Report prepared for the Minerals Industry National Skills Shortage Strategy

Transcription

1 The Labour Force Outlook in the Minerals Resources Sector: 2005 to 2015 Report prepared for the Minerals Industry National Skills Shortage Strategy By Dr Diiannah Lowry,, Mr Siimon Molllloy & Dr Yan Tan May,, 2006

2 CONTENTS 1. EXECUTIVE SUMMARY PURPOSE OF THE REPORT PROJECTING THE DEMAND FOR LABOUR: DATA SOURCES & METHOD OUTLINE OF THE DATA SOURCES AND METHOD USED OVERVIEW OF LABOUR DEMAND OCCUPATIONS AND SKILLS REQUIRED IN OCCUPATIONAL STRUCTURE IN THE RESOURCES SECTOR BROAD OCCUPATIONS REQUIRED IN EACH OF THE COMMODITIES CAPACITY OF THE ECONOMY TO RESPOND TO GROWING DEMAND FOR LABOUR INTRODUCTION LIMITATIONS OF THE ANALYSIS AUSTRALIAN LABOUR FORCE TRENDS PROJECTIONS OF EMPLOYEES IN OCCUPATIONAL CATEGORIES DEMAND-SUPPLY RATIOS CONCLUSIONS AND RECOMMENDATIONS SKILLS SHORTAGE OR PEOPLE SHORTAGE? RECOMMENDATIONS APPENDIX A APPENDIX B CALCULATING THE BASE EMPLOYMENT DATA SET CALCULATING PROJECTED EMPLOYMENT DEMAND DISTRIBUTING PROJECTED DEMAND BY OCCUPATIONAL CLASSIFICATIONS AND MINE ACTIVITY APPENDIX C EMPLOYMENT SHARE PROJECTION: GROWTH CURVE MODELS DATA AND SOURCES REFERENCES...64 LIST OF TABLES TABLE 1: OUTPUT AND EMPLOYMENT, DATA USED FOR EMPLOYMENT PROJECTIONS...14 TABLE 2: PERCENTAGE OF EMPLOYMENT CHANGE IN TABLE 3: OCCUPATIONAL STRUCTURE BY COMMODITY COMPARED TO ARGUS MODEL...17 TABLE 4: PROJECTED ECONOMY-WIDE EMPLOYMENT IN OCCUPATIONAL CATEGORIES (NO. OF PERSONS)...40 TABLE 5: PROJECTED EMPLOYMENT AND DEMAND IN OCCUPATIONAL CATEGORIES: GROWTH RATES 43 TABLE 6: ECONOMY-WIDE CAPACITY TO RESPOND TO DEMAND FOR LABOUR FROM THE RESOURCE SECTOR

