks, cashiers, telephone operators, bank tellers or bookkeepers (OECD, 2017[11]). However, recent research has showed that, contrary to common belief, new forms of technology, such as AI, could change the types of jobs most at risk of automation going forward (Muro, Whiton and Maxim, 2019[20]). Research also suggests labour market institutions contribute to occupational change and polarisation. For instance, the OECD has found that higher union density rates may help mitigate polarisation by reducing job suppression in certain parts of the skills distribution (OECD, 2017[11]). Research on the topic also suggests many of these factors do not explain polarisation on their own, but rather constitute a set of variables that interact with each other to shape occupational change (OECD, 2015[21]).
Research suggests that, across the OECD, polarisation has taken place primarily within-industries (accounting for two-thirds of occupational change) rather than across industries (one third of occupation change) (OECD, 2017[11]). In this way, the decline in middle-skill occupations has occurred across almost all economic sectors, often offset by a rise in high-skilled occupations within sectors. Certain sectors, such as manufacturing industry, have tended to undergo a higher degree of loss in middle-skilled jobs. Moreover, the OECD has found occupational change to vary significantly within countries, with different changes in occupational distributions based on local characteristics (OECD, 2018[22]).
Box 3.3. Defining low-, middle-, and high-skill jobs
Estimates of labour market polarisation are sensitive to the methodology used to define low-, middle-, and high-skill occupations. The skill level of occupations can be approximated in different ways, including by educational requirements, complexity of tasks, and wages. The OECD methodology divides occupations into three skill categories based on their ILO International Standard Classification of Occupations (ISCO-88) major group. ISCO-88 categorises occupations into ten major groups. The ILO considers the type of work performed – or a job – and the skills required to perform the job, to group them into categories. The ILO defines these concepts the following way focusing on the complexity of tasks:
A job is defined as “a set of tasks and duties performed, or meant to be performed, by one person, including for an employer or in self employment”. An occupation “refers to the kind of work performed in a job. The concept of occupation is defined as a ‘set of jobs whose main tasks and duties are characterised by a high degree of similarity’”.
A skill is defined as “the ability to carry out the tasks and duties of a given job”. Two dimensions are considered: (a) skill level, defined as “a function of the complexity and range of tasks and duties to be performed in an occupation”, and (b) skill specialisation, defined by “the field of knowledge required, the tools and machinery used, the materials worked on or with, as well as the kinds of goods and services produced”.
Thus, the OECD considers high-skill occupations to include jobs classified under the ISCO-88 major groups 1, 2, and 3. That is, legislators, senior officials, and managers (group 1), professionals (group 2), and technicians and associate professionals (group 3). Middle-skill occupations include jobs classified under the ISCO-88 major groups 4, 7, and 8. That is, clerks (group 4), craft and related trades workers (group 7), and plant and machine operators and assemblers (group 8). Low-skill occupations include jobs classified under major groups 5 and 9. That is, service workers and shop and market sales workers (group 5), and elementary occupations (group 9).
Source: ILO (2012[23])
Figure 3.9. Job polarisation in Australia
Percentage point change in the employment share of high-, middle- and low-skill jobs, 2006-2016
Source: OECD calculations on Population and Housing Census.
3.3.2. All Australian states and territories have primarily shifted towards high-skill jobs
In all Australian states and territories, employment shares have shifted from middle-skill to high-skill jobs between 2006 and 2016 (see Figure 3.10). The decline in middle-skill jobs was sharpest in Victoria, where it amounted to about 4.4 percentage points, while it was less pronounced in Northern Territory (-0.7 p.p.). The employment share of high-skill jobs increased by about 3.8 percentage points in Victoria, the largest increase recorded across Australian states and territories. Northern Territory and Western Australia are the only states and territories where the employment shares of both middle-skill and low-skill jobs have decreased.
In most states and territories, employment shares have also shifted towards lower levels of skills, although to a lesser extent than the shift towards high-skill jobs. The size of the increase in the employment share of low-skill jobs was substantial in Tasmania, where it increased by 1.5 percentage points. It has been argued that the decrease in middle-skill jobs, traditionally protected by collective bargaining agreements, has been associated with a weakening of unions and changes in labour law during this period. Between 1986 and 2018, union membership in Australia fell from 45.6% in 1986 to 13.7% in 2018, paralleled by a decrease in the share of workers covered by collective bargaining, which fell from 83% to 58.9% in the same period (OECD, 2019[17]).
