1. Assessment and recommendations

Australia’s labour market rebounded quickly from the COVID-19 shock. According to Australian labour force statistics, during the first wave of the pandemic, employment levels fell by almost a million between March and May 2020, and for the first time in over 20 years, Australia’s unemployment rate rose to over 7%. However after peaking at 7.4% in July 2020, unemployment began to fall, and by June 2021 was below its pre-pandemic rate. Employment also started to rebound in June 2020 and reached pre-pandemic levels in February 2021.

Australian states and territories have been affected differently by COVID-19. After the initial outbreak, between March and April 2020, the unemployment rate increased by 1.4 percentage points in Queensland, the largest monthly increase across Australia. On the other hand, in the Northern Territory and Western Australia, the unemployment rate increased by only 0.4 percentage points during the same period. As of June 2020, all states and territories started experiencing gains in employment, after months of job losses, but the unemployment rate continued to fluctuate. In July 2021, the unemployment rate was less than its pre-pandemic level in all states and territories, except for the Australian Capital Territory.

The rise in teleworking during the pandemic has also highlighted labour market inequalities. Teleworking has been a necessary practice during the lockdown period of COVID-19. Workers and businesses have undergone a large scale “forced experiment” where they have continued to operate while being physically separated, provided they had the necessary technological, legal and digital security conditions. OECD finds that the Australian Capital Territory has the highest share of jobs that can potentially be performed remotely (56.2%), followed by Victoria (49.9%) and New South Wales (47.6%). On the other hand, only 36.1% of jobs can be performed remotely in South Australia. Local differences in the share of jobs amenable to teleworking highlight the spatial inequalities in the ability of workers to continue working during COVID-19 across Australian states and territories.

Despite positive developments in the labour market prior to COVID-19, the unemployment rate remained higher than the pre-Global Financial Crisis (GFC) level in Australia. OECD data shows that the labour force participation rate, accounting for labour force participants as a share of the working age (15-64 year old) population, has been above the OECD average over the past decade, and amounted to 78.5% in 2019, compared to the OECD average of 72.8%. Total employment in Australia was 20% higher in 2019 than it was in 2008, compared to the OECD average increase of 10%, However, like many other OECD countries, Australia’s unemployment rate in 2019 remained higher (5.2%) than before the 2008 GFC (4.2%).

The unemployment rate had increased in all Australian states and territories between 2008 and 2019, except for New South Wales. According to Australian labour force statistics, on average during 2019, the monthly unemployment rate stood at 6.3% in Tasmania and South Australia, while it was 3.4% in the Australian Capital Territory. Regions within states and territories have experienced diverging trends, which reflect place-specific labour market dynamics. For example, looking at New South Wales, the unemployment rate in 2019 was highest in Southern Highlands and Shoalhaven, standing at 8.5%, while it was lowest in Sydney-Sutherland, averaging 2.3% in the same year.

Job creation has been led by capital city regions within each state and territory. In Tasmania, Hobart, which accounts for almost half of total employment there, led the state with 78.0% of net job creation (or 11 000 jobs) between 2015 and 2020. Similarly, in Western Australia, Perth-North West and Perth-South West accounted for 47.7% and 34.6% of net job creation over the same period, corresponding to about 19 400 and 14 100 jobs respectively. In South Australia, Adelaide-South and Adelaide-North created 37.5% and 31.6% of state net job creation (about 19 200 and 16 200 jobs).

COVID-19 is likely to speed up the adoption of automation, as firms seek to increase their productivity and lower physical interaction within workplaces. An OECD survey found that over 26% of Australian firms reported an increase in the take-up of new technology or automation because of COVID-19, with firms in New South Wales (27.0%), Victoria (35.1%), and Australian Capital Territory (35.7%) reporting take-up rates higher than the Australian average. Historically, automation has gained traction in the wake of economic shocks, when human labour become relatively more expensive as firms’ revenues decline. During these periods, employers are more likely to seek labour productivity increases by shedding lower-skilled workers and replacing them with technology and higher-skilled workers. The adoption of automation technologies in Australia’s industries has been going on for some time, with Australia being a world leader in mining equipment automation. The need to reduce the frequency and duration of human-to-human contact could further speed up the adoption of automation, as experts warn of the increasing threat of future pandemics.

Australia faces a lower risk of losing jobs to automation than on average across the OECD. Recent OECD estimates show that about 36% of jobs are at high or significant risk of being automated in Australia, compared to the OECD average of about 46%. Food Preparation Assistants, Handicraft and Printing Workers, and Stationary Plant and Machine Operators are the three occupations facing the highest average risk of automation in Australia. Given Australia’s occupational structure, personal service workers represent the largest number of at-risk workers, with 314 000 workers who might lose their job or experience significant change due to automation. Men tend to face a higher risk than women, since men are over-represented in occupations related to trades, manufacturing, and mining. Youth and Indigenous workers face a particularly high risk, given that they tend to be employed in occupations entailing more routine and repetitive tasks than the rest of the population.

