18 May 2021
In this episode of the PwC Federal Budget Podcast, we look at how Australia’s is going when it comes to reducing its skills gap, where to next from JobSeeker and JobKeeper, and how the economy is coping without skilled migration.
Laura Jayes: Hello, I'm Laura Jayes and welcome to the PwC Federal Budget podcast. The past 12 months has prompted a remarkable acceleration towards a new future of work. Challenges have been many and varied but the government's measures to support job creation for individuals, regions and industries were big steps in the right direction.
I caught up with PwC’s National Workplace Law Lead, Bryony Binns and Future of Work lead Dr. Ben Haymer to discuss how Australia is going when it comes to reducing our skills gap, where to next for JobSeeker and JobKeeper and how the economy is coping without skilled migration
So what were the big winners in the Budget for workforce and where did it miss the mark? Let's find out.
Laura Jayes: Ben and Bryony thanks so much for your time. Lots in this budget, the government's focus is jobs. What does this Budget mean for work and workers Ben?
Ben Hamer: jobs and skills is absolutely front and center of this budget and it's clear that the Government is looking towards the jobs and skills agenda to drive the post pandemic rebuild. And I think that they're coming off a really strong base when we think about what was achieved off the back of the last budget towards the end of last year. So we saw 74,000 more jobs created than there were pre pandemic and unemployment, which was once forecast by the Treasury to exceed 15 percent, is now sitting at 5.6 percent. So looking forwards and in the context of this budget, it's really about as our economic position and the job market outlook starts to stabilize, going about repairing some of the cracks or the gaps that might have been exposed. And our take is the Government has done a pretty good job of doing this with the recently announced budget, which looks to create 250,000 jobs over the next two years.
Laura Jayes: The government has made it very clear that it wants an unemployment rate with a four in front of it. Does this budget do that in creating new opportunities or is it using the template of old?
Bryony Binns: I think it's probably somewhere in between. So in terms of creating new opportunities there’s absolutely a focus on trying to get certain cohorts of our workforce or a potential workforce back working, particularly in relation to underemployed people. And so we've really had a focus on areas that need it for other reasons as well, like aged care and childcare. So we've seen a big push towards investment, towards a women's agenda, which is great to see. But there's a question as to whether or not we're seeing really any real underlying strategic shift or more sort of funding of the symptoms rather than underlying causes to underemployment and particularly in respect of women's participation.
Laura Jayes: So has it been a big reforming budget when it comes to creating opportunities in jobs, still looking at those traditional employment areas, isn't it?
Bryony Binns: Yeah, that's right. So in terms of reform, I think, no, reform is not the right word to use here. And perhaps not a fair word to use either. So if we take aged care as an industry, for example, so massive investment into aged care, both to address underlying issues that were raised in the Royal Commission, but also if we compare to the budget last year, which was very focused on industries that are male dominated, so building and construction, infrastructure, etc.
If you look at aged care, yes, we're pushing more funding towards aged care, which is a women dominated industry, but we're not really addressing the systemic issues in relation to wages paid in that sector, for example, is still low paid. And the fact that we've got funding there for more places and more employment isn't going to change that.
Laura Jayes: Ben, that said, if you had to pick a winner in this budget, who would it be?
Ben Hamer: I think that there are probably a lot of winners in this budget, in terms of a jobs and skills perspective, I would say that I agree with Bryony in the sense that it is somewhat short term focus. So it doesn't have some of that structural reform in there that looks to focus on more secure, reliable employment or increases to wages. But there are quite a lot of winners in terms of women to try and drive out female participation, some of those key industries that were impacted by the pandemic, although some would argue potentially not enough. And I really do like to see the nod towards the digital economy getting a future and a $1.2 billion funding boost there.
Laura Jayes: Underemployment has been talked about by this government as a huge problem and also has a strong relationship with low wages growth. Does this budget address any of that?
Bryony Binns: I think it does. So underemployment tends to occur in sectors where there's more casual employment or part time employment. And we see funding in two sectors, particularly aged care and childcare, where hopefully there will be more opportunity for people to take up work, take up more hours.
Ben Hamer: I guess. Bryony, I was pretty surprised to see that off the back of two quarters of record low wage growth, there probably wasn't anything that was more systemically looking at trying to progress that. So do you have any advice or any thoughts around how we can actually go about driving wage growth within Australia more broadly?
Bryony Binns: So I think it's important to remember that it's not actually the federal government's job to set minimum wages. That's the job of the Fair Work Commission. They do that independently, but they're taking into account the broader economic circumstances that will feed into whether or not a particular industry can sustain higher wages growth. So in terms of your question, Ben, it's got to be not just funding in relation to, places so employment places, but also funding within a sector like aged care, which perhaps changes the cost and reimbursement models so that employers within that sector can afford increased wages.
Laura Jayes: Bryony Aged Care also has a huge problem with skills shortage as well, which feeds into all of that as well. No surprises after the Royal Commission that we did see a big investment. How do you think this almost $18 billion will boost that sector in particular?
