4. Future-proofing people, places and firms in Australia

4.1.1. COVID-19 has had major impacts on families and workers in Australia

The first COVID-19 cases were reported in Australia in late January 2020. In mid-March, the government introduced initial measures to slow down the spread of the virus, including mandatory self-isolation of arriving travellers, the implementation of contact tracing and expansion of testing services. The government also introduced a first economic stimulus package to support the impacts on the economy. Towards the end of the month, lockdown restrictions limiting citizens’ movements and reducing opportunities for public gatherings were progressively implemented to reduce the risk of local infections. In April 2020, the number of cases declined in Australia. However, from mid-June 2020, cases increased and peaked in early August 2020. Since then, the number of new cases reported each day has been decreasing. On 1 November 2020, Australia recorded zero cases of community transmission nationwide for the first time since 9 June 2020. In the following months and through the beginning of 2021, localised restrictions have been imposed across Australia in response to local outbreaks.

While Australia has rebounded quickly from the pandemic, albeit some states and territories have been hit harder than others where the recovery has been slower. By mid-June 2021, Victoria had a total of about 20 000 confirmed cases since the pandemic began, accounting for nearly 70% of total cases in Australia, and recorded about 800 COVID-19-related deaths (90% of total deaths in Australia). On the other hand, about 170 cases were confirmed in the Northern Territory, with zero deaths. As of August 2021, the number of COVID-19 cases in New South Wales surpassed Victoria but the number of COVID-19 deaths remained lower than in Victoria.

As localised COVID-19 outbreaks continue to be recorded across the country, Australia’s response to COVID-19 has included regionally targeted restrictions where necessary. In June 2020, restrictions had been reinstated in the state of Victoria as new COVID-19 clusters began to be recorded, in an apparent second wave of infection, leading to a state of emergency until November 2020. Melbourne was in strict lockdown for longer than the remainder of Victoria over the 2020 winter, and outbreaks have led to regional lockdowns in North-West Tasmania, the Northern Beaches of Sydney and several other regions. A new state of emergency was declared in Victoria at the end of January 2021 (Department of Health, 2020[1]).

COVID-19 took a heavy toll on the Australian labour market. The number of employed people in Australia dropped by almost a million between March and May 2020. Employment started to rebound in June, when about 240 000 jobs were added, and continued to do so in July (103 000 jobs) and August (148 000 jobs), although employment fell again in September (-46 000 jobs). Total employment stood at 13.2 million in July 2021, surpassing the pre-pandemic mark. COVID-19 led to dramatic increases in unemployment rates in Australia. For the first time in over 20 years, Australia’s unemployment rate rose to over 7% in June 2020. It decreased to 4.6% as of July 2021.

4.1.2. Both the federal and state/territory governments have taken action to support families and workers during COVID-19

The Australian Government took 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 support stimuli to provide timely support to affected workers, businesses and the broader community (Department of Health, 2020[2]). As outlined in the Australian Government’s Budget 2020-21, released in October 2020, since the onset of the COVID-19 pandemic, the government has provided more than AUD 500 billion of support in response to COVID-19, of which 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 income support. Since measures were first introduced in March 2020, the government has extended and further tailored temporary economic measures to support sectors, regions and communities. These actions have the objective of supporting the economy during unprecedented times and setting the foundation for a strong recovery going forward.

The 2020-21 government Budget included further commitments bringing the overall support provided by the Australian Government to AUD 507 billion, including AUD 257 billion in direct economic support. The government’s response continues to be temporary and targeted, using existing delivery mechanisms where possible. The Budget foresees a comprehensive set of reforms, in the areas of taxes, jobs, welfare, education and small businesses among others. Businesses will receive up to AUD 200 per week to hire young Australians, with the objective of reversing the increase in youth unemployment witnessed during the recession. The Australian Government has also partnered with state and territory governments to establish a new AUD 1 billion JobTrainer Fund. Through the fund, job seekers and young people, including school leavers, will be able to take advantage of subsidised training to learn skills for jobs in demand. The government is providing AUD 500 million in 2020-21 and this is being matched by contributions from state and territory governments. Subsidies will be available to employers to keep apprentices and trainees in work (Australian Government Department of Education, Skills and Employment, 2020[3]). At the time of writing, the JobKeeper payment and the Coronavirus Supplement have both been extended until March 2021. The government’s plan is reflected in the revised Economic and Fiscal Strategy, setting the focus on driving the economic recovery to strengthen the budget position in the near term, then stabilising and reducing debt as a share of the economy over the medium term (Australian Government, 2020[4]).

Australian state and territory governments have announced a range of economic and social measures in response to COVID-19. The Commonwealth, State and Territory governments have agreed to introduce a range of measures to help commercial and residential tenants during COVID-19. These include temporarily halting evictions and providing rent reductions for eligible commercial tenants at least proportionate to their decline in turnover. New South Wales, Victoria, Queensland, Western Australia, South Australia, Tasmania and the Australian Capital Territory have extended the relief measures until at least December 2020. Most states and territories have introduced grants and tax relief, as well as fees and other charges relief (CPA Australia, 2020[5]). In addition, state and territory governments have developed plans to support the economy in the recovery, building on local assets and opportunities. As an example, the Government of New South Wales has introduced a COVID-19 Recovery Plan, aiming to promote innovation, foster local resilience and future-proof its state economy (see Box 4.1).

4.1.3. Prior to COVID-19, automation and other megatrends were re-shaping labour markets

Prior to COVID-19, economic, demographic, and environmental trends were changing the geography of jobs, the demand for skills, as well as the composition of local workforces. These changes have had many positive effects, including longer and healthier lives, safer workplaces, and more productive economies. Yet, they have also generated substantial uncertainty about the future. Indeed, job stability has been decreasing and skill gaps have been growing in recent decades. Ongoing shifts could also reinforce geographic divides, as large cities and other places already ahead are generally better poised to reap the benefits of these changes (OECD, 2020[7]).

Over the past decades, fear of technological unemployment has mounted across OECD countries, as automation, digitalisation and new technologies have changed the way we live and work. Automation and new technologies have traditionally contributed to increased productivity since the invention of the wheel. However, the labour-saving effect of automation has always generated debate around technological unemployment. While the productivity gains from automation are immediate, it might take time for workers to re-train and find other jobs. Despite fears, technological innovations have historically given rise to new jobs, while the productivity growth from automation has been an important driver of rising living standards (OECD, 2018[8]).

Chapter 2 of this report presented results on the impacts of automation at the local level in Australia. Australia overall faces a lower risk of automation than on average across the OECD (about 36% vs. 46%). However, regional differences in the risk exist within all Australian states, with some showing higher regional variation than others. For example, in Queensland, the risk of automation varies from 41.2% in Mackay - Isaac - Whitsunday to 27.7% in Brisbane Inner City. The drivers of the risk of automation depend on the occupational profile of local labour markets. In rural regions, the risk of losing jobs to automation relates to the prevalence of skilled occupations in Agriculture. This is the case of South Australia-South East (South Australia), where 40.3% of jobs are at risk. In some regions, the risk is driven by occupations which are common to the mining sector, such as in Mackay-Isaac-Whitsunday (Queensland). Regions at risk of automation also tend to have high employment shares in Manufacturing. Other regions are characterised by the prevalence of jobs in occupations at risk across sectors. The net-zero carbon transition is also likely to have an adverse impact on jobs in manufacturing and mining which could exacerbate regional labour market inequalities (OECD, 2021[9]).