In Australia, the risk of automation varies at the local level, with some regions more at risk than others. Automatable tasks are more prevalent in certain occupations and sectors, and neither occupations nor sectors are evenly distributed within national borders. Therefore, regions with a higher proportion of jobs relying on routine tasks are likely to experience more disruption, whereas places where more jobs require tacit skills will face lower levels of risk. Tacit skills are based on experience and intuition instead of formal rules, and are therefore more difficult to replicate through mechanical processes or standard algorithms. Moreover, the net-zero carbon transition could lead to job losses in sectors such as mining among others, which likely will not have a significant impact at the national level, but may lead to regional labour market disparities.

The Australian Capital Territory faces the lowest risk of automation across states and territories in Australia. About 29.3% of jobs are at risk of becoming automated in the Australian Capital Territory – 21.3% facing high risk and 8.0% vulnerable to significant change. New South Wales (33.9%), Victoria (34.0%) and Northern Territory (34.5%) also face a lower risk of automatable jobs than the Australia average. However, regional differences in the risk of automation are pronounced within all Australian states and territories. For example, regional variation in the share of jobs at risk of automation amounts to more than 15% in New South Wales, ranging from 40.2% in Hunter Valley exc. Newcastle to 24.6% in Sydney-North Sydney and Hornsby. Looking across all regions, Mackay-Isaac-Whitsunday is the region in Australia facing the highest risk of automation, with about 41.2% of jobs (or 32 000 jobs) at risk. On the other hand, Sydney-North Sydney and Hornsby is the region facing the lowest risk (24.6% of jobs, or 50 000 jobs).

The drivers of job loss due to automation might differ across regions, even when they face similar risks of automation. For example, in rural and remote regions, where agriculture is a prevalent source of income, the risk of losing jobs to automation might be mainly related to the prevalence of low-skilled occupations in agriculture, which could be potentially replaced by machines. On the other hand, the concentration of administrative jobs in regions where a large number of companies are located, might cause the risk of automation in these regions to be related mainly to those occupations.

The good news is that the large majority of regions in Australia (81 regions, accounting for about 91% of regions) are creating jobs facing a lower risk of automation. This suggests that most Australian regions have decreased their vulnerability to automation over the past decade. Employment growth in occupations such as health professionals, teaching professionals, production and specialised services managers, business and administration professionals, have contributed to reducing the risk of job losses from automation. There are however some notable exceptions. For example, six Australia regions (7% of total regions) lost jobs between 2006 and 2016 predominantly in less risky occupations. These include Northern Territory-Outback (Northern Territory), West and North West (Tasmania), South Australia-Outback (South Australia), Queensland-Outback (Queensland), Brisbane-West (Queensland), and Far West and Orana (New South Wales).

The 2018 Manpower Group Talent Shortage Survey reported that about 34% of employers in Australia could not find the talent they needed. The number was higher for medium-sized organisations (50-249 employees), standing at 43% in 2018. However, the share of employers reporting shortages was lower in Australia than around the world on average (45%). Despite declining over the past decade, the share is still higher than in 2006, when it stood at 32%. One in four employers reported that the lack of applicants was the main reason why they could not find the skills they needed. As companies digitalise, automate and transform, finding candidates with the right blend of technical skills becomes more important than ever. Yet, many employers reported the lack of required hard skills as the driver of talent shortage (21%).

COVID-19 will likely accelerate changing demand for skills and employer expectations in Australia. The pandemic will have different impacts on workers across the skills distribution, and there is a risk that it will exacerbate inequalities in the labour market where there is an acceleration in trends towards digitalisation. After falling across all skills categories throughout the year, job vacancies, as measured by the Internet Vacancy Index (IVI), started to rebound in August 2020, with higher-skill workers experiencing stronger gains. By October 2020, the number of job vacancies exceeded pre-pandemic levels across Australia and across skill groups. However, the pandemic-induced labour market shock will leave a lasting impression on the economy and many employers are likely to raise skill requirements for certain jobs given the trend towards digitalisation.

Adult learning and digital skills will become even more crucial in a post pandemic labour market. Investments today in lifelong learning and vocational training can help workers and regions to make transitions to new economic opportunities. Australian adults have a strong set of digital skills, compared to the OECD average, according to the OECD’s Survey of Adult Skills (PIAAC). 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. 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 job vacancies requiring digital skills. For example, vacancies 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. The future of work requires workers to develop a broad mix of skills, including not just digital skills but also strong basic, cognitive and socio-emotional skills, to succeed in the workplace.

