By Julie Hare    

Skill shortages are “like hospital waiting lists: they are going to come up and bite the government on the bum”, according to Heather Ridout, chief executive of the Australian Industry Group.

Ms Ridout told the Skills Australia conference on Monday that crippling skill shortages coupled with over-skilling would prove to be the two most compelling issues facing workforce productivity in the years ahead.

And policy on both sides of government, which seemed intent on limiting skilled migration, would serve to magnify shortages, driving a two-speed economy, along with higher inflation and interest rates.

Despite being one of the most critical strategic issues for the economy and public policy, the issue of skill shortages was absent from the recent election campaign.

However, migration — which was high on the campaign agenda — was the critical link.

“Demography is going to sour the national accounts unless we can improve our productivity and workforce participation rates,” Ms Ridout said. “Over the next 20 years we are going to need an increase of 1.25 per cent in the size of the labour force and 1 per cent of that will need to come from migration.”

Ms Ridout and Philip Bullock, chairman of Skills Australia, were also eager to press home the point on skills utilisation, saying it was a critical ingredient in improving workforce productivity.

“Why is it that there is an oversupply of graduates in most areas?” Bullock asked. “Skill utilisation goes to the heart of skill shortages, but we focus so much on the numbers of how many we don’t have now and how many we will need tomorrow that we miss the point.”

Mr Bullock said there was a mismatch between where people were trained and where they were needed in the workforce. He said 42 per cent of employers had responded in a recent survey that they had staff with skills at higher levels than were being used by the company.

With 25 per cent of staff indicating they were looking to change jobs in the next year and the average annual turnover of 17 per cent, Mr Bullock said one of the most obvious ways to find productivity growth was to fully use the education and skills of existing staff.

Ms Ridout agreed. “Companies that know how to unlock skill utilisation properly will have a competitive advantage,” she said.

“The next frontier is increasing skill levels in the workforce, but not for their own sake.”

She said good management that focused on communication, reward and recognition systems and collegiality would be essential to this.

“Highly skilled people want to be treated as individuals,” she said.

“The thing that sets high-performing companies apart is that they focus on people. They recruit well, have extensive and ongoing training, and are prepared to redesign jobs around the people they have instead of the other way around.

“Organisations grow by strategic innovation and continuous improvement and education and training is fundamental to that.”

Article from The Australian, September 8, 2010.