3 LIST OF FIGURES FIGURE 1: ESTIMATED EMPLOYED PERSONS IN MINING INDUSTRY (TO 2010)...11 FIGURE 2: ACTUAL AND PROJECTED VACANCIES IN MINING ( )...12 FIGURE 3: TRENDS OF ANNUAL PERCENTAGE CHANGES...13 FIGURE 4: STATE LABOUR DEMAND IN FIGURE 5: OCCUPATIONAL STRUCTURE BY SIX COMMODITIES FOR FIGURE 6: OCCUPATIONAL STRUCTURE BY THREE COMMODITIES FOR FIGURE 7A: COAL - PROJECTED EMPLOYMENT GROWTH AND OCCUPATIONAL STRUCTURE...20 FIGURE 7B: COAL - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...21 FIGURE 8A: IRON ORE - PROJECTED EMPLOYMENT GROWTH AND OCCUPATIONAL STRUCTURE IN FIGURE 8B: IRON - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...23 FIGURE 9A: GOLD - PROJECTED EMPLOYMENT...24 FIGURE 9B: GOLD - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...24 FIGURE 10A: BAUXITE - PROJECTED EMPLOYMENT...25 FIGURE 10B: BAUXITE - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...26 FIGURE 11A: COPPER - PROJECTED EMPLOYMENT...27 FIGURE 11B: COPPER - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...27 FIGURE 12A: NICKEL - PROJECTED EMPLOYMENT...28 FIGURE 12B: NICKEL - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...29 FIGURE 13A: ZINC - PROJECTED EMPLOYMENT...29 FIGURE 13B: ZINC - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...30 FIGURE 14A: LEAD - PROJECTED EMPLOYMENT...31 FIGURE 14B: LEAD - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...32 FIGURE 15A: URANIUM - PROJECTED EMPLOYMENT...33 FIGURE 15B: URANIUM - OCCUPATIONAL DISTRIBUTION BY OPERATIONAL ACTIVITY...34 FIGURE 16: TOTAL WORKING AGE POPULATION AND ANNUAL PERCENTAGE CHANGE, AUSTRALIA 1990 TO FIGURE 17: SHARES OF POPULATION, BY AGE GROUP, AUSTRALIA 1990 TO FIGURE 18: LABOUR FORCE PARTICIPATION RATES IN AUSTRALIA, BY SEX (JANUARY 2005)...38 FIGURE 19: GROWTH OF THE LABOUR FORCE, AUSTRALIA FIGURE 20: PROJECTED EMPLOYMENT IN OCCUPATIONAL CATEGORIES: GROWTH RATES...40 FIGURE 21: PROJECTED ANNUAL GROWTH RATES...41 FIGURE 22: GAP BETWEEN DEMAND AND SUPPLY: NUMBER OF PERSONS...42 FIGURE 23: GAP BETWEEN DEMAND AND SUPPLY: NUMBER OF PERSONS...43 FIGURE 23: GAP BETWEEN DEMAND AND SUPPLY: NUMBER OF PERSONS...43 FIGURE 24: GROWTH RATES BY OCCUPATIONAL CLASSIFICATION...44 FIGURE 25: DEMAND SUPPLY RATIO, BY OCCUPATIONAL CATEGORIES: ALL COMMODITIES...45 FIGURE 26: DSR, BY OCCUPATIONAL CATEGORIES: COAL...46 FIGURE 27: DSR, BY OCCUPATIONAL CATEGORIES: IRON ORE...47 FIGURE 28: DSR, BY OCCUPATIONAL CATEGORIES: BAUXITE...47 FIGURE 29: DSR, BY OCCUPATIONAL CATEGORIES: COPPER...48 FIGURE 30: DSR, BY OCCUPATIONAL CATEGORIES: NICKEL FIGURE 31: DSR, BY OCCUPATIONAL CATEGORIES: GOLD...49 FIGURE 32: DSR, BY OCCUPATIONAL CATEGORIES: URANIUM...50 FIGURE 33: DSR, BY OCCUPATIONAL CATEGORIES: LEAD...51 FIGURE 34: DSR, BY OCCUPATIONAL CATEGORIES: ZINC

4 1. EXECUTIVE SUMMARY This study projected the demand for labour in key occupational groups required by the mineral resources sector for nine major commodities in Australia from 2006 to The labour demand projections are based on mineral output projections for the major commodities to 2015, supplied by BIS Shrapnel (2005). In addition to projecting labour demand in the resources sector, the project examined the capacity of the economy to respond to increases in demand. Our projections indicate a significantly increased demand for labour in the resources sector leading up to Key findings include the following: To achieve currently predicted increases in output, the resources sector will need to employ 70,000 more workers than it currently employs, by 2015; The largest shortages are projected to be in the non-professional occupational classifications with the greatest absolute increases being in tradespersons (26,983 additional workers required) and semi-skilled workers (22,058 additional workers required); Our projections of economy-wide employment (our indicator of the potential for supply response) in these non-professional occupational categories indicate that they are likely to be the slowest growing, indicating that the minerals industry will need to attract a greater share of people in these occupational categories; The fastest growing demand for workers will be in copper, nickel, bauxite and potentially uranium mining; Of the 70,000 additional employees required, almost 42,000 will be required in Western Australia, almost 15,000 in Queensland, and approximately 5,000 in both New South Wales and South Australia; The output projections we have used indicate the fastest growth between 2006 and There is therefore the potential for a rapid onset of significant labour shortages. Further, these shortages will continue to worsen as the growth rate of projected labour demand remains above the capacity of the labour market to respond. Our findings indicate that labour shortages are likely to be a major constraint on the growth of the mineral sector over the next decade. The resources sector clearly needs a continuing and vigorous program to attract and retain labour in the identified areas of skill shortages. Given that the projected demand supply gaps are largest in occupational classifications with low skill levels, the labour shortage problem identified here in the resources sector is not one that training policy can necessarily 4