The Australian Government has taken immediate action to support Australians during the COVID-19 pandemic. The health response to the pandemic has been guided by the Australian Health Sector Emergency Response Plan for Novel Coronavirus (COVID‐19 Plan), designed to support and help co-ordinate government health agencies. The government has introduced economic stimuli to provide timely support to affected workers, businesses and the broader community. Since the onset of the COVID-19 pandemic, the government has provided AUD 257 billion in direct economic support to cushion the blow and strengthen the recovery. It has done so for example through the JobKeeper Payment scheme, a subsidy for businesses significantly affected by COVID-19, the Boosting Cash Flow for Employers programme, providing payments to help keep businesses operating, pay rent, electricity and other bills and retain staff. In addition, the government has provided income support to Australians, through the Coronavirus Supplement and AUD 750 payments to those on certain forms of income support.

The Australian Government has invested AUD 48.3 million to establish the National Skills Commission (NSC), which develops intelligence on Australia’s labour market, as well as current and emerging skills needs. The NSC will drive long-term improvements across the skills system by bringing together existing data to develop new capabilities in skills analysis which will improve VET pricing and outcomes. The National Skills Commissioner Bill 2020 established a new statutory position: the National Skills Commissioner. The Commissioner performs an advisory function by providing advice on Australia’s employment and educational workforce needs; VET performance, course prices and government investment returns; and opportunities to improve VET access and choice in regional, rural and remote areas.

A number of other initiatives and reforms have also been implemented to help workers transition. For example, the Local Jobs Program, where Employment Facilitators will work with employers and other key stakeholders to develop employment solutions at the local level and support Australians back into work. The programme focuses on re-skilling, up-skilling and employment pathways to assist people to move back into jobs as the economy recovers. In addition, employment services are being transformed in Australia to deliver better services to job seekers and employers and a better system for providers, capitalising on the potential of digital technologies. The development of the new employment services model involved extensive consultation with more than 1 400 stakeholders including job seekers, employment services providers, industry representatives, employers and peak bodies, and independent advice delivered by the Employment Services Expert Advisory Panel to the government.

Digitalisation, automation and new technologies are more likely to change tasks within jobs rather than replace entire jobs. Few occupations will be heavily affected by automation, but many more will face significant change. These changes in the task composition of occupations require workers to access re-skill and up-skill opportunities to stay relevant in their current job or transition into new jobs. The future of work will require a mix of digital skills, which are becoming even more relevant in light of COVID-19, as well as inter-personal skills and new occupation-specific competences. Supporting mid-career job transitions, re-skilling, up-skilling and training programmes will be crucial for supporting job transitions.

Some segments of the population will be hit harder than others by changes in the world of work. This study has shown that men tend to be employed more in occupations facing a higher risk of automation than women. Although more personal service jobs, which tend to be female-dominated, are at high risk of becoming automated than any other occupation, men are over-represented in other occupations facing a high risk of automation, such as drivers and mobile plant operators, and building and related trades workers (excluding electricians), and labourers in mining, construction, manufacturing and transport. Older workers and young people also typically face a more challenging labour market. Older people who have traditionally worked in a specific occupation will encounter more difficulties in transitioning to new jobs. Young people on the other hand tend to be in less stable employment contracts in Australia as well as across OECD countries. Indigenous Australians often work in jobs requiring lower skill levels, which face the highest risk of being automated over the long-term. They have lower employment shares than the rest of the population in occupations such as Managers and Professionals, while they have higher employment shares in Machine Operators, and Driver and Labourer occupations.

While Australian adults are more likely to continue in education and training after leaving formal education than their peers in other countries, there are disparities in access to training in Australia. Australian adults have a strong set of digital skills, compared to the OECD average, according to the OECD’s Survey of Adult Skills (PIAAC). They have above average proficiency in problem-solving in technology-rich environments, with about 40% scoring in the top two levels, compared to the OECD average of about 30%. Australia also outperforms the OECD average in adult literacy and numeracy proficiency. There are however differences in adult training participation in Australia based on a number of socio-economic characteristics. For example, adults aged 55+ are less likely to participate in training than the rest of the population. In addition, those with less than high school education are about half as likely to participate in training than adults with above high school education.

There is an opportunity to leverage local action in Australia and support people to transition into the future of work. This would be particularly important for more disadvantaged segments of the labour market, including Indigenous people, immigrants, persons with disabilities as well as older workers. At the local level, worker engagement is also an important element to ensure a people-centred policy response to the future of work. The social economy could play a key role in supporting disadvantaged groups.

