Nipping the skills shortage in the bud

3D render illustration of construction site, including cranes and lifting machine, where the word Skills is being built.

While the manufacturing sector is experiencing early stages of recovery, experts say the growth could be hampered by a shortage of skilled workforce, if the issue is not addressed immediately. Manufacturers’ Monthly reports.

The National Manufacturing Summit 2018 highlighted that while many indicators point to an improvement in the fundamental economic conditions of manufacturing, one key factor that could hold back that recovery is the shortage of skilled workforce.

Many indicators point to an improvement in the fundamental economic conditions of manufacturing. For example, the Australian Industry Group (Ai Group) Australian Performance of Manufacturing Index (PMI) recorded the 21st month of continuous expansion in June – the longest run of consecutive expanding conditions since 2005.

Perhaps most encouragingly, the industry is now in hiring mode: according to data by the Australian Bureau of Statistics, trend total employment in manufacturing increased by almost 50,000 positions in the year ending in May 2018, making manufacturing one of the largest sources of new jobs in the entire economy.

It may seem counter-intuitive that manufacturing could already be facing skills shortages, after a decade of substantial job losses. But, the “Advanced Skills for Advanced Manufacturing” report, prepared by the Centre for Future Work based on interviews with key informants from several different segments of Australian manufacturing and published research from other sources, indicate that manufacturing employers are indeed facing growing challenges in meeting their requirements for skilled workers.

The report, written by Tanya Carney and Jim Stanford, identifies some key factors behind the rapid emergence of skills shortages in manufacturing and proposes a set of 12 recommendations to help resolve the skills crisis in manufacturing.

 Director of the Centre for Future Work, Jim Stanford, explained why the skills shortage could become a pressing issue, relatively early in the industry’s recovery.
Director of the Centre for Future Work, Jim Stanford, explained why the skills shortage could become a pressing issue, relatively early in the industry’s recovery.

The skills challenge

Director of the Centre for Future Work and the report’s co-author, Jim Stanford, explained why the skills shortage could become a pressing issue, relatively early in the industry’s recovery.

Part of the complexity, he said, comes from the sectoral and occupational diversity in the manufacturing workforce.

“The works in the manufacturing sector are not homogeneous. While in the macroeconomic level, there are about three million unemployed, under-employed or marginally-attached workers seeking opportunities for high-valued work in the manufacturing sector, the existence of specific sub-sector means that people with an specialised skill cannot be hired in another sub-sector,” he said.

To give a perspective on the diversity of the sector, he cited data from the Australian Bureau of Statistics catalogue on manufacturing employment in May 2018.

The data shows that while overall trend total employment in manufacturing increased by almost 50,000 positions in the year ending in May 2018, the employment growth has not been shared consistently by each sub-sector – some sub-sectors are still experiencing decline, while others are enjoying even stronger growth than the overall manufacturing trend.

A parallel factor behind the emergence of skills shortages within manufacturing, according to the report, is the demographic transition of the manufacturing workforce.

“A considerable section of today’s workforce was hired during the expansionary years of the pervious decades, some of them as early as the 1980s. These people, who accumulated skills and qualifications over the years, are getting ready to retire soon. So, even if the overall employment had been stable during this period, we would still be facing a skills shortage for that reason,” he said.

Another factor adding to the complexity of the skills shortage in manufacturing, according to Stanford, is the increasing complexity and breadth of required skills.

“The overall trend within manufacturing towards a more sophisticated and technology-intensive manufacturing models means that there are not only new and more complicated skills that have to be learned, but the greater challenge is the comprehensive and multi- dimensional nature of the package of skills employers need.

“The employers don’t just need someone who knows how to run a particular machine. They also unanimously are demanding people with the ability to solve problems, think creatively and pull together bits of information from different places,” he said.

The report further notes that the above factors were accompanied by a series of policy errors at national level in the vocational education and training (VET) system, which led to a failure by the VET system to provide a steady flow of skilled workers, possessing modern and flexible qualifications – consistent with the expansion of more specialised, advanced manufacturing business models.

Twelve recommendations

To address the challenges described above, the Centre for Future Work has proposed 12 recommendations.

Re-establishing adequately funded and stable TAFEs as the centrepiece of vocational education is the first of these recommendations.

“We absolutely need to rebuild and restore the centrality of high-quality, permanent, public institutions – including TAFE and community colleges.

“The idea that private companies are going to pop up and offer something and then disappear the next year is a disaster in the making. That underpins the necessity of a system that delivers consistent high- quality training,” Stanford said.

The second recommendation in the report is to develop the capacities of TAFE teachers in manufacturing fields, and invest in modern capital equipment for training.

The Centre also encourages partnerships on customised joint training initiatives between specific TAFEs and firms or groups of firms.

Another recommendation in the report includes implementing higher-level and multi-disciplinary qualifications reflecting emerging skills and composite capacities.

“The growing complexity and multi-dimensionality of manufacturing work, especially given the adoption of advanced manufacturing strategies by enterprises, requires manufacturing workers to be equipped with flexible sets of skills – including technical, problem-solving, and enterprise skills. The higher-level diploma and post- diploma certifications need to reflect this trend,” Stanford explained.

A parallel recommendation to allow comprehensive education to students, Stanford said, is to shift emphasis in curricula and training programs toward comprehensive and complete qualifications, rather than micro-competencies.

The report goes on to recommend integrating basic literacy and numeracy training into VET offerings at all levels.

According to Stanford, many employers report the absence of core literacy and numeracy skills to be a barrier to the employment of potential workers who otherwise possess necessary technical qualifications. Access to these foundational programs should be universally provided for those students that require them.

Supporting the expansion of apprenticeships in manufacturing with fiscal measures, instruction resources, and mentoring is another recommendation.

According to the report, the number of apprentices commencing positions in Australian firms, including in manufacturing, has experienced a worrisome decline. Fiscal supports for both employers and apprentices need to be expanded. Apprenticeships would be more successful, and completion rates higher, if both students and their managers/employers were supported with more intense supervision and mentoring.

The authors further suggest access to training opportunities, and fair employment conditions for trainees and apprentices within modern awards and enterprise agreements.

Developing ambitious and better-resourced systems to support retraining and redeployment of displaced workers in declining manufacturing sectors is another recommendation put forth.

“Clearly, we are still seeing shedding of labour from certain industries. We should get our act together to provide those affected workers with opportunities and provide growing industries with the ability to tap into those people.

“Of course, some of the displaced automotive workers may not have some of the experience needed in the machinery equipment manufacturing. But, there have some of the foundational knowledge and process experiences. With a bit of thought and support, we should be able to connect the dots,” Stanford said.

He also spoke about developing new models for phased retirement to smooth the demographic transition facing skilled trade positions in manufacturing.

“If you have senior people looking at retirement, let’s think of ways to phase in that retirement so that they can play some of the roles of mentoring the new apprentices. Think about ways that they could move into retirement gradually and also help to bridge that demographic gap,” he said.

As a final recommendation, the Centre for Future Work proposes establishing a leadership-level Manufacturing VET Policy Board to coordinate VET initiatives in the sector, and represent the interests of manufacturing in broader VET processes and dialogues.

“Having a leading body, incorporating all major stakeholders with an interest in manufacturing VET (including individual businesses, peak bodies, trade unions, TAFEs, other VET providers, and state and Commonwealth governments) could help create a united voice that influences the decision of policymakers,” Stanford said.