Figure 3.10. Employment has primarily shifted towards high-skill jobs in all Australian states and territories
Job polarisation by Australian states and territories, 2006-2016
Note: Low-skill workers are those with jobs in sales and services and elementary occupations (ISCO 5 and 9). Middle-skill workers hold jobs as clerks, skilled agricultural workers, craft workers, plant and machine operators and assemblers (ISCO 4, 6, 7 and 8). High-skill workers are those who have jobs in managerial, professional, technical and associated professional occupations (ISCO 1, 2 and 3).
Source: OECD calculations on Census.
3.3.3. Local labour markets across Australia experienced different job polarisation trends
Job polarisation dynamics vary substantially at the local level in Australia. Some Australian regions have experienced increases in the employment share of middle-skill jobs over the past decade. The most prominent example is the Outback North region of Western Australia, where middle-skill jobs increased by nearly 5 percentage points between 2006 and 2016. Increases in mining activity may partly explain the increase in middle-skill jobs in the region. Employment has shifted primarily towards high-skill jobs in the large majority of regions, but there are some places where instead the shift has been towards lower levels of skills. In Southern Highlands and Shoalhaven (New South Wales), the employment share of low-skill jobs has increased by 1.7 percentage points, while the share of high-skill jobs by only 1.2 p.p. In West and North West (Tasmania), the share of low-skill jobs has increased by 2.4 p.p., compared to 1.6 for high-skill jobs.
Looking at net job creation, while the large majority of regions have created jobs in high- and low-skill occupations, many regions have also created middle-skill jobs (see Figure 3.11). While this has been compensated in most cases by faster employment growth in high-skill occupations, resulting in employment share shifts towards high-skill jobs, the reliance of local employment on middle-skill jobs may create challenges in some regions, as these are the occupations most likely to be automated.
Figure 3.11. All regions have created high-skill jobs, but the majority have also created middle-skill ones
Regions creating or losing jobs by skill level, 2006 to 2016
Note: Low-skill workers are those with jobs in sales and services and elementary occupations (ISCO 5 and 9). Middle-skill workers hold jobs as clerks, skilled agricultural workers, craft workers, plant and machine operators and assemblers (ISCO 4, 6, 7 and 8). High-skill workers are those who have jobs in managerial, professional, technical and associated professional occupations (ISCO 1, 2 and 3). The numbers inside the bars indicate the number of regions.
Source: OECD calculations on Population and Housing Census.
Box 3.4. Case study areas: Sydney-South West and Warrnambool and South West
Sydney-South West
Sydney-South West experienced job polarisation over the past decade, shifting primarily towards high-skill jobs. The employment share of middle-skill jobs has decreased by about 5.3 percentage points. Jobs have primarily shifted towards higher skill level, with the employment share of high-skill jobs increasing by 4.2 percentage points. This suggests that local labour markets in the region require higher levels of skills among local workers.
Looking at the occupational profile of the Sydney-South West labour market over the 2006-2016 period shows that Metal, Machinery and Related Trades Workers has been the occupation shedding the largest number of jobs (-580). Other middle-skill occupations have also shed a large number of jobs in the local economy. This includes for example Stationary Plant and Machine Operators, Handicraft and Printing Workers, and General and Keyboard Clerks, shedding about 520, 340 and 260 jobs respectively. On the other hand, employment in high-skill occupations such as Teaching Professionals, Health Professionals and Business and Administration Associate Professionals has substantially increased over the same period (2 400, 2 100 and 1 800 jobs respectively). The largest net job increase has however been recorded in two low-skill occupations, Personal Care Workers and Personal Services Workers (3 000 and 2 600 jobs).
