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Speech to the Workforce Tomorrow Industry and Employer Breakfast: Sydney: 20 February 2006.



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Hon Kevin Andrews MP

Minister for Employment and Workplace Relations Minister Assisting the Prime Minister for the Public Service 20 February, 2006

Speech

Workforce Tomorrow Industry and Employer Breakfast-Sydney

Workforce Tomorrow Industry and Employer Breakfast, Sydney

The importance of workforce participation and its economic and social benefits cannot be underestimated.

The key is to make certain that workforce participation is dynamic and flexible enough to ensure that not only do we

as a nation sustain our prosperity, but that more Australians are given the opportunity to share in that prosperity.

Economic growth and demographic change

Australia has enjoyed almost a decade and a half of uninterrupted economic growth. The Howard Government’s

reforms since 1996 have delivered an economic climate of low inflation and interest rates; an unemployment rate at

30-year lows; and 14 per cent growth in average real wages.

Employment growth was robust during 2005, with the creation of 211, 000 jobs, with the result being that over 10

million Australians are now in work. There are now also more than 7 million Australians in full time work.

Labour market conditions have also been strong in Sydney over the five years to January 2006. Employment has

increased by 7.5 per cent over the period. And Sydney's unemployment rate was 4.7 per cent in January 2006,

which is below than the national average.

The Ageing Population

We all know that Australia’s population is ageing, but few of you are probably aware that Australia is now in a phase

of accelerated population ageing. At the same time, we are also experiencing excess demand for many skilled

occupations.

Action must be taken now by business, government and individuals if these problems are to be successfully

mitigated or eliminated.

The Intergenerational Report, released by the Government in 2002 and the Productivity Commission’s report,

Economic Implications of an Ageing Australia, have emphasised the three key Strategies for addressing these

challenges presented by ageing. These are the three “P’s—Participation, Productivity and Population growth.

Whilst the Government has increased skilled migration intakes over recent years to 120,000 places, it is widely

acknowledged that Population policies will have a limited role in maintaining and improving the living standards of

Australians over coming decades. This is partly because new migrants age like the rest of the population and also

partly because other countries which are experiencing ageing of their own populations will be competing for

migrants. Therefore, greater attention must be paid to Participation and Productivity policies.

While the Intergenerational Report and the Productivity Commission highlighted the long-term implications of an

ageing population, there was a need for further analysis of the implications for employers now and over the next five

years.

With this aim in mind, the Government commissioned the Centre of Policy Studies at Monash University last year to

undertake research and provide projections of Australian employment growth both in the presence and absence of

population ageing.

The result of this research is the publication of Workforce Tomorrow, the first Australian research which specifically

analyses the medium-term effects of population ageing on the labour market, by occupation, industry and region.

Main Messages in Workforce Tomorrow

The key message from the economic modelling conducted for Workforce Tomorrow is that Australia faces a

potential shortfall of 195,000 workers over the next five years, as a result of population ageing.

In other words, while employment is expected to continue to grow at a solid pace over the next five years, it is likely

to be substantially less than it could be if the age structure of the adult population were to have remained

unchanged.

The Workforce Tomorrow research is important as it shows that the effects of population ageing will be felt across

the nation, but not uniformly. Given that each of the States and Territories differs in terms of its demographic,

industrial, occupational and other characteristics, population ageing is likely to impact in different ways.

For example, Sydney’s industry structure differs from the rest of the nation. Property and Business Services is

currently the largest employing industry in Sydney, with 14.7 per cent of the city’s total workforce, closely followed

by Retail Trade with 14.0 per cent and Manufacturing with 10.3 per cent. This is in contrast to Australia as a whole,

where Retail Trade replaces Property and Business Services as the largest industry in terms of employment.

The increase in total employment in Sydney between 2004-05 and 2009-10 is forecast to be around 44,000 less than

it would have been had Sydney not been affected by ageing of the adult population.

