Managing labour market constraints

The labour market in Australia is the tightest it has been in thirty years.  Many organisations complain of the difficulty in attracting and retaining qualified staff and specific industries are experiencing severe skill shortages.

The Federal Government’s Office of Employment and Workplace Relations predicts a potential shortfall of 195,000 workers in five years time as a result of population ageing (The Workforce Tomorrow, 2005, Department of Employment and Workplace Relations ).

This harsh reality will require innovative responses from employers in order to gain the staff they need.  New levels of flexibility will be required within employment contracts.  Job-sharing and multi-skilling will become the norm.  The workforce will, by necessity, become more diverse. 

Reducing staff numbers impinges on the ability of businesses to maintain their rate of output or quality of service.  Customers will continue to demand the level of service they expect now.  Businesses that cannot deliver will find their customers going elsewhere.

In the past, managing staff reductions was more likely to be a cost-cutting exercise by management.  The heady days of the 1980’s ended with the recession ‘we had to have’ in the early 1990’s.  Businesses were forced to re-map their employment structure and seriously assess their numbers.

The term ‘downsizing’ was coined at this time.  Retrenchment packages were weighed up in businesses everywhere. Organisations became leaner and employees became fearful for their place on the organisational chart.

Management in the past was in control of staff reductions.  They planned and costed them.  They designed and implemented change management plans and unveiled their restructure to the workforce.

The shoe is now on the other foot with business facing a major challenge to attract and retain appropriately skilled staff.  In many cases, staff must be trained by an organisation to learn the specific skills required.  Training becomes an immediate expense if staff do not stay long enough for the business to achieve a return on the training investment.

The younger members of the workforce today show little loyalty to employers.  They anticipate having several employers in their lifetime.  If their organisation is reducing staff they are more likely to apply for a departure package, such is their confidence of finding employment elsewhere.

High rates of attrition are serious financial and operational imposts on many industries today.  Staff turnover rates have a direct impact on the bottom line.  Staff morale is also hostage to attrition and absenteeism.  Workloads increase and so resentment builds.

The ageing of the labour force will probably be the most critical element impacting on recruitment and HR management in Australia for some years to come.  In some industries, more than half the workforce is already aged 45 years or over (Australian Jobs, 2006, Department of Employment and Workplace Relations).  

As these people move into retirement, huge gaps will appear within organisations.  The Australian Bureau of Statistics predicts nearly one quarter of our population will be over 65 by 2050.  If we look at working age, there will be just two people of working age for each person over 65 compared with the four we have currently (according to ABS 1998 projections).

The voids will become more difficult to fill.  In 2001, Access Economics estimated that there would be 170,000 new entrants to the workforce each year.  From 2020-2030, they predict a mere 125,000 new entrants over the entire decade.

Staff reductions today are beyond the control of management.  Reductions are now imposed on business by the labour market.  Employers need to design policies to retain their existing workforce and to encourage mature age participation.  Without a change in practice and mindset, Australian business will face serious labour constraints in coming decades.

Published 2006.