Sydney-South West has a lower share of tertiary educated population than the Australian average. About 15% of the population has a bachelor’s degree and above, compared to about 24.3% in Australia. Over the past years, the share of population with non-school qualifications, including post-graduate degrees, bachelor’s Degrees, diplomas and certificates among others, has increased in Sydney-South West. The increase between 2011 and 2016 has been particularly strong for non-school qualifications in society and culture (2.1 percentage points), followed by management and commerce (1.1 percentage points). On the other hand, the share of people with non-school qualifications in engineering and related technologies has decreased (-1.2 percentage points). Engineering and Related Technologies however remains the main field of study for non-school qualifications in Sydney-South West, accounting for about 15.6% of non-school qualifications.
Warrnambool and South West
Warrnambool and South West has experienced an increase in the employment shares of both high- and low-skill jobs. The employment share of middle-skill jobs has decreased by 4.4 percentage points in the region between 2006 and 2016, matched by a 2.5 percentage point increase in the share of high-skill jobs and a 1.8 percentage point increase in the share of low-skill jobs. The increase in the share of low-skill jobs is the second-highest in Victoria.
Middle-skill occupations have shed a large number of jobs in Warrnambool and South West. Specifically, Market-oriented Skilled Agricultural Workers (-700), Labourers in Mining, Construction, Manufacturing and Transport (-500), Building and Related Trades Workers (excluding Electricians) (-300) are middle-skill occupations that have shed a significant number of jobs. However, the occupation that has shed the largest number of jobs in Warrnambool and South West is Production and Specialized Services Managers, a high-skill occupation (-700 jobs). On the other hand, low-skill jobs such as Personal Care Workers and Personal Services Workers have experienced strong growth (500 jobs each), as well as high-skill jobs such as Health Professionals (400 jobs).
The share of people with non-school qualifications has increased in Warrnambool and South West between 2011 and 2016 from 51.7% to 57%. Also, in Warrnambool and South West, the increase has been strongest for non-school qualifications in society and culture (1.5 percentage points), followed by education (0.3 percentage points). On the other hand, the relative importance of non-school qualifications in Architecture and Building, Engineering and Related Technologies, Food, Hospitality and Personal Services, as well as Information Technology has slightly decreased (-0.6, -0.5, -0.5 and -0.1 p.p. respectively). Health is the most common field of study for non-school qualifications in Warrnambool and South West, accounting for about 12.4% of non-school qualifications.
Source: OECD calculations on Population and Housing Census.
3.3.4. Polarisation has raised concerns about a shrinking middle class in Australia and across the OECD
The debate on job polarisation is part of more general public concerns around growing inequalities and a shrinking middle class across the OECD. Over the last decade, wage levels in the top of workers in the top of the skill distribution have increased substantially more than for the middle class across OECD countries. It is estimated that median incomes increased a third less than the average income of the richest 10% over the last 30 years, while the cost of important parts of the middle-class lifestyle have increased faster than median income over the last two decades (OECD, 2019[24]).
Income inequality represents a challenge to inclusiveness in both Australia as in many OECD countries. The top 20% of the income distribution in Australia lives in a household with five times as much income as the bottom 20%. In addition, people in the highest 1% live in households with an average weekly income that is 26 times the income of a person in the lowest 5% (AUD 11 682 vs AUD 436/week) (Australian Council of Social Service and University of New South Wales, 2018[25]). Income inequality in Australia has risen slightly, and is somewhat above the OECD average. However, this increase has slowed and inequality has stabilised in the last decade (OECD, 2018[10]).
Recent research finds that changes in the occupational structure of employment in Australia can explain part of the overall increase in inequality that has occurred in the country. Changes in average earnings by occupation have also contributed to earnings inequality changes (Coelli and Borland, 2015[26]). Over the past 30–40 years, in Australia there has been a steady growth in earnings inequality for both male and female employees. Since the mid-1990s, this growth has been most pronounced at the top of the earnings distribution. Increasing earnings inequality in Australia appears to be related to changes in the occupation composition of employment; but earnings differentials between workers with different levels of education attainment have remained stable. Technological change that has allowed workers undertaking routine tasks to be replaced by machines, and institutional shifts such as the decline of trade unions, are underlying factors that seem important causes of increases in earnings inequality (Borland and Coelli, 2016[27]).