While some jobs are likely to disappear due to automation, a larger share is likely to undergo significant change in the type of skills they require. Automation will likely impact selected tasks within jobs rather than replacing entire jobs. This could lead to improvements in the quality of jobs: dangerous or boring tasks can be automated; people can choose where and when to work more freely, resulting in a better work-life balance; work environments can be made safer and healthier; and informality could be reduced (OECD, 2019[10]). Structural change creates employment opportunities in some occupations and industries and decreases opportunities in others, and thereby changing the types of skills that are needed in the labour market. In the past decade, some countries have seen their economies transform more rapidly than others, implying a greater need to re-train workers (OECD, 2019[11]). Whether workers lose their jobs or have to adapt to new tasks in light of automation, adult learning systems play a key role in up- and re-skilling to meet new skill needs. In Australia, more adults participate in training than on average across the OECD (48% and 40% during a 12-month period). However, the share drops to 23% for low-skilled adults and to 32% for older adults aged 55 and over. In addition, participation in training has decreased over the past years (OECD, 2018[12]).

Automation will also create jobs, but these will not necessarily be in the same places as the jobs that were lost. On average, regions with a lower-educated workforce and that are less urbanised have a higher share of jobs at risk. In past waves of technological change, cities that already had a highly skilled workforce have benefited the most from the new, complementary jobs created. They attracted more high-skill jobs and workers, and reaped the spill over benefits in terms of other local job creation (e.g. as a result of increased demand for local services such as restaurants, hairdressers, etc.) (OECD, 2020[7]).

4.1.4. COVID-19 will accelerate automation and impact other ongoing transitions

The long-term impacts of COVID-19 on local labour market outcomes will become clearer with time, but there is a major risk that it could accelerate the pace of automation in the labour market, exacerbating economic and social inequalities worldwide. Investment in automation typically comes with uncertainty, and firms may lack the resources to undertake it in times of economic downturn. However, to reduce their exposure to any potential future social distancing and confinement measures, more firms could decide to invest in technology to automate the production of goods and services. The adoption of automation in the workplace tends to accelerate in times of economic crises, as firms replace workers performing routine tasks with a mix of technology and better skilled workers (Muro, Maxim and Whiton, 2020[13]). Already in one February/March survey, 36% of top executives said they were accelerating investment in automation as a result of COVID-19, and a further 41% said they were currently re-evaluating their strategies in this area (EY, 2020[14]). The increasing adoption of automation technologies also emerges from the production and sale of robots. In Japan, sales of industrial robots outperformed those of industrial machinery, while in August, China recorded a 14% annual growth in the production of industrial robots. The International Federation of Robotics (IFR) expects the number of professional services robots in operation around the world to increase by 38% in 2020 and that growth to continue in the next two years (Financial Times, 2020[15]). Research on the use of robots in over twenty countries, including China and the United States, also found that ground and aerial robots are playing a crucial role in almost every aspect of managing the pandemic. For instance, doctors, nurses and family members are using robots to interact in real time with patients from a safe distance, while outside of hospitals, robots are being used to spray disinfectant throughout public spaces (World Economic Forum, 2020[16]).

Firms in Australia have however been less impacted by COVID-19 than elsewhere across the OECD, with positive impacts on business continuity but potential productivity losses over the longer term. Most firms in the country have been able to return to normal operations since mid-2020. It is therefore likely that the incentives for changing business models and production processes will be limited, compared to other OECD countries that experienced larger disruption. On one hand, this points to overall positive effects for businesses and the economy in Australia, as they navigated the pandemic with less disruption. On the other hand, there may also be a risk that Australia will miss out on the forced change to more productive approaches firms overseas are adopting which may have some long term costs.

COVID-19 has also led to a shift towards online retail and remote working, which could reshape the sectoral composition of the Australian labour market going forward. Restrictions placed on the operation of physical retail stores saw both businesses and consumers turn to online retailing. Online sales have experienced large rises in March and April 2020 at the outset of COVID-19 as customers complied with social distancing regulations, and rises in July and August when Victoria entered a second lockdown (Australian Bureau of Statistics, 2021[17]). The shifts towards online sales could have large impacts in the future composition of the future sectoral composition of the labour market, reducing employment in the retail trade industry but increasing it in sectors such as transportation. At the same time, remote working has peaked in Australia in light of the pandemic, with potential long-term implications. Work from the Institute of Transport and Logistics Studies (ITLS) shows that the number of work from home days doubled for managers and almost tripled for employees in sales and clerical/administration work in Australia during the pandemic. Surveys also show that about 75% of workers think employers will support future work from home plans once the pandemic has passed (University of Sydney, 2020[18]). Over the longer term, increased remote working could reduce the demand for commercial retail/office buildings as well as commuter infrastructure, reducing employment in the construction industry, and increasing it in technology and other industries,

Finally, in addition to its labour market impact, the pandemic could transform many other ongoing economic, demographic, and environmental shifts into abrupt changes, making the transition even more difficult for some people and places. It could also reorient trends such as urbanisation and globalisation, opening up new opportunities for places that previously risked being left behind. Managing supply chain risks could result in re-localisation and consumer preferences could shift towards greener consumption. There are also additional environmental imperatives that will require more greening of construction, manufacturing, mining, transport and many other sectors. Some population may flow away from large, urban areas, and rural areas might be able to attract new residents, helping to offset an ageing population. The pandemic could also decelerate the international movement of workers and students, at least in the short term (OECD, 2020[7]).

4.1.5. Local actors will play a key role in supporting transitions in light of COVID-19 and the future of work

In Australia, local governments have important responsibilities for the employment, skills, and economic development policies that can help workers and firms transition to the future of work. There are three layers of government in Australia: federal, state/territory and local government. As direct providers of local services with significant responsibility for administrative and governance functions that enable delivery, local governments are significant stakeholders within communities and the broader service delivery environment. Increasingly, local governments are becoming the principal providers of government services to local communities on behalf of state, territory and Commonwealth governments, as a more contextually responsive and localised approach to government service delivery is seen to be the most appropriate mode (Australian Centre of Excellence for Local Government, 2013[19]). Going forward, they are likely to take on larger roles as the employment policy response transitions from delivering benefits to helping unemployed workers transition to new opportunities. Local capacities will need to be upgraded to meet these increased demands.

Local actors are also well-positioned to co-ordinate across policy areas. For example, due to their understanding of local labour market dynamics, they can help identify and deliver the types of training needed to help displaced workers transition quickly from shrinking to growing sectors. Partnerships across local economic development agencies and training institutions can help local SMEs both secure financial resources and expertise to integrate new technologies into production processes, and upgrade the skills of their workforces to put them to good use.

COVID-19 and the general downturn will exacerbate poverty and deprivation worldwide, and local governments will have to pick up many of the pieces. In a number of countries, local governments are directly responsible for benefits for the long-term unemployed or other social assistance recipients. Even in countries where subnational governments are not responsible for these benefits directly, it often falls on the shoulders of local actors to support those in the most precarious situations via emergency housing, material assistance such as food banks, health and mental health support, among others (OECD, 2020[7]).

