Employers are being forced to throw money at their employees or offer huge pay packets to entice newcomers as a skills shortage bites hard.
Pay rises of 20 per cent or more are being offered to Aussie workers, who are cashing in on a national skills shortage and international borders preventing overseas talent from coming in.
People working in industries such as tech, finance, business support and marketing are expected to command huge pay rises worth tens of thousands on the back of fierce competition for talent.
But it’s not just white collar jobs that are creating headaches for businesses… it’s predicted that job vacancies in hospitality are going to surge to an incredible 100,000 across Australia in the next fortnight, with reports that some waitstaff are being offered $50 an hour by desperate owners to take a job.
On average, Aussie workers could expect a wage increase of 3 per cent or higher, according to ANZ head of Australian economics David Plank, as the unemployment rate has fallen to 4.6 per cent and is expected to go even lower…
52 per cent of Australian business leaders now think it will be more challenging to find qualified employees compared to pre-pandemic conditions and 47 per cent believe the pandemic has increased the skills shortage in Australia… The international borders being closed has had a really big impact…
Former Reserve Bank of Australia economist Callam Pickering agreed that pay rises were going to be non negotiable for employers.
“A more highly competitive jobs market will force many Australian businesses to offer higher wages or greater benefits or more flexible work next year to either attract new talent or retain existing staff,” he said…
“This is a jobseeker-friendly recruitment environment. Jobseekers can choose to be a little picky about the roles they accept and the conditions under which they accept them. They can choose to negotiate for higher wages and greater benefits in the knowledge that they do so from a stronger bargaining position.”
Companies are offering 20 per cent-plus pay rises to snap up investment bankers, lawyers, marketing executives, accountants, construction managers and sustainability and risk specialists amid a professional skills shortage that is spreading far beyond the IT sector…
“Pretty much everyone is getting 10 per cent [pay increase] if you move company,” [David Jones, the senior managing director of Robert Half Asia Pacific] said.
Pay rises could be as high as 25 per cent for candidates with highly specialised skills in tech, finance and accounting and who landed a promotion when moving from one business to another, he said…
Mr Jones expects the shortage of talent caused by Australia’s prolonged border closures will persist well into 2022, as skilled migration slowly ramps up.
“I can’t see migration really solving labour shortages until the second half of next year, or more likely early the year after,” he said.
Restaurants and Catering Australia chief executive Wes Lambert said there’s at least 50,000 positions open for semi skilled roles such as waitstaff, baristas and bartenders, which would normally be filled by working holiday visa holders, international students and the partners of skilled migrants.
There are also around 40,000 roles for entire kitchen team and managers, including cafe and restaurant managers and sous chefs, he said.
“It’s a recruitment crisis and many businesses are telling us they paying above the award, as well as giving sign on and retention bonuses into the thousands of dollars,” he told news.com.au.
“And some operators are reporting offering between $40 and $50 an hour for some of most critical front of house positions”…
He said the international borders around Australia need to open “immediately”.
“There is no excuse that could be given that double vaccinated or in some cases triple vaccinated workers cannot return to Australia,” he said.
The Reserve Bank is less bullish on wages, cautioning on Friday that businesses are finding alternatives to permanent pay rises to retain staff, presumably while they wait for the international border to reopen:
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Based on job-level WPI data, most wage increases remained below 3 per cent over the year to the June quarter; the share of jobs experiencing wage increases above 3 per cent remains much lower than was seen in the 2000s (Graph 4.16). Information from the Bank’s business liaison program suggests that – rather than raise base wages – many firms experiencing difficulties finding labour have been using other strategies to retain and attract employees. These strategies include paying targeted sign-on and retention bonuses, offering increased workplace flexibility, providing more internal training and relying more on less-experienced staff. Liaison reports suggest that, recently, wages growth has been strong for specific jobs where labour shortages are acute (such as some types of IT professionals, tradespersons and chefs).
The distribution of firms’ wages growth expectations is broadly similar to the pre-pandemic pattern, with only around a quarter of firms expecting wages growth to be greater than 3 per cent (Graph 4.17).
Other surveys of wages growth expectations are also consistent with wages growth picking up to around 2–2½ per cent over the year ahead (Graph 4.18).
Meanwhile, Home Affairs Minister Karen Andrews confirmed over the weekend that the government will quickly reboot immigration to relieve ‘skills shortages’ faced by businesses:
“We know there is a significant skills shortage here in Australia and we’re doing all that we can to make sure that we put the right structures in place to support these businesses that need workers,” [] said…
Ms Andrews, whose Queensland seat incudes part of the Gold Coast, said Australia “absolutely” had to have skilled workers and hoped this would start within weeks…
“When you’ve got unemployment in the fours, you are getting very close to full employment.
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Standing alongside NSW Premier Dominic “Ponzi” Perrottet, Prime Minister Scott Morrison also said on Friday that skilled migrants would be allowed back in before Christmas:
“I’m keen to see it happen this year in whatever staged format we can, and I think it’s going to be particularly important for our agricultural workforce,” Mr Morrison said.
“We’ve got to deal with the supply side challenges we’re going to have…
As a growing number of businesses complain of worker shortages, AFR Weekend understands the federal government is developing a worker migration program to match foreign workers with understaffed local industries…
“Labour shortages is a serious issue,” said NSW Premier Dominic Perrottet, standing alongside Mr Morrison…
“In hospitality and other sectors where those shortages are, we need to address that, and we continue to work closely with the federal government,” Mr Perrottet said.
The long-term solution to “labour shortages” is to offer higher wages and better conditions. That’s how the labour “market” is supposed to work. Paying higher wages is also good for productivity.
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Without such easy access to lower-paid migrants, firms are forced to lift wages to attract local workers, as we are seeing above. These higher wages should then encourage firms to seek out labour-saving technologies and automation in a bid to lower their labour costs, which would ultimately lift the economy’s productivity.
Higher wages further improves productivity by encouraging the least productive businesses to lose people, shrink and go bust, transferring workers, land and capital to more productive businesses.
By contrast, if Australian firms are continually given easy access to cheap, exploitable migrants, then wages will remain low, unemployment will remain elevated, there will be little incentive for firms to automate, the capital base will shallow, and ultimately the nation’s productivity will stagnate.
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This is basically the predicament Australia found itself in over that past decade, simultaneously suffering from both low wage growth and low productivity growth as immigration boomed. It is a recipe only for living standards to stride endlessly backwards.
Sadly, the federal government always panders to vested interests in the business lobby. Therefore, it has committed to crush wages by rebooting pre-COVID mass immigration.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