Bryony Binns: Hopefully it will encourage more hiring to occur. I mean, that's the first thing, both in terms of people getting to work and into employment, but also to improve the quality of care outside of a conversation about skills. It's going to be really difficult, though. You know, we're focused on the money that is there on the other side, we need to consider that a lot of employees historically within that sector have been migrant workers. So there's a real question as to what will occur if we're not having that same influx of migrant labor to support that particular sector.
Laura Jayes: More generally when you look across the economy and previously we've looked at the pink recession about not having enough women in the workforce, do you think this budget goes far enough to address that issue?
Bryony Binns: Well, I think it's a start, but I think that's all it is. So I think we really need to think about whether or not the incentives are set at the right level to get women back to work or to get women working more. So if we sort of take that step back to thinking about those more female dominated industries like aged care and childcare, we're funding places, not wages. So where's the incentive? So there's some increase to childcare support, but is it enough?
So the Government is committing about $1.7 billion over four years to childcare. The estimate is that that will help around 2000 sorry, 250,000 families that are within the system. And on average, that will amount to about 2200 a year. But if you're looking at taking that benefit to allow you to get back to work to a minimum wage job, is the incentive really there? That my question and my concern whilst the funding's there and the focus on skills is great, are we really setting the incentives at the right level.
Laura Jayes: Ben there was a more than $2 billion commitment in this budget beyond what we've seen pre budget to those struggling sectors, aviation, tourism, the arts and international education providers, how far will that go?
Ben Hamer: Yeah, I'm always conscious about whether or not we think about spending as being sufficient or how far it might go because budgets are all about tradeoffs. But what I will say is that it is really pleasing to see governments supporting these industries that have been hardest hit and which is worth calling out have disproportionately affected more women than men.
The other thing about this is that these measures are in addition to what we're seeing many state governments do to stimulate similar industries. So, for example, I live in New South Wales where there's a Dine and Discover voucher program for stimulating a lot of providers within hospitality and adjacent industries. And so we need to keep stimulating the economy. We need to keep spending, which will go a long way to affecting those effective workers, creating jobs and reducing pressure on the social welfare system as well.
Laura Jayes: Bryony, we've seen covid affect our psyche in so many ways, the way we work, the way we interact with our colleagues, but also our mental health. One thing that has been noted this year is that people, there is some evidence, have got better at asking for help. But are the structures there? Is the support there in the Budget?
Bryony Binns: So we know that workers are really feeling the pinch at the moment, particularly coming out of covid and different ways of working, some of which have been fantastic, others which have been forced on us. So the flexible working, working from home has lacked employee agency up until this point. So our research, in fact, found that 61 per cent of workers say that their workload has increased following covid, interestingly. This on top of market uncertainty, job losses and mass displacement caused stress. And they do, you're right, heightened mental health challenges. So the Government's proposal to invest $2.3 billion in mental health and wellbeing is really very much welcomed. It's got to have an impact on how people operate at work productivity and therefore go towards the bottom line.
Laura Jayes: You have spoken about the skills gap in Australia. Does the Budget go far enough to address that in the short and medium term?
Ben Hamer: Yeah, Laura, the skills gap is pretty significant in Australia, and one way in which this is highlighted is that the number of job vacancies that we have now is more than double what we had pre pandemic. And yet we know there is still a whole heap of people out there who are looking for work. So there's lots of jobs, there's lots of people looking for work, but they can't be placed, which means that there's a skills gap and they don't have the skills that we need for the jobs that are required.
We're really going to need to see the Government play a role at Federal and State levels around this. There was a lot in the budget that did come at it from a skills perspective. It was predominantly towards supporting unemployed individuals or those who may have been impacted by covid as well as younger workers. So a significant investment around the Boosting Apprenticeships Commencements Program with another 70,000 places, as well as supporting some of those cohorts we spoke about in terms of females and indigenous girls.
What I would say is that there's potentially a gap whereby we're supporting those who are currently unemployed or younger people. We're not supporting those who currently are employed and who may need to reskill, upskill and redeploy as well, which to me says we could see a skills gap be exacerbated at that medium to higher skilled level over the medium to longer term.
Laura Jayes: Bryony what's your take on this? Because there's a few problems here in the pipeline because our borders are closed so we're not getting those overseas expertise. But is there a bit of an opportunity here?
Bryony Binns: It needs to be the start of a conversation because there's not that funding of places. And particularly we see that in terms of education. So tertiary education has missed out a little in this Budget. We need to think again, particularly because the university sector will be impacted by a loss of migration and student students arriving in Australia. How do we fix that for the medium and long term, not just the short to medium term, particularly in terms of developing skills that we need today, but shifting our skills, mindset towards innovation so that we can not just survive but prosper in the longer term,
Laura Jayes: Then there’s significant investment around skills, but our providers position to embrace it?
Ben Hamer: Yes. So there's a significant reform agenda that's going on more broadly within the school system. A lot of the investments are targeted towards vocational education i.e. TAFE. One of the sectors that was potentially underrepresented in the Budget was the tertiary sector i.e. universities. There was 19 billion dollars towards them, but we do know that universities are the heart of research, development and innovation.