Mining and Manufacturing are projected to be the most affected industries in respect to reduced employment

growth, Australia-wide. In absolute terms, Manufacturing and Retail Trade are forecast to experience the largest

shortfalls of workers.

All major occupational groups are forecast to be adversely affected by ageing of the population. Tradespersons and

other semi-skilled occupations are forecast to experience the largest reduction in employment growth, while

Professionals, Advanced Clerical, Sales Workers, Managers and Administrators are all forecast to record similar or

lower reductions to the national average.

An ageing population will affect all of Australia, but different regions, occupations and industries will feel the effects

of ageing in different ways. So strategies to deal with an ageing population need to be tailored and targeted

appropriately.

In addition to these key messages, there is also a wealth of detailed projections of the effects of population ageing on

employment by industry, occupation and region.

What population ageing means for business

Fewer labour force entrants and greater competition for workers are potentially negative for the business bottom

line. One such difficulty is the inability to fill jobs when they become vacant. Without sufficient skilled workers,

businesses will be constrained in their ability to maintain current output levels.

This issue was highlighted by The Reserve Bank of Australia’s Statement on Monetary Policy which was released last

week. It stated that skilled and unskilled labour shortages are broad based and have become an increasing constraint

on business growth and that labour scarcity is a greater constraint on business activity than lack of demand.

What is the Government doing to address the consequences of population ageing?

In addition to policies already in place which assist in addressing population ageing, such as improvements in

superannuation, the Australian Government is implementing policies to address workplace flexibility, labour supply

and skills shortages. At the top of the Howard Government’s fourth term agenda has been implementation of

welfare-to-work reforms and workplace relations.

Welfare-to-Work Reforms

The Welfare-to-Work reforms, passed by the parliament in December 2005, recognise that every Australian of working age has the right, and deserves the opportunity, to participate in the economic life of our country.

The reforms focus on assisting parents, people with disabilities, mature age and the very long term unemployed.

There is substantial untapped labour supply in Sydney. As at 31 December 2005 the number of working-age people

(and by this I mean those aged 15-64 years) in receipt of allowances and pensions in Sydney stood at just over

420,000. This is over ten per cent of the civilian working-age population.

Of those receiving allowances and pensions in Sydney, less than one-fifth have any participation requirements.

Disability Support Pensioners made up a quarter of this population. A further quarter was in receipt of a Parenting

Payment.

As part of these reforms the 2005-06 Australian Government Budget allocated $50 million to the Employer

Demand and Workplace Flexibility Strategy. The strategy is part of a broader response to Australia’s demographic

changes and aims to help increase workforce participation and reduce dependency on welfare.

It is designed to help employers increase work opportunities for people from groups that have traditionally been

under-represented in the workforce, such as people with a disability, mature age workers, parents, and the very long-term unemployed.

The Strategy provides wage subsidies and workplace modifications for businesses that employ people with a

disability, as well as training and tools to help employers better manage an ageing workforce. There is also help for

employers to engage more people through New Apprenticeships and to increase Indigenous employment.

The Government is working with peak business groups to develop employment demonstration projects in industries

that are experiencing labour shortages. More than $6 million has been made available to develop innovative

recruitment, training and retention solutions with industry and employers to increase participation in the

workforce.

Workplace Relations Policies

Workplace Relations policies are also an important part of the Government’s response to an ageing population.

As labour shortages become more apparent, employers will need to be innovative to successfully compete for

workers.

Existing Workplace Relations reforms have simplified an overly prescriptive awards-based system and given people

in Australian workplaces much greater choice in negotiating flexible and innovative working conditions. It has

helped to ensure that Australian workplaces are efficient and competitive.

The flexibility in the Workplace Relations Act has seen an increase in the range of provisions appearing in

agreements in Australia. It is becoming more commonplace to see provisions in agreements such as:

z variable start and finish times;

z averaging working hours over weeks, months or a year;

z flexible working time arrangements and

z greater flexibility in taking rest and meal breaks.