OECD estimates also show that middle-skill workers are more likely to be in lower income than before in Australia. Australia is among the OECD countries in which the share of middle-skill workers attaining upper-income class has decreased since the mid-1990s, while the share of middle-skill workers entering the low-income class has increased significantly. The OECD estimates that 4.8% less middle-skill workers comprised the upper-income class in the mid-2010s compared to the mid-1990s, while 5.1% more middle-skill workers entered the lower-income class (OECD, 2019[28]). The COVID-19 crisis is likely to accelerate such income inequality trends, harming the employment prospects of those with lower educational attainment disproportionately (Furceri et al., 2020[29]).
However, the relationship between polarisation and a shrinking middle class is more complicated than a one-to-one relationship. In general, across OECD countries, growth in high-skill occupations has outpaced growth in middle- and low-skill occupations, shifting the overall labour market distribution towards higher-skill jobs. Other factors may be more important in explaining the shrinking middle class. Notably, the changing relationship between skills and income classes means that middle-skill workers are now more likely to be in lower-income classes than middle-income classes. The wage structure is also characterised by growing divides between top earners and everyone else, rather than growth in jobs at both ends of the wage scale (i.e. polarisation) (OECD, 2019[28]).
Figure 3.12. The relationship between skills and income has loosened across the OECD
Source: OECD (2019[28]).
3.4. Job polarisation has gone hand in hand with skills upgrading
3.4.1. Australia attains higher levels of education than on average in the OECD
In addition to digitalisation and automation, polarisation has often been linked to changes in the labour supply, or the type of skills available in the labour force. In particular, the rising educational attainment of the population may have contributed to job creation at the upper end of the skills distribution. Indeed, when the educational attainment of the workforce rises, employers have an incentive to shape production processes around higher-skill jobs (Murphy and Oesch, 2017[30]).
Tertiary education attainment has increased in Australia as across the OECD over the past decades. About 27.5% of 25-64 year-olds attained tertiary education in Australia in 2000, while today more than 45.7% do so. The share of tertiary educated adults in Australia has been consistently above the OECD average. However, it lags behind some top performers across the OECD, including for instance Canada. About one in three tertiary graduates in Australia graduated in Business as their field of study. Health is the second most often picked field of study.
In general, more Australians attain non-school qualifications, including bachelor’s degrees and above, Advanced Diplomas and Certificates. The share of the population with a bachelor’s degree and above as their highest qualification level has increased from 17.6% to 24.3% between 2006 and 2016. More people achieve Advanced Diploma and Diploma, as well as Certificate Level, while the share of those with no non-school qualifications has fallen. In addition, the share of Australians with higher levels of education is likely to increase over the coming years, as enrolment rates in tertiary education have continued to rise.
Figure 3.13. Share of adults, 25 to 64 years old, with a tertiary education in Australia is higher than the OECD average
Source: OECD (2021[31])
Figure 3.14. The share of Australians with a bachelor’s degree, advanced diploma or certificate has increased over the past decade
Note: Bachelor degree and above includes bachelor degrees, graduate certificates and graduate diplomas and postgraduate degrees.
Source: Australia Census of Population and Housing
3.4.2. ..but educational attainment varies substantially across regions
While the share of people undertaking non-school education has increased across Australia, the picture is rather uneven across states and territories. For example, in the Australian Capital Territory, 60.6% of the population aged 15+ (about 195 000 people) has non-school qualifications, with the majority of them having a bachelor’s degree (72 000 people). On the other hand, only 44.7% of the population residing in Northern Territory (about 80 000 people) has non-school qualifications, with less than 13 000 people having a bachelor’s degree.
Regional differences are even more pronounced when looking within states and territories (see Figure 3.15). In New South Wales for instance, where about 16% of the population (977 000 people) have a Bachelor Degree, the share of the population with a Bachelor Degree ranges from 50.7% in Sydney-North Sydney and Hornsby (about 156 000 people) to 11.9% in Hunter Valley exc. Newcastle (22 000 people). Similarly, in Victoria, where 16.5% of the population has a bachelor’s degree (798 000 people), the share varies substantially at the regional level. About 49.1% of the population (230 000 people) has a bachelor’s degree in Melbourne – Inner, while only 11.7% in North West (12 000 people).
Figure 3.15. The share of population with bachelor’s degree and above varies widely within states and territories
Share of population with a bachelor degree and above, regions within state and territories with the highest and lowest shares, 2016
Source: Australian Bureau of Statistics. 2071.0 Census of Population and Housing: Reflecting Australia - Stories from the Census, 2016 - Educational Qualifications.