Industrial policy has been at the heart of the policy debate to prepare for the future of work across many OECD countries. As discussed in Chapter 4 of this publication, the tradable sector is recognised as a driver of productivity growth, but jobs in this sector typically face a higher risk of automation, as they entail routine and repetitive tasks. Policy makers need to embrace the long-term benefits from shifting towards the tradable sector as productivity growth can lead to better wages and standards of living, while also addressing the risks related to automation that come from this shift. In the context of the future of work, policies can look within the tradable sector and identify how to steer support towards occupations with tasks that are less vulnerable to automation. Given that industrial and skills development policies often pertain to different government departments, policy co-ordination is crucial.

Local policy makers could build on the skills and competences of their population and on the presence of key actors in employment and skills. The so-called local skills ecosystems can be instrumental in providing access to relevant specialised knowledge and skills. There may be benefits to focusing on local expertise and strengths with the objective of creating a diversified labour market. Local skills ecosystems are typically characterised by a high level of social capital and strong multi-sector linkages between employment services, training organisations, as well as economic development actors, providing local firms with easy access to specialised support for fostering innovation. The emergence of a local skills ecosystem is often dependent on a strong anchor institution, such as a higher education or vocational education institution as well as a catalyst for change that unites different local actors. In addition to promoting digital skills, local actors can also lead the way in closing the digital divide between urban and rural areas by ensuring adequate access to high-speed broadband in rural areas.

Building on local skills ecosystems, policies could promote diversification into activities that are closely related and connected to the existing skills base of the population. As communities respond to structural adjustments resulting from automation, evidence suggests that local networks connecting industries with overlapping skill requirements are predictive of where firms are most likely to diversify economic activities. Successful examples of this diversification approach can be found in Ohio (United States), as well as across the European Union (EU) through the Smart Specialisation Strategy approach. These examples are presented in Chapter 4. More recently, Germany has agreed to a EUR 2 billion (about AUD 3.2 billion) aid package to help its carmakers and auto industry suppliers’ transition into greener engines and automated driving. Under this programme, which is due to come into force in 2021, the government plans to distribute grants to important industry players by 2024. It will also use the funds to promote research and development in areas including the digitalisation of supply chains, 3D-printing and the shared use of production data, and give support to clusters of companies to train employees. The programme is part of Germany’s economic stimulus plan aimed at cushioning the effects of the COVID-19 crisis.

SMEs represent the backbone of the Australian economy, and they have been hit harder than larger firms by COVID-19. SMEs account for about 99.8% of all businesses (more than 2 million units), slightly higher than the OECD average. The pandemic has caused SMEs to suffer more than larger firms, both in Australia and across the OECD. In the Australian context, a number of surveys have shed light on the particular difficulties for small businesses in light of COVID-19. For example, a survey undertaken by American Express finds that 80% of small business owners are optimistic that they will survive the crisis in Australia, but 52% fear that sales will not bounce back strong enough to survive in the longer term.

SMEs struggle more than other firms in accessing training and embracing new technologies. The COVID-19 crisis has heightened the importance of SME digitalisation, and has served as an accelerator. Limited access to training is generally due to the lack of dedicated internal training or Human Resources departments to organise and co-ordinate training. SMEs tend to have lower levels of management skills and practices, suggesting that even when employee skills are developed, these may not be used effectively. High direct financial costs for developing tailored training are another typical constraint for SMEs when it comes to training. Within Australia, 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%). In addition, there are large barriers for many SMEs to adopt digital technologies, reflecting challenges such as relative difficulty accessing finance or a lack of key capabilities. The slow adoption of digital technology might also be a reflection of the lower incentives for some SMEs who might not be able to reap the same pay-offs from the digitalisation of their production processes as larger businesses.

Australia has introduced measures to support access to training for firms. The Australian Government has a dedicated webpage, providing information on support and incentives. There is a focus within Australia on supporting firms in providing apprenticeship opportunities. For example, the Australian Apprenticeships Incentives Program (AAIP) contains a range of direct payments to support employers. In light of the pandemic, the government has also introduced the Boosting Apprenticeship Commencements programme, supporting firms to take on new apprentices and trainees. In addition, the Support for Adult Australian Apprentices (SAAA) incentive is a payment of AUD 4 000 to an eligible employer of an adult Australian Apprentice once the apprentice has successfully completed 12 months of training.

Australia could consider taking measures in support of employee training as well as towards the creation of employer-led networks for skills development at the local level. Given the constraints faced by smaller firms in accessing trainings, incentives can be even more effective in the context of SMEs. Across the OECD, employees in small firms are 50% less likely to be offered formal training than those in larger firms. The creation of networks of businesses within the same sector or partnerships among SMEs can play a crucial role in helping SMEs navigate labour market changes and get easier access to skills development information and opportunities. Several OECD countries are investing more in “brokers” or intermediary bodies such as collective training offices to organise training for groups of SMEs to shift the burden away from individual employers. These organisations often sign apprenticeship contracts with the government while also providing practical assistance to individual apprentices.

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