4.1.1. Local jobs programmes have been introduced to support workers impacted by COVID-19

A number of place-based programmes have been introduced in Australia. Acknowledging the urgency in assisting job seekers navigate change, together with longer-term trends impacting skill requirements in many jobs, the Australian Government has introduced the Local Jobs Program. Through the Local Jobs Program, Employment Facilitators will work with employers and other key local stakeholders to develop employment solutions at a local level and support Australians back into work. The programme focuses on re-skilling, up-skilling and providing employment pathways to assist people to move back into jobs as the economy recovers. Recognising the importance of local knowledge in getting people back into jobs quickly, the Australian Government’s Local Jobs Program has:

• put in place local Employment Facilitators

• create Local Jobs and Skills Taskforces and

• provide Local Recovery Funds to support small scale projects, in 25 employment regions across Australia.

Employment Facilitators are dedicated individuals who work with local job seekers in specific regions to connect them with training, job opportunities and other support. As part of their role, facilitators chair Local Jobs and Skills Taskforces across 25 regions and work with local stakeholders

including employers, employment services providers and training organisations to drive the development of a Local Jobs Plan. Facilitators also support local stakeholders to create targeted projects that meet the priorities of the plan. They work with organisations that apply for funding through the Local Recovery Funds to ensure employment opportunities are maximised. Employment Facilitators are also contracted in regions facing structural change, for instance in regions in New South Wales, South Australia, Tasmania and West Australia. Not all these regions are Local Jobs Program regions, and contracting of facilitators is for a longer term, recognising the enduring impact of structural change.

Local taskforces will identify key employment priorities, local labour needs and help design potential solutions. Taskforces will consist of local business, employment services and training providers and other key stakeholders. The taskforces will develop a Local Jobs Plan, identifying the region’s priorities and opportunities, and solutions to support job seekers in meeting local employers’ requirements. This will be supported through information provided by the National Skills Commission and the National Careers Institute. The establishment of local boards to develop solutions to labour market challenges is a common initiative across OECD countries (see Box 4.2).

Measures to help worker re-skill and up-skill, transitioning into new sectors, have also been introduced in several OECD countries. For example, in the United Kingdom, a Lifetime Skills Guarantee has recently been announced, with the objective of helping people, especially workers in sectors heavily impacted by COVID-19, transition into new job opportunities. In addition, Scotland has introduced a National Transition Training Fund, to support job transitions (see Box 4.3).

4.1.2. Jobs Fairs moved from physical to virtual fairs as a result of COVID-19

Jobs Fairs bring together job seekers, employers and employment service providers to provide an opportunity for job seekers to talk to employers and learn about jobs, training and career options available in their area. On the day of the Jobs Fair there are also workshops held for job seekers on topics on finding and retaining a job, as well as one-to-one sessions on résumé writing and interview advice. Traditionally, Jobs Fairs have been held as a physical day-long event, however due to COVID-19 the Australian Government transitioned to holding the physical event to online “virtual” jobs fairs.

Since July 2020, 11 virtual Jobs Fairs have been delivered to assist job seekers to enter or re-enter the workforce. Elements such as workshops have been retained, with the both “live” and “on-demand” workshops available. The traditional jobs board is also available online, with links to the employer booths, so that job seekers can chat in real time, online, to prospective employers about the jobs.

Some fairs have focussed on jobs within specific regions or specific industry sectors. For example, in November 2020 the National Harvest Virtual Jobs Fair was held, to help address labour shortages in the agriculture sector. This fair focussed on ensuring that employers that had jobs available were connected with job seekers looking for work, as well as provide information about working in harvest roles. Over 2 710 job seekers attended this virtual Jobs Fair with over 26 000 jobs available on the day.

4.1.3. Public employment services are under reform to become more responsive to the future of work

jobactive is the main employment services programme in Australia, which features a digital service for the most job ready job seekers and a network of service providers in over 1 500 locations across Australia, delivering employment support programmes and services for job seekers who require additional assistance. Since July 2019, retrenched workers and their partners have been able to access jobactive immediately after being retrenched, thanks to the Job Seeker Classification Instrument (JSCI). In jobactive, job seekers in the digital service can use online tools to improve their job readiness and employability skills and prepare employment applications. Job seekers in provider service can receive additional assistance to achieve these goals as well as addressing any non-vocational barriers they may have. Service providers can match job seekers with suitable work experience placements including through compulsory activities such as the Work for the Dole programme. Providers also support jobseekers and their employers once placed in a job, by giving access to other types of supports, including wage subsidies and or relocation assistance, and ensure that all job seekers are treated fairly and with respect in a culturally sensitive way (OECD, 2019[25]).

Employment services are being transformed in Australia to deliver better services to job seekers and employers and a better system for providers, tapping into 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 in its report to Government. The new model is being trialled in two regions from July 2019 before being rolled out nationally from July 2022. Digital job matching platforms can be instrumental in reducing spatial barriers to employment, engaging communities facing more labour market hardship than others, such as Indigenous People (Raderschall, Krawchenko and Leblanc, 2020[26]).

The new model foresees two main work streams, depending on the job-readiness and skills of job seekers. Those who are job-ready and digitally literate will enter the digital service, self-managing online through the digital employment services platform, accessing information, tools, and searching for jobs online. Digital job seekers will report online how they are meeting their requirements, receiving targeted suggestions of activities and options to improve their chances of finding work. Some digital job seekers may receive some additional support with skills or training. Digital job seekers will self-manage online and have additional support available through a contact centre. Should a job seeker need it, they can have access to funding to help with transport or employment-related expenses. They can be connected to an employment services or training provider for specific services such as training to help use the digital service or work skills training. Finally, those with multiple barriers to employment will enter the Enhanced Services stream. These job seekers will receive individually-tailored case management from an employment services provider to help build job readiness, organise training and education, connect with complementary services and work experience. Job seekers in Enhanced Services will have access to the digital platform and will be supported by their employment services provider to access services online, where appropriate (Australian Government Department of Education, Skills and Employment, 2020[27]). The new public employment service model builds on the opportunities emerging from digital technologies, while acknowledging the potential trade-offs of digital service delivery, and the need for the more disadvantaged job seekers to also receive tailored support from a provider.

4.2.1. Actions are being taken to deliver skills for today and tomorrow in Australia

The Australian Government has recently committed to strengthening the vocational education and training sector. This includes the AUD 585.3 million Skills Package Delivering Skills for Today and Tomorrow. The package aims to help train highly skilled and qualified workers, including in regional areas, to meet the needs of industry, acknowledging that a strong VET sector is crucial to prepare Australians for the workforce opportunities of today and the future. The Skills Package lays the building blocks for reforms identified in the Expert review of Australia's vocational education and training system, placing industry at the centre and raising the profile of VET as a career pathway of choice. It takes important steps towards longer term funding and governance reforms to help ensure that the VET system is responsive, well-respected and flexible into the future (Australian Government Department of Education, Skills and Employment, 2020[29]). As part of the package, the government is providing AUD 52.5 million through the Foundation Skills for Your Future Program to support eligible Australians to undertake further education and training. Eligible employed or recently unemployed Australians can undertake free accredited and non-accredited training to improve their language, literacy, numeracy and digital skills to help them up-skill or re-skill for new roles, to obtain and retain secure employment and to undertake further education and training. The package also includes AUD 9.9 million over three years for a Remote community Pilot in each of South Australia, the Northern Territory, Queensland and Western Australia. The pilots will inform future delivery of English language, literacy, numeracy and digital (LLND) skills training in remote communities and elsewhere.