3.4.3. High-skill workers and jobs tend to be geographically concentrated
Differences in the qualifications of the local labour force reflect disparities in the availability of labour market opportunities at the local level. Highly qualified people were more likely to be employed in professional occupations across Australia. The most common occupations in 2016 for people with a bachelor’s degree or above were Registered nurses and Primary and Secondary school teachers. Men with a bachelor’s degree or above were more likely to be Accountants (56 000) or Software applications programmers (51 600), whereas women were more likely to be Registered nurses (141 700) or Primary school teachers (111 700). For those with other non-school qualifications, the most common occupations were Sales assistants, Electricians and Child carers. Men with other qualifications were more likely to be Electricians (90 700) or Carpenters and joiners (73 200), whereas women were more likely to be Child carers (75 900) or Sales assistants (67 800) (Australian Bureau of Statistics, 2017[32]). Regions where the share of population with a bachelor’s degree and above is higher also tend to have shifted more towards high-skill jobs.
3.5. The future of work requires action on both the skills supply and demand in Australia
Investments today in lifelong learning and vocational training can ensure workers are ready for the upturn, while also supporting regions to make transitions to new economic opportunities. During the 2008 Global Financial Crisis (GFC), investments mainly targeted individuals to acquire skills in new and emerging sectors. However, such efforts were sometimes undermined by low firm demand and sub-optimal use of those skills in the workplace. Flexible forms of skills development can be instrumental in responding to the accelerated reallocation of labour in local economies, including greater access to e-learning opportunities that focus on the needs of workers, especially disadvantaged ones while working with firms to promote workforce innovation and better human resources management practices. This tailoring and proximity to firms and workers will be an essential asset for the recovery (OECD, 2020[33]).
3.5.1. Digital skills will be crucial to succeed in a post-pandemic world
COVID-19 has highlighted the importance of digital skills in the labour market. The crisis has accelerated the adoption of digitalisation in the workplace, to help reduce avoidable physical interactions. This has meant finding ways to reinvent work and, in some cases, a partial disruption of jobs and changes in the way workers perform them (McKinsey & Company, 2020[34]). Developing the appropriate digital skills in the workforce is an important component in Australia’s effort to compete in this rapidly emerging global digital economy.
Australian adults have a strong set of digital skills, compared to the OECD average, according to the OECD’s Survey of Adult Skills (PIAAC) (see Figure 3.16). Australian adults have above average proficiency in problem-solving in technology-rich environments, with about 40% scoring in the top two levels, compared to about 30% on average across the OECD (OECD, 2018[35]). In addition, Australia has a lower share of adults with low ICT skills and information-processing skills than the OECD average (7.5% and 1.7% of adults in Australia, compared to 16.3% and 3.0% across the OECD).
Figure 3.16. Australian adults perform better than across the OECD in problem-solving in a technology-rich environment
Results from the OECD Programme for the International Assessment of Adult Competences (PIAAC)
Source: OECD (2019[36])
The demand for digital skills has a local dimension in Australia. Burning Glass (BG) data shows that within Australia there is a substantial difference at the local level in the demand for digital skills, which emerges from advertisements of jobs requiring digital skills. For example, jobs advertisement linked to ICT specialist jobs are heavily concentrated, within New South Wales, and specifically Sydney, being the city where more than 40% of total jobs are advertised. In addition, ICT job openings are concentrated predominantly in urban areas in Australia, more so than in some other OECD countries according to Burning Glass data. The degree to which digitalisation is occurring in Australian workplaces is highly variable, as are the approaches of employers in meeting their digital skill requirements. The National Centre for Vocational Education Research (NCVER) identifies three different categories of employers, based on their approaches to technology uptake and skills acquisition: aggressive technology adoption and skills-development approach; keen technology adoption but cautious skills-development approach; appreciation of growing need for digital skills, but no investment in skills development (NCVER, 2020[37]).