More broadly, there's a significant reform agenda going on there as well. I spoke to Martin Bean, who is the Vice-Chancellor from RMIT University, and he was talking about how the curriculum needs to evolve. It's not just what we teach, but how we teach different delivery methods and also the emergence of micro-credentials as well. I think there's still question marks around where that sits and how that's going to be funded
Laura Jayes: Ben, international travel is off the cards for at least another 12 months. How does the economy cope with the constraints to skilled migration?
Ben Hamer: So I think, Laura, that's where we're seeing a lot of the skills investment being targeted towards those industries that were impacted by low skilled migration and mobility. So looking at funding places that will support apprenticeships and trainees in construction and other sectors. But again, I think that's where we might be being a little bit too short-sighted in the context of this Budget. But it really is looking at how we go about investing in developing local talent while also exploring the opportunities for leveraging a more global workforce with the advent of technology and less of a reliance around face-to-face interactions that's evolved over time.
Laura Jayes: Bryony, how does this budget support the underemployed or low income earners?
Bryony Binns: So there is provision for an increase in $9 billion towards Social Security Safety net increases for those on JobSeeker and other working age payments. That includes an increase of $50 per fortnight for working age payments expected to benefit around $1.9 million Australians. And importantly, the Government's also looking to increase the income free earnings to $150 per fortnight for people on job seeker and Youth Allowance. So increasing the amount that can be earned before impacting their benefits.
Laura Jayes: Ben, you've spoken at length about skills. I think in the last year everyone knows that we need to have digital skills more and more. So does this budget go towards investing in that space?
Ben Hamer: So within the Budget there was the $1.2 billion investment around the digital economy more broadly. And it does have around 10,000 places focused towards digital skills as well. What I would say is that this is a sign the Government is really starting to step into the space of the digital economy. And in future Budgets, we would hope to see more happening here. But also going back to the commentary earlier around how there's not as much funding from the Government around supporting employed persons to reskill and upskill, this is giving a nod to industry that it's the responsibility of organisations to invest in upskilling and reskilling their people. And as a firm, we would say that one of the core and key skills you need to be investing in in your workforce is digital literacy and foundational digital skills.
Laura Jayes: Ben, that's a really good point, because it’s not just up to the Government here, it's up to the corporate sector. In this Budget. Bryony, what is the single biggest measure that you think will have an impact on the future of work and workers or at least gives employers the ability and the space to do so?
Bryony Binns: We're seeing here pivot towards skills and new skills. Yes, there's a focus on getting employers to do the heavy lifting, but this is something that needs to be part of the language of our Budgets moving forward - that just unyielding focus on skills. It’s absolutely necessary to look at this from a short to medium term for now, coming out of somewhat of a crisis, but I think if we can change the language of our budgets in future to really focus on skills and skill development over time, that's got to be a good thing for workers.
Laura Jayes: Do you think it's taken the pandemic to change that language already? Are we on the right trajectory?
Bryony Binns: I think the pandemic has in many instances accelerated our conversations around skills around the way that we work, where we work, the type of work that we do. So I think, yes, it was a conversation that we're always going to have, but I think it's good that we're having it now then.
Laura Jayes: Ben and Bryony, has the government done enough here to enable companies to support their workers?
Bryony Binns: One of the interesting things about what people get paid in Australia is that we have to remember that there's been quite a lot of focus over the last two to three years on wage compliance. So notwithstanding where our minimum wages have been set, employers have really struggled to get it right because of complexity within our industrial relations system.
Bearing in mind that the Government is beginning to think about digital skills and we see that through the Budget. One of the interesting sort of footnotes that I picked up on. being a lawyer. was that the Fair Work Commission is a recipient of increased funding to allow for employers to better access real time data and to use that data to feed into their payroll systems moving forward.
So the Fair Work Commission has been given this money to, I guess, help and support in a real practical way how employers continue into the future in terms of compliance, which I think is a great thing.
Ben Hamer: And I think from my perspective, if I go back to that original Treasury forecast where it was thought that unemployment could reach over 15 per cent, we're now sitting at five point six per cent. And so for me, that says that the Government has gone a long way to creating the market conditions that provide confidence, that allow organisations to succeed and thrive.
What I would say moving forwards, though, is that many of our clients and many organisations are still focused on this sort of horizon 1 thinking - the immediate economic recovery of the immediate sort of response to how we get through covid. What we need organisations and in turn the Government to do is start looking towards the medium to longer term together.
Laura Jayes: Ben, Bryony, thanks very much.
Ben Hamer: Thank you.
Bryony Binns: Thank you.
Ben Hamer: If you like what you just heard and want to find out more, join me Ben Hamer on our Future of Work podcast series where I speak with some of Australia's most senior leaders and changemakers about what the future of work actually means for workers and organisations.
Search PwC Future of Work and take a listen on Apple, Spotify or wherever you get your podcast from.