5 address. It is more a matter of attracting people to the industry, in other words, what the sector is facing is a people shortage, not necessarily a skills shortage per se. Against this backdrop, we make the following recommendations: It is common knowledge that the resources sector faces labour supply shortages, however, the extent and composition of the shortages have been less widely understood. The industry needs to promote a broader understanding of these aspects of the labour shortage in order to encourage broader support for policies to deal with the problem; The identified demand gaps suggest that there may be pressure on compression of wage differentials especially between professional and nonprofessional employees, and that the sector investigate ways it can accommodate such changes in income differentials; The finding that the projected shortages will be most acute in the area of semi-skilled employees suggests that a heightened focus on the development of appropriate training systems is required, with a particular emphasis on designing systems for quality on-the-job training provision. This means ensuring the identification and cultivation of appropriate in-house trainers as well as the design of appropriate on-the-job training evaluation systems; The shortfall of workers is so large that all alternative labour reservoirs need to be identified and targeted. One alternative labour reservoir is the manufacturing sector, which is projected to experience a further decline in non-professional occupational categories over the next decade. This decline is likely to result in a pool of available labour with broadly compatible skill sets to that required by the resources sector. For this source of labour to be accessed by the resources sector, there are significant locational issues to be overcome; Women also constitute an alternative labour pool for the resources sector. Crucial challenges associated with targeting women are likely to be ensuring the provision of childcare in remote locations, the design of family friendly policies including flexible rosters, and changing the traditionally masculine culture associated with mining; Another labour reservoir lies in the rural, regional and remote communities, including indigenous communities, in close proximity to many of the mine sites. This raises a number of fundamental issues related to attraction, provision of training, and retention; Importing labour from outside of Australia is another option, but we emphasise that the numerous long-term implications of this must be 5

6 investigated and such a strategy should not replace growing our own workforce locally; We believe it is in the resources sector interest to develop an understanding and expertise in determinants of labour supply in the Australian economy. This means understanding not only the economic data, but deeper socioeconomic trends that underpin the supply of labour, particularly in nonprofessional occupational groups Purpose of the Report The purpose of this study is to project the key skills required by the mineral resources sector for major commodities in Australia from 2006 to The review is based on predicted production levels for the major commodities to 2015, supplied by BIS Shrapnel (2005). In addition, to projecting the demand for skills, the project examines the capacity of the economy to respond to increased future labour demand from the resources sector. The project covers all regions and States of Australia for the nine major commodities of iron ore, coal, bauxite/alumina, gold, nickel, lead/zinc, copper and uranium, spanning the operational activities of exploration, open-pit mining, underground mining, processing and maintenance. In terms of skill levels and skill types, the objective of the project is to gain an understanding of occupational classifications to trade level, including technicians. The coverage of this report however encompasses the six broad occupational categories that constitute the vast majority of all employees in the minerals industry. This broader coverage has involved no compromise in the detail of coverage for the non-professional occupational classifications which we intended as the main focus of the report. Focussing only on non-professionals would have provided an incomplete analysis in terms of capturing the relativities and distinctiveness of issues across occupational groups. For example, one of the main conclusions that have emerged is that the labour supply problem appears fundamentally different in character and extent in the non-professional occupations compared with the professional occupations and this is in our view a critical guide to strategic responses. It should be noted that available detailed data on actual skills (at the job level) required by different commodities in the resources sector in Australia is scant. In this report we use occupational classification as a proxy for skill, on the assumption that each occupational classification involves an implied and broadly known skill set. Based on the BIS Shrapnel data, the scope of our review involved providing answers to the following key questions: 6

7 For each State and for each major commodity what is the projected demand for labour over the next 10 years? What are the key skills that will be required in each of the main commodities and different operational activities over the next 10 years? What is the projected supply of labour at a national level to 2015, and how does this compare to projected labour demand within the minerals resources sector? The report is organised into 6 remaining sections. The next section presents an outline of the methodology and assumptions used in calculating the employment estimates, with a more detailed explanation of the methodology and assumptions provided in Appendix B and C. Based on the BIS Shrapnel forecasts, Section 3 explores the different commodity groups and provides an overview of employment growth to Section 4 provides information on the number of people required in the sector by 2015, broken down by the major commodity groups and operational activities, and skills that are likely be required. The capacity of the economy-wide labour market (our indicator of supply) to respond to the demand for labour within the minerals resources sector is explored in Section 5. Finally, conclusions are drawn in Section 6. 7