Box 3.5. The importance of “hybrid skills”: evidence from Canada
While digital skills are in need across the OECD, this is not in isolation. Looking at the Canadian labour market, the Brookfield Institute for Innovation + Entrepreneurship (BII+E), a Canadian think tank, has identified some trends, whereby employers are seeking digital and non-digital skills in combination, i.e. “hybrid jobs”. Despite a growing narrative around the importance of learning to code, for most Canadians, foundational digital skills alongside a suite of non-digital skills — in particular, interpersonal skills — are critical foundations to be competitive in the labour market. General workforce digital skills, while less digitally-intensive, show up in roughly one third of all job postings in Canada. This includes the baseline digital skills that most Canadian workers need, the most predominant of which are those found in the Microsoft Office Suite. It also includes occupation-specific software, such as business intelligence software and SAS. The most common skills appearing alongside workforce digital skills are communication and organisational skills. Other soft skills likely to appear alongside workforce digital skills include interpersonal skills, such as ‘teamwork’, ‘collaboration’, and ‘customer service’; project management skills, such as ‘budgeting’ and ‘planning’; and more general skills and aptitudes, such as ‘problem-solving’ and ‘detail-orientedness’.
For highly technical workers, digital skills are necessary, but they should be complemented by non-digital skills. Roles requiring a high proportion of skills from the Software/Product Development and Systems Infrastructure skills clusters are not only the most digitally-intensive, but also the most hybrid. This means that in addition to digital skills, employers look for non-digital skills from different domains at a higher intensity compared to other roles. For these highly-digital roles, employers are looking for particularly dynamic candidates, with technical domain knowledge augmented by many non-digital skills; in particular, those that pertain to communications, teamwork, problem solving, and project management, reflecting the creative and collaborative nature of these roles. For current and prospective workers in these fields, strong digital skills are necessary, but insufficient. It is perhaps just as critical to enhance one’s interpersonal, creative, and problem-solving skills and abilities.
Source: OECD (2020[38]); Vu, Willoughby and Lamb (2019[39]).
In addition to basic digital proficiency, it will be crucial for Australians to develop know-how of specific digital applications. A recent survey conducted by the NCVER shows that the top five technologies with the greatest impact on skill requirements across Australian industries are mobile, cloud, automation, big data and the internet of things. The increasing digitalisation of work through the application of mobile and smart devices, robotics, enterprise systems, cloud computing and augmented and virtual reality will continue to significantly affect working methods and practices and the types of skills required to succeed in future workplaces. The majority of survey respondents indicated that their need for ICT professionals, which are mostly high-skilled and well-paying jobs, has increased over the past five years, with the required skills becoming more difficult to find. On the other hand, because of the adoption of digital technologies, some employers are having an easier time than previously in meeting their digital skill requirements (NCVER, 2020[37]).
The future of work requires workers to develop a broad mix of skills, including digital skills but also strong basic, cognitive and socio-emotional skills, to succeed in the workplace. The digital revolution makes the same kind of skills mix necessary in all walks of life. Without basic skills, workers are locked out of the benefits the Internet can offer, or limited to its most elementary uses. Recent work by the Brookfield Institute for Innovation + Entrepreneurship in Canada highlights the importance of “hybrid skills” in the workplace (see Box 3.5). Policies need to offer everyone ways to get the most out of new technologies. This is particularly true for regions that are already lagging behind (OECD, 2019[40]).
3.5.2. Australians have good foundational skills, but there are differences based on socio-economic characteristics
Australia outperforms the OECD average in adult literacy and numeracy proficiency. Data from the OECD Programme for the International Assessment of Adult Competences (PIAAC) shows that the mean literacy score for Australian adults is 280.4, compared to the average across the OECD of 266.2. Australia’s score in literacy is the fourth highest across all OECD countries. Similarly, Australian adults score on average 267.6 in numeracy, compared to 261.9 (OECD, 2019[36]).
There are however differences among segments of the population in terms of basic proficiency, and these are sometimes more accentuated than the OECD average. For example, when looking at literacy proficiency, differences are particularly accentuated by education, occupation and immigrant background. Tertiary educated adults perform better than those with less than upper secondary education, skilled workers outperform those in elementary occupations, and native born/native language adults score better than foreign born/foreign language ones (OECD, 2013[41]).