The Australian Government has invested AUD 48.3 million to establish the National Skills Commission (NSC), which develops independent intelligence on Australia’s labour market and 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 and improve VET pricing and outcomes. The National Skills Commissioner Act 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.

In addition, the Australian Government has explored how large, local and international data sets can help workers and job seekers transfer their existing skills to new jobs and identify new skills to develop. The report Reskilling Australia: a data-driven approach, published by the Department of Education, Skills and Employment (known as Department of Employment, Skills, Small and Family Business at the time of the publication of the report), identifies that moving towards a skills-based approach to labour market analysis could help Australia respond to this changing demand for skills. After analysing the US careers database O*Net and Burning Glass Technologies job advertisement data from 2.6 million online job postings in Australia, the department developed a job similarity model, which shows how the skills of one job compare to another to help identify practical avenues to a career change. The Skills Match and JobSwitch tools recently released on the Job Outlook website also use this new model to provide a practical way of helping individuals navigate the changing labour market. The National Skills Commission has taken ownership of this work for the Australian Government going forward.

While the Australian Government has taken important steps to prepare Australians for the future of work, it could also look to examples of other initiatives across the OECD. Among these, individual learning schemes have recently gained prominence in the international policy debates, in light of a rise in non-standard work and an increased fragmentation of workers careers. Individual learning schemes are training schemes attached to individuals (rather than to a specific employer or employment status), which are at their disposal to undertake continuous training along their working lives and at their own initiative. The goal of these schemes is to boost individual choice and responsibility concerning training (OECD, 2019[30]). Such schemes however also come with challenges. For example, if not carefully designed, schemes are more likely to be used by high-skilled workers than low skilled ones, potentially exacerbating inequality in skills outcomes and producing deadweight loss which arise from the fact that some beneficiaries would have participated in training even in the absence of the scheme (OECD, 2019[31]). In addition, ILS generally only cover tuition fees associated with training, and do not cover indirect costs (e.g. child care expenses, transportation costs) or opportunity costs (i.e. wage costs for the time spent off work). This means that on their own, ILAs are unable to address time constraints that prevent adults from participating in adult learning. The introduction of an individual learning scheme should therefore be carefully designed, to avoid market distortions and ensure its broad coverage. Box 4.5 outlines the characteristics of the individual learning schemes introduced in France and in Canada.

4.2.2. The government recently introduced skills development programmes to support regional development

An Australian Apprenticeship provides a nationally recognised qualification and on-the-job employment experience. It combines on- and off-the-job learning, can be completed in full-time or part-time patterns, and can be commenced while a learner is still at school. Australian Apprenticeships are available to any Australian of working age, regardless of their level of education, including those who are school-leavers, re-entering the workforce or adult workers simply wishing to change careers. Australian Apprenticeships are available across Australia in a variety of qualification levels and in more than 500 occupations, including traditional trades, as well as emerging careers in most sectors of business and industry.

The Skilling Australians Fund was established as an ongoing arrangement by the Australian Government as part of the 2017–18 Budget. The purpose of the Fund is to ensure that businesses that benefit from employing migrants are also skilling Australians. It does this by encouraging improved employment outcomes in supporting the training needs of Australians prioritised towards apprenticeships and traineeships in industries and occupations in demand.

Since July 2018, the Fund has been managed through the National Partnership on the Skilling Australians Fund, which supports the delivery of state and territory projects. These projects aim to increase the uptake of apprenticeships and traineeships, pre-apprenticeships and pre-traineeships, and other employment related training opportunities. Since 2017, the Fund has provided over AUD 550 million to state and territory projects that has supported almost 130 000 additional apprenticeships, traineeships, pre-apprenticeship and traineeships and other employment-related training activities. The Skilling Australians Fund levy is the principal mechanism for raising revenue for the Fund. The levy is paid by employers who sponsor skilled workers from overseas, under certain visa classes. The collection of the levy in this way means that employers seeking to access skilled workers from overseas are contributing to the skills development of Australians.

Under the National Partnership, projects delivered by the states and territories are set out in individual bilateral agreements between the Australian Government and six participating states and territories (New South Wales, Western Australia, South Australia, Tasmania, the Australian Capital Territory and the Northern Territory). In addition to a description of the project, each agreement includes the level of funding commitments (including matched funding and funding for their state skills system), performance benchmarks for additional training places, and milestones. Any differences in the agreements are to accommodate the vocational education and training (VET) system and industry needs in each state and territory. To receive a payment from the Fund, the states and territories are required to report to the Commonwealth on 30 April each year. The reports are assessed against the requirements in the National Partnership and the bilateral agreement. Funding is then allocated based on their achievements and the funding amounts in the bilateral agreement.

The projects under the National Partnership were developed by the states and territories and considered by the Australian Government. The projects funded are prioritised towards those that support training in occupations in high demand that currently rely on skilled migration, future growth industries, and in rural and regional areas. The projects also need to demonstrate engagement with, and support from, industry and employers (Australian Government Department of Education, Skills and Employment, 2020[34]).

4.2.3. Australia is reforming its training system to make it more responsive

Australia's vocational education and training (VET) system supports the needs of industry by providing workplace skills and knowledge-based competencies for a wide range of occupations through a variety of training institutions and enterprises. The system provides training for learners of all ages and backgrounds. Learners have many options for training and may study individual units, sets of units (skillsets) to target an identified need, or full qualifications. Training and assessment takes place in classrooms, workplaces or online, and can be either full-time or part-time. There are around 4 million students (including overseas students) enrolled in our training system, or one in four working age Australians.

Training packages are a key feature of Australia's national VET system. A training package is an Australia-wide set of industry-endorsed standards and qualifications for recognising and assessing peoples' skills in a specific industry, sector or enterprise. Australia maintains high-quality VET outcomes through several regulatory frameworks. The national VET regulator, the Australian Skills Quality Authority, registers training providers, monitors compliance with national standards and investigates quality concerns. In Victoria and Western Australia, the Victorian Registration and Qualifications Authority and the Training Accreditation Council Western Australia perform these roles. The Australian Qualification Framework ensures qualifications meet national expectations for quality and consistency (Australian Government Department of Education, Skills and Employment, 2020[35]).

VET delivery in Australia is largely government-funded and reflects agreements between, and skills and labour needs identified by, the federal and state and territory governments. However, companies and individual learners may also contribute to the cost of training. For example, companies may purchase training or assessment services for their employees, while students frequently contribute to the cost of training through the payment of supplementary course and administrative fees. About 4 100 registered training organisations deliver VET in Australia. These include public TAFE institutes, universities, secondary schools, private training providers, enterprises, industry organisations, adult and community-based education providers. The training.gov.au website is the official national register of VET in Australia and an authoritative source of information on training packages, qualifications, accredited courses, units of competency, skill sets and registered training organisations (Australian Government Department of Education, Skills and Employment, 2020[36]).