Such provisions will be increasingly valuable for employers trying to attract and retain staff in an environment of

skill and labour shortages.

Provisions that encourage mature-age workers to make phased, rather than sudden transitions into retirement will

be important. Options such as part-time and/or casual work, job sharing, allowing employees to work from home

and contract work are just some of the provisions that can help employers retain staff not wishing to continue full-time work.

However, we cannot rest on the laurels of the achievements of past reforms. The Workplace Relations system is still

too arcane, complicated and inflexible. At present, Australia has over 130 pieces of industrial relations legislation,

4,000 different awards and six different Workplace Relations systems.

The Howard Government is promoting greater labour market flexibility and simplifying workplace relations

arrangements through the implementation of WorkChoices.

The essence of these reforms is to further promote the making of agreements at the workplace level. The Howard

Government wants to give businesses and their employees the opportunity to negotiate at the workplace level.

What business needs to do to address population ageing and what measures are likely to be

successful?

Businesses will need to work with the Government and prospective employees to improve workplace flexibility.

Business will also need to recognise the benefits of hiring more employees from the large untapped pool of potential

workers targeted by the welfare to work reforms. It is inevitable that the Australian workforce of the future will

include more older workers, more people with disabilities, more parents and more people who want to work part-time.

The challenge for employers will be to find creative responses in order to attract and retain workers. Some

innovative responses that employers are making include:

z retaining mature-age employees through strategies such as phased retirement and age-awareness training;

increasing education and training for existing employees (both on the job and off the job);

improving the work/family balance for their employees to attract and retain workers; z providing child care facilities in or near the workplace to retain workers who are carers for young children;

z modifying the workplace and tasks so that they can be performed by employees with various levels of

disability; and

Sydney projects

Here in Sydney the Australian Government has developed a number of cooperative projects with industry to increase work opportunities for the mature aged, people with a disability, parents and the very long term unemployed.

For example, Restaurant and Catering NSW has developed a project called Career Café which is focussed primarily

on parents, but which will also assist job seekers aged 50 + and very long term unemployed job seekers. It is

expected that a total of 150 people will be trained under this program, with the emphasis being on enabling the

participants to enter hospitality work with hours suited to their needs.

Conclusion

Ladies and Gentlemen, Workforce Tomorrow shows us that population ageing is not a slowly developing

phenomenon which will take place in the distant future

It is happening now and businesses need to factor it into their decision-making processes. Employers will need to

assess their labour force needs and find solutions to dealing with an ageing workforce in their business.

It also gives me great pleasure this morning to announce that I will be signing up to the Australian Government’s

Corporate Leaders for Indigenous Employment Project with Sinclair Knight Merz, following the breakfast. The

Corporate Leaders for Indigenous Employment Project is part of the recently launched Indigenous Economic

Development Strategy, to encourage a partnership between leading private sector companies and the Australian

Government aimed at generating more jobs for Indigenous Australians.

Sinclair Knight Merz is a leading global professional services firm working with public and private sector clients.

Sinclair Knight Merz provide a diverse range of services in several fields including engineering, planning, logistics,

and project management. They have been involved in a range of award winning projects including the engineering

design of the roof of the main stadium for the Athens Olympic Games and rail and road projects and tackling salinity

problems along the Murray-Darling Basin.

Sinclair Knight Merz, Chief Executive Officer, Mr Paul Dougas is here today to sign the MOU and I acknowledge

Sinclair Knight Merz’s commitment to this worthy programme - welcome Mr Dougas.

As a signatory to the Corporate Leaders for Indigenous Employment Project, Sinclair Knight Merz has accepted a key

role of providing real jobs for Indigenous Australians. Sinclair Knight Merz will be joining 72 other signatories

under this programme.

Finally, I encourage you all to read the Workforce Tomorrow publication and seriously consider innovative strategies

to increase the workforce participation of the untapped pool of potential workers in Sydney.

For further information contact:

Russ Street 0417 044 712