One in five Australians – around three million adults – have low literacy and/or numeracy skills, according to the PIAAC Survey. For the purposes of this report, adults with low literacy or numeracy skills are not able to reach Level 2 proficiency in literacy or numeracy on a scale that goes up to Level 5. Australia has a similar share of adults with low literacy and/or numeracy skills as New Zealand. It has a smaller proportion of adults with low skills than the United States, the United Kingdom (England and Northern Ireland) and most European Mediterranean countries but a larger share than Nordic countries, Japan, and the Netherlands (OECD, 2017[42]). Adults lacking the basic foundational skills and might face more hardship in switching jobs or transition to new opportunities in light of COVID-19.
3.5.3. Adult training participation is uneven across segments of the population
Adults in Australia, including those with low skills, are more likely to continue in education and training after leaving formal education than their peers in other countries. However, fewer Australian adults participate in training compared to some top performing OECD countries. About 55.7% of adults participate in training in Australia, lower than in the United States (60%), Canada (58.4%) and England (56.4%). However, Australia performs better than Germany (53%) (see Figure 3.17). Among the reasons for not participating in training, most Australians cite being too busy at work (26.9% of Australians not participating in training). Not having the time and being enrolled in education are the following most cited reasons (21% and 18.4%) (see Figure 3.18). The reasons for not participating in training differ slightly among men and women. About 30% of women who do not participate in training cite the lack of time as the reason, while this is an issue for only 10% of men not participating in training. On the other hand, 37% of men claim that they were too busy at work to participate in training, compared to less than 20% for women.
There are differences in adult training participation in Australia based on a number of socio-economic characteristics (see Figure 3.19). For example, age: adults aged 25-54 are more likely to participate in training than those aged 15-24 and 55+ (59.4%, 58.3% and 40.6% respectively). This is intuitive, as most adults receive training at work, and younger adults are likely to be in school, while older people are likely to be retired. However, this also points to potential challenges, especially for older adults, who might risk losing their job to automation or in light of the COVID-19 pandemic, and are less likely to participate in training. Adults working in micro and small enterprises are less likely to participate in training than those working in medium-sized firms (56.1%, 64.4% and 75.4% respectively), although those least likely to participate in training are adults working in large firms (45.9%). Finally, educational attainment is also a key variable influencing adult training participation. Those with less than high-school education are about half as likely to participate in training than adults with above than high-school education (36.1% and 74.4% respectively). About one in two Australian adults with a high-school degree participates in training. Part of this difference can be explained by the job characteristics of low-skilled individuals. For example, low-skilled adults are typically in jobs that provide fewer training opportunities (Grotlüschen et al., 2016[43]).
Figure 3.17. Australia is behind the United States, Canada and England in adult training participation
Share of 25-64 year-olds participating in training
Source: OECD calculations on PIAAC (2012, 2015, 2018)
Figure 3.18. Most Australians who did not participate in training were too busy at work
Reasons for not participating in training
Source: OECD calculations on PIAAC (2012).
Figure 3.19. There are a number of gaps in training participation across Australia
Note: Micro: less than 10 workers; small: 10-49 workers; medium: 50-249 workers; large: 250+ workers.
Source: OECD calculations on PIAAC (2012).
3.5.4. COVID-19 has made investment in skills development more important than ever
Closing gaps in access to training is particularly important, given the uneven impacts of COVID-19 across the skills spectrum. Low-skill, low-wage, and young people may be the most vulnerable to job losses. These same groups are also more likely to hold jobs at higher risk of automation, a process that firms may accelerate in light of the pandemic. Going forward, it will be crucial to ensure that these categories of workers can access skills development opportunities to prepare for the upturn and transition into new jobs (OECD, 2020[33]).
The COVID‑19 crisis proved an important testing ground for online training and career guidance, as in-person services were not available (OECD, 2020[44]). Equity has emerged as an important concern, as low-skilled or low-wage workers who did not have sufficient digital skills or access to adequate internet connection could not take advantage of these opportunities. Going forward, training should be aligned with the results of skill assessment and anticipation exercises. Career guidance counsellors can be instrumental in directing adults towards skills in demand. Skills profiling tools and programmes could help ensure that training is efficiently focused on the jobseeker’s skill gaps. Australia’s Department for Education, Skills and Employment is encouraging workers affected by COVID‑19 to consult its Skills Match online tool. The tool helps users to identify the skills they already have based on their previous work experience. It then presents new job ideas that use similar transferable skills (OECD, 2020[45]).