The Australian Government has implemented substantial reforms of its VET system since 2014. Ongoing developments aim to ensure VET continues to deliver the skills required by industry, and meets the needs of the economy. At the national level, Australia's VET system is led by a council made up of Australian, state and territory government ministers responsible for skills development and national training arrangements. The Council of Australian Governments (COAG) Skills Council provides leadership and direction for the skills sector. The council has streamlined governance arrangements, policy development and the oversight of the performance of the VET sector. As a result, the Australian Industry and Skills Committee was established to provide industry with a formal role in advising the COAG Skills Council on policy directions and decision making in the national training system (Australian Government Department of Education, Skills and Employment, 2020[36]). Australia could look to reforms being introduced in other OECD countries to make post-secondary education, including VET, more responsive to the labour market. A recent reform has been introduced in the Province of Ontario, Canada, with the objective of aligning post-secondary institutions funding with labour market performance (see Box 4.7).

The government is also piloting Skills Organisations to enhance the role and leadership of industry in the skilling of workers and to test and trial ways to improve the efficient operation of the VET system. Skills Organisation Pilots have been established in three key industries – human services, digital technology and mining (see Box 4.8 for a focus on mining). The Skills Organisations are exploring potential system designs, organisational approaches and ways to strengthen industry engagement and improve the long-term outcomes of all stakeholders. Skills Organisations are working collaboratively with the Australian Industry and Skills Committee (AISC), the National Skills Commission (NSC) and the National Careers Institute (NCI) to deliver better outcomes for industry and a more flexible and responsive VET system. The three pilots are trialling new ways of working to shape the national training system to be more responsive to the skills needs for those industries, to ensure that training is relevant to employment. Lessons from the pilots will help inform broader improvements to the national training system (Australian Government Department of Education, Skills and Employment, 2020[37]).

In addition, the VET Student Loans programme assists eligible students pay tuition fees for accredited VET courses. The programme is being reviewed to inform potential changes, and the role it plays in the overarching VET funding model in Australia (Australian Government Department of Education, Skills and Employment, 2020[29]).

4.3.1. Regional Development Australia (RDA) is a main player for local development in Australia

Regional Development Australia (RDA) is a network of 52 committees and the Indian Ocean Territories Regional Development Organisation (collectively referred to as RDA Committees) bringing together leaders at all levels of government, business and community groups to support the development of their regions. In particular, the RDAs are focused on connecting local businesses to industry in order to create more jobs and attract more local investment (OECD, 2019[41]). It is funded by the Australian Government and by state, territory and local governments in some jurisdictions. It is administered by the Department of Infrastructure, Transport, Regional Development and Communications.

RDA Committee members are local people developing local solutions to local issues. They build partnerships to develop strategies and deliver sustainable infrastructure and services to their regions. They also work with each other to identify issues that cross regions. As the regional development voice of their regions, RDA Committees consult and engage with local communities; promote and participate in regional programs and initiatives; provide information and advice on their region to all levels of government, and; support informed regional planning (Regional Development Australia, 2020[44]).

During COVID-19, RDA Committees have provided the Australian Government with real-time, local intelligence from every region of the country. Information has been gathered through teleconferences between RDA Committee representatives and the responsible Minister, held up to three times per week. This information has been shared with Government Ministers, agencies and state government representatives through bulletins produced and distributed on the same day as the teleconferences. This real-time intelligence has informed Government policy making and provided valuable information about the effectiveness of programs, allowing for adjustments to be made to improve outcomes.

4.3.2. The Regional Employment Trials (RET) program has been established to support disadvantaged regions

Recognising that some regions face more challenges than others in terms of employment and economic outcomes, the Australian Government has introduced the Regional Employment Trials (RET) program in ten disadvantaged regions. Running from 1 October 2018, the RET program was initially foreseen to end in 2020, but COVID-19 has led the government to extend it until 30 June 2021. A precursor to the newer Local Jobs Program, the RET program takes into account regional variations to help ensure that local economic opportunities are better promoted to Australians looking for work and employment services providers. In trial regions, Employment Facilitators work with Regional Development Australia (RDA) committees to enable local stakeholders to address employment issues. RDA committees play a key role in the identification, assessment and promotion of RET projects to ensure they align with local needs. Stakeholders could include local governments, employers, training organisations, not-for-profits, employment services providers and other community organisations able to provide employment and training related opportunities and assistance to unemployed people (Australian Government Department of Education, Skills and Employment, 2020[45]). The trial aims to achieve the following objectives:

• stronger connections between regional stakeholders, including employment services providers;

• tailored employment initiatives that meet local needs;

• improved awareness of local labour markets;

• the potential for improved regional employment outcomes.

The RET program is targeting regions facing challenges in terms of employment opportunities. This includes the Regional Development Australia regions of Northern Inland (NSW), Far South Coast (NSW), Wide Bay Burnett (QLD), Murraylands and Riverland (SA), Yorke and Mid North (SA), Gippsland (VIC), Peel (WA) and DESE Employment Regions Western Melbourne/North Western Melbourne (VIC), North and North Western Tasmania (TAS) and Townsville (QLD). As at 31 December 2020, 111 projects have been approved, totalling around AUD 9.996 million in RET funding. Of the 111 approved projects, 63 have been completed and 48 are underway. Around 6,300 unemployed people were expected to participate in these projects, however the COVID-19 pandemic has affected this (Australian Government, 2019[46]).

A Local Employment Initiative Fund was established to provide grants for employment-related projects to local stakeholders. The fund has a budget of AUD 10 million and was available across the 10 RET regions, providing grants of between AUD 7 500 and AUD 200 000. Local stakeholders in the selected regions developed project proposals for initial consideration by their local RDA committee. To facilitate a strong connection with employment programs, all projects partnered with at least one employment services provider. Activities are aimed to better connect employers with regional Australians looking for work, identify future employment, training or work experience opportunities, and help address local skills gaps. Initiatives were tailored to the opportunities and needs in each selected region. Examples included pre-apprenticeship placement programs; mature aged residents and local business leaders mentoring job seekers; preparing job seekers to be skilled and ready for employment in up-coming infrastructure projects; work experience projects aligned with local employment opportunities.

Australia could also look to initiatives undertaken in other countries in support of regions facing structural labour market challenges. For example, a few years ago the European Union (EU) introduced a Youth Employment Initiative, specifically targeting regions across the EU with high youth unemployment rates. Funding has been allocated centrally, and the programme has been implemented at the local level by regional governments. Both national and regional governments have played a role in the implementation of the scheme in the different regions. The Youth Employment Initiative has achieved positive results over the years of its existence and could therefore represent a potential source of inspiration. See Box 4.11 for more details about the programme.

4.3.3. States and territories are also taking initiative in support of regional areas

Australian states and territories have also taken the lead in the development of measures to support local development in regional areas For example, New South Wales, Victoria and Queensland have established respectively a Regional Job Creation Fund, a Regional Jobs Fund and a Jobs and Regional Growth Fund in support investment attraction and job creation in regional areas.

In New South Wales, the Regional Job Creation Fund has been recently established to support regional investment and job creation by offering up to AUD 10 million in co-funding to activate or bring forward regional projects in engine, enabling or emerging sectors. The Regional Job Creation Fund’s focus is to co-fund projects creating at least five sustainable regional jobs, and is part of a broader NSW government strategy to attract investment and promote local job creation (NSW Government, 2020[54]). Examples of eligible projects could include the:

• replacement, upgrade or adaptation of plant and equipment at an existing regional NSW business

• establishment of an additional production line for an existing regional NSW business

• onshoring of activity currently done overseas to a regional NSW location

• development of new regional tourism experiences and visitor attractions

• relocation of a business operation from out of state to regional NSW.