8 2. PROJECTING THE DEMAND FOR LABOUR: DATA SOURCES & METHOD In this section we present a brief outline of the measures and assumptions used in calculating the 2015 labour demand estimates. A detailed explanation of the methodology and assumptions is provided in Appendix B and C. It should be acknowledged at the outset that forecasting and speculation of technological, economic and social developments needs to be interpreted with caution, since it is not always a simple matter to understand the present let alone predict future trends and impacts. The review undertaken here involves what we prefer to see as making projections about people and skill requirements to 2015, rather than forecasting or predicting per se. As discussed in the previous chapter, our projections are based on BIS Shrapnel commodity output forecasts together with current employment data produced by the DoIR (WA) and the Resource Information Unit (WA). Assumptions embedded in both sources ultimately impact on the accuracy of our projections. In addition to assumptions embedded in the source data, we have also made some assumptions in regard to the resources sector. For example, by assuming that the rate of growth of employment will be equal to the rate of growth of output we have effectively assumed that the impact of technological and management change on mining output per employee will be small. Considerable caution should be exercised in the treatment of our projections with regard to uranium. The future output of uranium is particularly uncertain at this time due to the potential future impact of the Olympic Dam project in South Australia. While we obtained the most recent update of output predictions for uranium, it is highly likely that the BIS Shrapnel predictions for uranium are extremely conservative. We recommend that the employment projections for uranium be recalculated in collaboration with representatives from BHP Billiton once the uncertainty surrounding the Olympic Dam project is reduced Outline of the data sources and method used This study used a number of data sources and methods to project employment and skills for 2015 and these are outlined below. More detail on data sources and the method can be found in Appendix B. The main data sources in this study were: Commodity output forecasts supplied by BIS Shrapnel (2005) - BIS Shrapnel supplied us with projections of output for each of the commodities to These formed the basis for our output by employee projections. 8

9 Employment data from the Resources Information Unit (RIU) The primary data source for these estimates is the 2006 Minelist from the Perth-based Resource Information Unit (RIU), which provided numbers of employees for each state and territory (excluding ACT) by major commodity. The Minelist data is based on a survey of Australian mines (with approximately 95 per cent coverage of the sector) was the first year that data (for 2005) on numbers of employees has been collected. RUI supplied NILS with two custom data sets based on the 2006 Minelist mine survey: o o a list of all mines in Australia with numbers of employees, mine type, main commodity a list of all multi-commodity mines (MCMs) with estimated output of each mine expressed in refined metal equivalents. Employment data from state mining and primary industries agencies and industry organisations. These included: o o o o o o Department of Natural Resources, Mines and Energy, Queensland Coal Statistics The Department of Industry and Resources (DoIR) in Western Australia Aluminium and the Australian Economy A Report to the Australian Aluminium Council, May 2000 Queensland Mines and Quarriers Safety Performance and Health Report NSW Coal Industry Profile, NSW Department of Primary Industries Annual Review 2003/2004 Mineral Resources, Tasmania The following methods were used to make the employment projections in this study. An outline of each measure is presented here, with a more detailed discussion including assumptions and formulae presented in Appendix B. 1. Calculation of the base employment levels for 2004 Using the data sources outlined above, base employment levels for 2004 (specifically, the end of 2004) were calculated in order to determine the numbers of employees for each state and territory (excluding ACT) by major commodity. The presence of multicommodity mines (MCMs), increased the complexity of the task of compiling base employment data. To calculate the base employment series, all MCMs were removed from the full Australian mine list creating a separate list for MCMs, with twenty six Australian mines each producing between two and five distinct mineral outputs. 9

10 Employees were allocated to commodities according to the relative value of those commodities in each mine s output mix 1. This process resulted in a list of commodity-distributed employment levels (CDELs) by mine. These CDELs were added to numbers of employees by commodity for single-commodity mines. From this consolidated data set, sub-totals for employment by state, commodity and mine type were calculated resulting in the base employment series for In cases where employment levels by state and by commodity were available and where these were greater than the numbers derived from the Minelist data the state-based data were used in preference. 2. Distributing employment level across occupations Once a projected employment level by state and by commodity had been established for 2005 to 2015, it was next necessary to distribute these totals across occupational groups. This project used a six-category occupational distribution: Managers Professionals Technicians Tradespersons Semi-skilled workers Labourers and related workers. A survey of 14 Australian mining companies (with coverage of 33,304 employees, approximately one third of employees in the commodities of interest) provided information about the distribution of occupations across all of the commodity groups and by the four main categories of mining activity (production, processing, maintenance and exploration). For each year from 2005 to 2015 the projected total level of employment in each commodity grouping was distributed across the six occupational classifications. These data sources and methods formed the basis of our employment projections, and these projections are the focus of the remainder of this report. 1 The use of refined equivalents rather than the value of ore shipped involves an approximation, that is, to the extent that different MCMs ship ores of differing qualities that sell for different prices, the use of refined equivalents will introduce inaccuracies. 10