Box 3.6. Australia’s Skills Match online tool
Skills Match is an online, interactive tool available on the Australian Government’s Job Outlook website to help workers and job seekers match their current skills and experience to new jobs. The tool is open to people of any age and stage in their working life, including workers looking for a promotion or a new job, those looking for work facing retrenchment, and those looking to develop new skills. Through the website, users can discover the key skills they may have developed throughout their career, ideas for careers they can transfer into, and the new skills needed to step into an alternative career. The tool also provides suggestions of training pathways that could help make the leap. It then presents new job ideas that use similar transferable skills. For instance, the tool suggests that workers affected by closures in accommodation and food services may have the necessary skills to transition into currently in-demand jobs like cashiers, cleaners, pharmacy sales assistants, aged and disabled care workers, and nursing support workers.
While the Skills Match tool was launched in mid‑2019, it was advertised in the context of the COVID-19 pandemic in 2020. The website emphasises that for workers who have lost their job due to COVID-19, it is important to understand the skills they have gained in past jobs and how this experience equips them to work in a range of different jobs they may not have previously considered, but might be in demand. As an example, Skills Match shows that people employed in the five largest employing jobs (i.e. Waiter, Kitchenhand, Bar Attendants and Baristas, Chefs and Sales Assistants) in the Accommodation and Food Services industry may have the skills to transition into jobs likely to be in demand, including:
checkout operators and office cashiers
pharmacy sales assistants
hospital orderlies, nursing support workers
aged and disabled carers, personal care assistants, welfare workers
shelf fillers
commercial cleaners
food and drink factory workers
storepersons
truck drivers and couriers
packers
call or contact centre operators
security officers and guards
Source: Australian Government Department of Education, Skills and Employment (2019[46]; 2020[47]); OECD (2020[45]).
3.5.5. Skill use at work is strong in Australia, but there is an opportunity to further promote high-performance work practices (HPWPs)
Across the OECD, policy makers have often emphasised the importance of boosting the supply of skills, with a focus on the number of people with vocational or academic qualifications. Less policy attention has been devoted to the use of skills in the workforce and the alignment between the competences of workers with the needs of the business. Having a workforce with the right skills is not sufficient to achieve economic growth and boost productivity. For economies to grow and individuals to succeed in the labour market, skills need to be put to productive use at work (OECD, 2016[48]). Promoting the increased use of skills can help employers move towards higher value-added employment and improve business performance. More productive jobs tend to be of higher quality and have higher wages, thereby improving social and economic outcomes at the local level (OECD/ILO, 2017[49]).
Australia is already among the top performers across the OECD when it comes to skills use in the workplace. Australia scores above the OECD average in the use of information-processing skills in the workplace, including reading, writing, numeracy, ICT and problem-solving. Specifically, it ranks first among all OECD countries in the use of problem-solving skills in the workplace.
Promoting the emergence of high-performance work practices could be a further opportunity for Australia to put skills to good use. The term “high performance work practices” (HPWPs) refers to a set of human resources practices that are associated with greater skills use and informal learning. HPWPs include aspects of work organisation and job design (such as teamwork, autonomy, task discretion, mentoring, job rotation, applying new learning), as well as management practices (such as employee participation, incentive pay, training practices and flexibility in working hours). OECD work shows that the share of jobs with HPWPs in Australia is around the OECD average, lagging behind top performers such as Denmark, Finland and Sweden (see Figure 3.20). The share of jobs with high work organisation HPWP is lower in Australia than on average in the OECD. Looking specifically at management practices, Australia is among the top OECD countries in the share of jobs providing flexible working hours, while only very few employees receive bonuses (OECD, 2016[50]).
Figure 3.20. Australia performs around the OECD average in the use of High Performance Work Practices (HPWPs)
Note: a) Share of workers in jobs where the summary HPWP is above the top 25th percentile of the pooled distribution; b) Average value, across jobs, of the HPWP index. The HPWP index is a sum scale of the following subcomponents: problem solving, ICT at work, numeracy, writing, and reading.
Source: OECD (2016[50])
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