Similarly, in Victoria, the Regional Jobs Fund provides businesses and organisations with funding to develop and retain jobs in the state. The Victorian Government invests in seven high potential, high value sectors to drive Victoria’s economic growth including food and fibre, advanced manufacturing, professional services, new energy technology, medical technology, life sciences and healthcare, transport, defence and construction technology, international education. Current and past programmes funded under the Regional Jobs Fund include Employment Precincts, Food Source Victoria, Horticulture Innovation Fund, Innovation and Productivity, Investment Attraction, Local Industry Fund for Transition, Market Access, Regional Skills, Wine Growth Fund (Regional Development Victoria, 2020[55]).

In Queensland, the AUD 175 million Jobs and Regional Growth Fund (JRGF) has the objective of increasing private sector investment and creating jobs. JRGF aims to assist business to grow and expand throughout regional Queensland. JRGF facilitates projects which support regional business investment and improve ongoing employment outcomes. The fund focuses primarily on regions outside South East Queensland (SEQ) however projects located in areas within SEQ may be considered on a case by case basis. The fund will provide one-off financial assistance ranging from AUD 100,000 to over AUD 10 million in either direct grants or relief of State charges (e.g., payroll tax, stamp duty). The fund will:

• support regional growth and job creation, by leveraging additional investment in the region

• assist businesses to grow and expand in Queensland

• target businesses and sectors such as agriculture, resources, tourism, manufacturing and construction (Queensland Government, 2019[56]).

4.3.4. There is an opportunity to connect workers to key sectors in Australia

States and territories across Australia are working to connect workers to sectors in expansion. For example, the New South Wales Government is delivering a large transport infrastructure programme, amounting to about AUD 41.4 billion of investment for major projects. The state’s population is set to grow to more than 12 million people by 2056, and the NSW Government is prioritising infrastructure investment to ensure a transport network that can safely, efficiently and reliably move people and goods around the state. The government has now developed the Future Transport Strategy 2056. It is the first plan of its kind to look at how to use new technology and innovation across transport system to transform the customer experience, improve communities and boost our economic performance. The government is completing business cases for a number of high-priority projects that will help future-proof Sydney’s transport to meet population and growth challenges – such as the Western Harbour Tunnel and Beaches Link, Stage 1 of the F6 Extension, Sydney Metro West, and the north-south rail link in Western Sydney (New South Wales Government, 2018[58]). Going forward, the Western Sydney Airport represents another opportunity for local job creation in New South Wales (see Box 4.13).

NSW has introduced the Infrastructure Skills Legacy Program (ISLP), to ensure workers develop the skills needed for local jobs in infrastructure. The programme will capitalise on the NSW Government’s record levels of infrastructure investment to boost the number of skilled construction workers and create fresh pathways to employment across the state. The NSW Government has consulted with the construction industry in establishing the ISLP’s training and employment targets, which will allow existing workers to learn new skills on the job; increase the representation of young people, Aboriginal and Torres Strait Islander people and women in the construction industry; ensure workers from surrounding areas are targeted for training and employment to help address existing skills shortages across NSW (New South Wales Government, 2017[61]).

Similarly, the Victoria Government has established the Skills First programme to provide skilled workers needed in six sectors identified for major growth. These include: medical technology and pharmaceuticals, new energy technology, food and fibre, transport, defence and construction technology, international education and professional services. The Government will continue to invest AUD 1.2 billion annually in the training and workforce development of Victorians. Under Skills First, there will be even stronger links between training and industry. The Workforce Training Innovation Fund will foster partnerships between industry, TAFEs and other training providers to work together to drive innovative collaboration through new qualifications, approaches to the delivery of training and curriculum development. Initial funding of AUD 40 million will be provided for 2017 (Victoria State Government, 2016[62]).

As COVID-19 is having an uneven impact, depending on the sectoral composition of local economies, there is also an opportunity for Australia to provide targeted support to specific states/territories and sectors. The Australian Government has established AUD 1 billion to support communities, regions and industries most significantly affected by the pandemic. These funds have the objective of assisting businesses during the outbreak and helping with the recovery. The initiatives announced under the Fund are supporting industries including aviation, agriculture, fisheries, tourism and the arts (Department of Infrastructure, Transport, Regional Development and Communications, 2020[63]). The government has introduced the Harvest Relocation Assistance programme, providing support for people to move and take up jobs in agriculture, including harvest work, from 1 November 2020 to 31 December 2021. As part of the programme, eligible workers receive financial assistance to help with the costs of travel and accommodation when relocating to take up a short-term agricultural work opportunity (Australian Government, 2020[64]). The Australian Government could also look to examples from other OECD countries, such as Canada, in supporting hard-hit sectors and places (see Box 1.14).

4.3.5. Australia could also facilitate transitions towards sectors facing a lower risk of automation

Across the OECD, there is renewed interest in the role of industrial policy to strengthen relevant sectors of the local economy. The tradable sector, including those economic sectors producing goods or services that can be traded, such as Mining, Industry, Information and Communication, Financial and Insurance activities, is recognised as a driver of productivity growth. However, jobs in this sector, typically face a higher risk of automation, as they tend to entail routine and repetitive tasks. This is mostly due to the fact that the tradable sector includes many sectors that have an especially high risk of automation, such as agriculture and manufacturing. On the other hand, tradable services, which form a small but growing part of the tradable sector, are likely at a lower risk of automation. Policy makers can support shifts towards the tradable sector as productivity growth can lead to better wages and standards of living, while addressing the risks related to automation stemming from this shift. Policies can look within the tradable sector to identify how to steer support towards jobs that are less vulnerable to automation. Given that industrial and skills development policies often pertain to different government departments, policy co-ordination is crucial (OECD, 2020[21]).

Local skills ecosystems can be instrumental in providing access to relevant specialised knowledge and skills (OECD, 2018[8]). Local skills ecosystems have 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 access to specialised support to innovate into new activities. Local skills ecosystems can emerge organically or in some cases governments can play a role in providing incentives for their development. The establishment of a local skills ecosystem often depends on a strong anchor institution, such as a higher education or vocational education institution, as well as a driver of change (including for example evidence that the region is likely to experience significant adjustment due to automation).

Policies in Australia could build on local skills ecosystems to promote diversification into activities closely related and connected to the existing skills base of the population. As communities respond to structural adjustments in light of automation, local networks connecting industries with overlapping skill requirements are predictive of where firms are most likely to diversify their activities. Successful examples of this diversification approach can be found in many communities across OECD countries. For example, in Akron, Ohio, United States, which was the location of four major tire companies in the 1990s. After experiencing major economic and jobs decline in this sector, the city invested in polymer technology, establishing a National Polymer Innovation Centre, which has since been a new source of job creation in the city. The city has managed to leverage the existing skills base and local knowledge and applied it to new technology and production processes. “Smart Specialisation” strategies within Europe could also provide useful examples, as they generally aim to focus local development activities in areas where there is a critical mass of knowledge and innovation potential. Similarly, the Basque Country (Spain) has taken action to prepare local industries transition to the future of work (see Box 4.16).

