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Labour Market Update: Strong Growth and Challenges in Australia

Learn more about the updates surrounding the Australian Labour Market

The Australian labour market remained robust in the first quarter of 2023, according to the latest Labour Market Update released by Jobs and Skills Australia and the Australian Bureau of Statistics. The report analyses data from various sources and provides the following:

  • Insights into the state of the labour market.
  • Highlighting trends.
  • Variations across industries and occupations.
  • Skills needs.

Continued Strength in Labour Market Conditions

Despite a slight increase in the unemployment rate to 3.7% in April, labour market conditions remained strong throughout the quarter. The demand for labour stabilised after a slight easing in the previous quarter, indicating a healthy and stable job market. Total employment continued to expand during the three months, with a significant growth in full-time jobs. This growth and a low underemployment rate suggest efficient workforce utilisation and less spare capacity.

Shift towards Skilled Occupations

The labour market update shows that the composition of employment has been shifting towards jobs that require post-secondary school qualifications (skill level 1 to 4 positions). In contrast, jobs that traditionally do not require such qualifications (skill level 5 jobs) have declined. Over the past year, approximately 92% of employment growth occurred in occupations that typically demand post-school capabilities. This highlights the importance of higher education and vocational education and training (VET) systems in nurturing a highly skilled Australian workforce.

VET Qualifications Driving Employment Growth

Notably, two-thirds of the total employment growth was observed in Skill Level 2 to Skill Level 4 occupations, where VET qualifications are the primary pathway. As employment continued to grow, levels of recruitment difficulty experienced by employers decreased, and the likelihood of filling advertised roles increased slightly. While skills shortages persist, these positive indicators suggest that the scarcity may have eased somewhat in recent months.

Promising Signs of Wage Growth

Wages growth also showed promising signs, with the most recent wage price index reporting the most substantial quarterly growth rate since 2012. Alternative measures of wages, reflecting job mobility or newly advertised jobs, displayed annual wage growth rates surpassing 4%. These higher wage growth levels for jobs involving greater skills indicate the workforce shifting towards higher-skilled occupations.

Challenges in Regional Areas

While the overall labour market conditions remain favourable, specific concerns regarding skills needs in regional areas exist. Employers in these regions reported a lower likelihood of filling vacancies and received fewer applicants per vacancy compared to their counterparts in capital cities. In particular, regional areas faced challenges in recruiting critical roles such as General Practitioners and Resident Medical Officers, exacerbating the existing skills shortages.

Factors Contributing to Skills Challenges

Various factors contribute to the skills challenges in regional areas, including an older age demographic, lower levels of educational attainment, limited job opportunities within proximity, the dominant industries in the region, and a history of labour market disadvantages. These factors have led to persistently low participation rates in these areas.

Understanding Skills Shortages

To better understand the underlying drivers of skills shortages, Jobs and Skills Australia conducted an expanded analysis. The study focused on whether the shortage was primarily due to a lack of people with essential technical skills or other factors, such as non-technical qualities valued by employers or reluctance to apply for vacancies under current conditions. The analysis revealed that shortages in critical occupations, including Clerical and Administrative Workers, Sales Workers, Machinery Operators and Drivers, and Labourers, were primarily driven by challenges in worker retention.

Addressing Challenges and Building a Strong Labour Market

The findings suggest that some individuals have the necessary technical skills for these occupations but are not applying for vacancies due to unfavourable working conditions. This emphasises the significance of offering well-paid, secure jobs with favourable working conditions to address these shortages effectively.

While the Australian labour market continues to demonstrate strength and resilience, policymakers and stakeholders must address regional areas’ specific challenges. Initiatives should focus on improving participation rates, addressing workforce retention issues, and providing attractive employment opportunities that meet the needs of both employers and job seekers. Australia can sustain its economic growth and drive prosperity by promoting a skilled and inclusive labour market.

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