4.4.1. The Australian Government has provided key support to SMEs during COVID-19

Small and Medium-sized Enterprises (SMEs) represent the backbone of the Australian economy. According to the Australian Bureau of Statistics, as at June 2020, there were 2 422 404 actively trading businesses in the Australian economy, mainly operating in the Construction, Transport, postal and warehousing and Professional, scientific and technical services sectors, Health Care and Social Assistance (Australian Bureau of Statistics, 2020[70]). Despite the impact of the pandemic on businesses, this represents a 2% increase compared to June 2019, when there were 2 375 753 actively trading businesses in Australia (Australian Bureau of Statistics, 2020[70]). SMEs account for about 99.8% of all businesses in Australia, slightly higher than on average across the OECD (OECD, 2020[71]).

SMEs have been hit harder than larger firms by the COVID-19 pandemic. The COVID-19 crisis has heightened the importance of SME digitalisation, and served as an accelerator. Firms have moved operations online and implemented smart working solutions to remain in business during lockdowns and overcome disruptions in supply chains, with online platforms playing an instrumental role in connecting users to new markets, suppliers or resources (OECD, 2021[72]). OECD work shows that this is due to both supply and demand factors. On the supply side, firms have experienced a reduction in the supply of labour, as workers have been unwell or have needed to look after children and other dependents while movements of people are restricted. Measures to contain the disease by lockdowns and quarantines have led to further and more severe drops in capacity utilisation. On the demand side, a dramatic and sudden loss of demand and revenue for SMEs severely affects their ability to function, and/or causes severe liquidity shortages. Furthermore, consumers experience loss of income, fear of contagion and heightened uncertainty, which in turn reduces spending and consumption (OECD, 2020[73]). In the Australian context, the particular difficulties for small businesses in the face of COVID-19 have emerged from a number of surveys. Around 70% of all businesses surveyed by the Australian Bureau of Statistics (ABS) in mid June reported a decline in revenue relative to the same time last year. Small businesses were twice as likely to record a large decline in revenue as large businesses. Likewise, smaller retailers have seen a sharp decline in sales while larger retailers overall have seen stronger growth in their sales (Lewis and Liu, 2020[74]). In addition, small businesses expectations throughout COVID-19 have been severely impacted. A survey released in June 2020 by American Express found that 80% of small business owners expressed optimism about their survival prospects through the pandemic in Australia, but 52% feared that sales will not bounce back strong enough to survive in the longer term (American Express, 2020[75]). Another survey conducted by KPMG found that 79% of companies were confident their organisation would be able to rebound financially. However, a third survey (Prushka's Canary in the Coal Mine report) gives a gloomier outlook on entrepreneurs’ confidence and expectations with only 22% of SMEs being confident in their business in May 2020 as compared to 40% a year before.

Acknowledging the importance of SMEs for the economy and their specific challenges during COVID-19, the Australian Government has taken immediate action to provide them with targeted support. For example, by establishing the Coronavirus Small and Medium Enterprises Guarantee Scheme, which is supporting up to AUD 40 billion of lending to SMEs (including sole traders and not-for-profits) and guaranteeing 50% of new loans issued by participating lenders to SMEs. The Scheme is enhancing lenders’ ability to provide cheaper credit, allowing many otherwise viable SMEs to access vital additional funding to get through the impact of Coronavirus, recover and invest for the future (The Treasury, 2020[76]). In addition, debt repayment holidays provided by financial institutions have supported SMEs throughout the pandemic in Australia. COVID-19 has induced the government in Australia as in many advanced economies to temporarily halt bankruptcy procedures, providing lifelines to keep firms alive through the crisis, at a time when premature bankruptcy can worsen the recession. Data for 2020 show that bankruptcy filings decreased by about 40% in Australia. Australia returned to normal bankruptcy procedures on 1 January 2021 (Djankov and Zhang, 2021[77]). Box 4.17 presents the wide range of measures introduced by the Australian Government to support SMEs since the beginning of the pandemic.

4.4.2. Training incentives can help SMEs access skills development opportunities

SMEs typically offer fewer opportunities for employee skills development. Targeted incentives can play an important role in favouring the participation of employers in the vocational education and training system (OECD/ILO, 2017[79]). Given the constraints faced by smaller firms in accessing training, 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 (OECD, 2013[80]). This is generally due to the lack of dedicated internal training or Human Resources departments to organise and co-ordinate training. In addition, SMEs often have lower levels of management skills and practices, suggesting that even when employee skills are developed, these may not be used effectively. Direct financial costs for developing tailored training are another typical constraint for SME training. Large firms can distribute the fixed training costs over a larger group of employees than SMEs (OECD, 2019[81]). 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%). COVID-19 is likely to cause SMEs to step up their digitalisation efforts in order to increase efficiency and competitiveness (OECD, 2021[72]).

The Australian Government has programmes in place providing support to firms in staff development and training. It can be challenging for small and medium-sized firms to have sufficient capacity and resources to participate in apprenticeship programmes (OECD, 2019[43]). The Australian Government has a dedicated webpage, providing information on available support and incentives. For example, the Australian Apprenticeships Incentives Program (AAIP) contains a range of direct payments to support employers in providing apprenticeship opportunities. The AAIP was scheduled to be replaced with a new and streamlined incentives programme for employers of apprentices and trainees, the Incentives for Australian Apprenticeships (IAA). However, due to COVID-19, the government has postponed its adoption to July 2021. In light of the pandemic, the government has also introduced the Boosting Apprenticeship Commencements measure, supporting firms to take on new apprentices and trainees. Under this measure employers who engage an Australian Apprentice between 5 October 2020 and 30 September 2021 may be eligible for a subsidy of 50% of wages paid to an apprentice for a period of 12 months from the date of commencement, to a maximum of AUD 7 000 per quarter. 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. The purpose of the SAAA incentive is to remove barriers to taking up an apprenticeship for adult Australian Apprentices and to encourage them to build on their skills.

Recent OECD work on financial incentives for adult learning recommends that Australia adjust the design of its financial incentives to address identified weaknesses. In particular, the report stresses that Australia could allow use of existing subsidies and loans for less time-consuming types of training (e.g. modular, distance, online, etc.), and broaden the eligibility of the self-education tax deduction to training unrelated to one’s current employment. Paid education and training leave could also be added to the existing set of incentives to address time barriers, and employers could be compensated for lost wages during paid training, or provided with replacement workers through a job rotation scheme. Better targeting of existing incentives would mitigate deadweight loss (OECD, 2019[31]).

Australia could also look to other OECD countries that have recently introduced measures to support firms in employee training. For example, in 2013 the Government of Canada introduced the Canada Job Grant (CJG), a funding programme designed to reduce the costs of providing third-party skills training to new and existing employees. The grant enables individuals to receive support of CAD 15 000 or more in training services, funded by the federal government and the individual employer (Government of Canada, 2013[82]). Lithuania introduced a competence training voucher, supporting both small and large firms in employee training, and helping workers adapt to changing skills in the labour market. Box 4.18 provides more information about the Canada Job Grant and the Lithuanian Competence Training Voucher.

4.4.3. Employer-led networks can be effective to boost SME skills development

Countries aim to raise awareness of the importance of training and skills development in SMEs through various channels, including public and stakeholder organisations. An option for awareness raising is to leverage local employer networks to promote skills upgrading in the workplace. Employer networks and associations can also foster trust-based relationships between firms that support knowledge-sharing and pooled investments in training. Collaborations across firms can also foster innovative diffusion within regional supply chains, potentially integrating firms into GVCs, which also reduces regional vulnerability to automation.

In Australia, Group Training Organisations (GTOs) are corporations employing apprentices and trainees under contracts of training with the various state and territory governments and placing them with host employers. GTOs are the legal employers of the apprentices or trainees and are responsible for selecting and recruiting them, identifying and matching them to host businesses, meeting employer obligations, including paying wages and entitlements, arranging formal training and assessment, and providing pastoral care and support throughout the engagement. GTOs in Australia have proved particularly helpful to SMEs that find committing to an apprenticeship difficult, lack the resources to manage an apprentice, or are unable to provide the full on the job training required for an apprenticeship.

Another approach to skills development for SMEs is the creation of networks of businesses within the same sector or partnerships to help firms navigate labour market changes and get easier access to skills development information and opportunities. A notable example is Skillnet Ireland, which has been particularly successful in creating networks (especially among SMEs) for businesses within the same sector of operation or geographical region, to come together and develop targeted skills development solutions. In Korea, the SME Training consortium National Human Resources Development Consortium has played a key role in fostering SME training access (see Box 4.19).

4.4.4. Measuring skills needs is crucial to support SMEs in the future of work

Both large firms and SMEs often face challenges in accessing the skills needed for the job. The Manpower Talent Shortage Survey shows that one quarter of Australian employers say the main reason they cannot fill roles is a lack of applicants. Another 19% say candidates lack the necessary experience (ManpowerGroup, 2018[87]). As COVID-19 and trends related to the future of work are changing the type of skills needed in the labour market and the future, it becomes even more crucial for policy makers to gather data and evidence on employers’ skills needs and training initiatives, to develop evidence-based policies aiming to foster skills development and employer-led training.

The National Skills Commission undertakes skill shortage research on an ongoing basis. The research is part of a programme which began more than three decades ago. The methodology is applied consistently across occupations and locations to provide information about employers’ ability to recruit the skilled workers they need. A key element of the skill shortage research is the Survey of Employers who have Recently Advertised (SERA). The SERA is a telephone-based survey of employers who have recently advertised vacancies in selected skilled occupations to determine their experiences recruiting. The SERA collects two kinds of information about employers’ experiences recruiting skilled workers.

• Qualitative information from discussions with employers and recruitment professionals, enabling the identification of key labour market issues for each occupation.

• Quantitative data about employers’ recruitment experiences, including the proportion of vacancies filled and the number of applicants, qualified applicants and suitable applicants. This provides the basis for historical comparisons and analysis across states/territories and occupations.

Taking account of all available information, including the results of the SERA and the reasons for employers being unable to fill vacancies, along with a range of other statistical information and stakeholder consultation, the Commission assigns an appropriate rating for each occupation. Ratings include: no shortage, shortage, recruitment difficulty, cannot rate and no rating. The rating for an occupation is based on the labour market for an average experienced worker rather than a new entrant. Depending on the data available, ratings are for the whole of the state or territory (or for Australia if it is a national assessment) unless there is evidence suggesting the rating varies between metropolitan and regional locations (Australian Government Department of Education, Skills and Employment, 2020[88]).

The National Skills Commission is conducting an ongoing survey of employers to monitor recruitment activity in the labour market (the Recruitment Experiences and Outlook Survey). The current iteration of the survey commenced on 21 September 2020, with data collected on a range of topics including current and recent recruitment activity, recruitment difficulty, recruitment methods, and future staffing expectations. Approximately 1 200 employers are surveyed each month, with data published in the weekly Recruitment Experiences and Outlook Snapshot on the Labour Market Information Portal (www.lmip.gov.au).

4.4.5. SMEs are making the digital transition in Australia

Digital technologies represent an opportunity for small firms, both in commercial and work-life balance terms. For example, a small business can use a point of sale system, an accounting software package, a customer relationship management system, and a variety of phone apps, to grow their revenue and increase their return on investment. Going digital can enable a business owner to work anywhere and anytime, to spend more time with family, and to protect the value of the business. Yet, many Australian small businesses are delaying, ignoring, or simply unaware of digital opportunities, and failing to realise the economic and lifestyle advantages that digital tools clearly offer (Department of Industry, Science, Energy and Resources, 2018[89]).

The Australian Government established a Small Business Digital Taskforce in 2017, with the objective of increasing awareness among Australian small businesses of the value in using digital technology. The Taskforce approached this task from two complementary perspectives: a user-centred approach focusing on the mindset and views of small business owners who have struggled, and who have succeeded, in going digital; and a system-level approach, highlighting the shortcomings of the current ecosystem that coordinates the digital advice that small businesses receive. The taskforce developed a set of recommendations for the government to increase the digital technology up-take by small firms (Department of Industry, Science, Energy and Resources, 2018[89]). In 2018, the Government consulted with representatives from technology companies, financial institutions, small business and industry associations, and federal, state and territory governments on each Taskforce recommendation, expressing support for the majority of recommendations. Specifically, the government expressed support for the taskforce’s primary recommendation to establish a new independent body to co-ordinate digital information and advice for small businesses, lift their digital capability and help them to grow (Department of Industry, Science, Energy and Resources, 2018[90]).

COVID-19 has made digital technologies more important than ever for small firms to continue their day-to-day business. SMEs may have less resilience and flexibility in dealing with the costs the pandemic shock entails. Costs for prevention as well as requested changes in work processes, such as the shift to teleworking, may be relatively higher for SMEs given their smaller size. In addition, SMEs typically have lower levels of digitalisation than larger firms and face difficulties in accessing and adopting technologies. As COVID-19 has led to a halt in production, the costs of under-utilised labour and capital weigh greater on SMEs than larger firms. Furthermore, SMEs may find it harder to obtain information not only on measures to halt the spread of the virus, but also on possible business strategies to lighten the shock, and government initiatives available to provide support (OECD, 2020[73]).

In light of the pandemic, the Australian Government has introduced new measures to promote the up-take of digital technologies by SMEs, providing information and free tools to support remote working. For example, the government has set up the Australian Business Continuity website, which provides information on remote communications, collaboration tools, workforce management, and video conferencing. The government also provides information to firms on the opportunities to go digital during the pandemic, outlining processes and steps for buying and selling online, setting up a website, registering a business website and marketing businesses on social media. In addition, two government initiatives have been introduced to help businesses go digital. Specifically, the Australian Small Business Advisory Services (ASBAS) Digital Solutions offers small businesses low cost, high quality advice on a range of digital solutions to meet their business needs. They provide low-cost advice on creating a website, selling online, social media and digital marketing, using small business software, online security and data privacy. Prior to the pandemic, the Small Business Digital Champions Project had provided 100 small businesses with funding to digitally transform their business (see Box 4.20). Through funding under the Small Business Digital Champions Project, 15 Australian Industry Associations will be providing digital advisory services to their members. They will provide sector specific advice, free of charge, and demonstrate the benefits of going digital to their members.