11 3. OVERVIEW OF LABOUR DEMAND 2015 In this section we provide an overview of projected employment growth in the Australian resources sector in 2015, based on the commodity output forecasts provided by BIS Shrapnel (2005) together with employment data produced by the various sources outlined in the previous section. Before going on to specifically examine employment growth in the resources sector, it is useful to explore issues related to general employment trends in the sector at a national level. Figure 1 shows that at a national level, there is a marked overall positive growth in employment in the resources sector to Figure 1: Estimated Employed Persons in Mining Industry (to 2010) An examination of vacancies in mining (nationally) supports this trend of employment growth, and this is evident in Figure 2 below (projection only to 2010). 11

12 Figure 2: Actual and projected vacancies in mining ( ) Source: ABS, Job Vacancies Australia, Cat. No Figure 3 below reveals that employment trends in mining are substantively different from the rest of industry, where employment growth is highly correlated with movements in gross domestic product. Figure 3 indicates that employment trends in mining are cyclical, dependant (among other factors) on commodity prices, state of reserves, intensity of exploration as well as employment needs at the stage of operations of different commodity developments (for example exploration followed by extraction). While we make the assumption that overall growth in employment in the resources sector is linear, the cycle of peaks and troughs is likely to remain. In other words, while we are able to project employment growth in 2015 based on the forecasted outputs by BIS Shrapnel, the timings of the peaks and troughs are unable to be accurately estimated based on our source data. 12

13 Figure 3: Trends of Annual Percentage Changes Source: ABS, Labour Force Australia, Cat. No ; ABS, Australian System of National Accounts, Cat. No Table 1 also shows BIS Shrapnel forecasts of output for each of the major commodity groups. Increased output is projected for all commodity groups, with nickel, bauxite, copper and iron ore respectively having a significantly higher level of predicted output in The BIS Shrapnel Report cites a number of reasons for the increases in output. Global prices and export quantities of commodities in Australia have expanded in response to surging demand from China, and this is forecast to increase over the next decade. According to BIS Shrapnel, mining output growth may start to slow down by 2007 or 2008, since the resources boom in Australia may be replicated overseas resulting in a potential oversupply. Nevertheless, Australia has some of the largest and richest commodity reserves in the world, and the longer-term outlook remains very positive for Australia s minerals industry. Continued investment, efficient mining operations and vast mineral resources augur particularly well for the medium to long-term outlook (BIS Shrapnel, 2005). 13

14 Table 1: Output and Employment, Data Used for Employment Projections BIS Shrapnel 2005 BIS Shrapnel 2015 DoIR & RIU Employment Sector 2005 Sector Employment 2015 Units Output OUTPUT 2005 OUTPUT % of Total Employment ALUMINA/BAUXITE kt , % 20,956 GOLD t , % 25,396 IRON ORE Mt , % 28,572 NICKEL Kt , % 16,053 URANIUM t % 1,293 COAL Mt , % 44,689 COPPER kt , % 16,904 LEAD kt % 2,265 ZINC kt % 6147 Total Major Sectors 92, % 162,275 Total Mining (including commodities not listed here) 129,400 Notes (1) Sector Employment for 2015 is based on estimates of output per employee, details of the method of deriving this measure and associated assumptions are provided in Appendix B and Attachments. (2) Total Mining employment is from ABS Catalogue and includes Petroleum and Gas Increases in output indicate an increase in workforce numbers. In order to calculate the numbers of workers required by the resources sector in 2015, the growth rate in output was applied to the base employment series. From Table 1, it can be seen that the resources sector will require a dramatically increased workforce by It is projected that by 2015, the resources sector workforce in Australia will be in the vicinity of 162,000 employees, representing an increase of approximately 70,000 workers over the next decade. Table 2 below shows that the percentage increase is most dramatic in copper, nickel bauxite and uranium, where the workforces are projected to more than double in number. 14

15 Table 2: Percentage of Employment Change in 2015 Resources Sector Employment 2005 Projected Employment in 2015 Employment 2005 to 2015 Change Employment 2005 to 2015 % Change BAUXITE GOLD IRON ORE NICKEL URANIUM COAL COPPER LEAD ZINC Figure 4 reveals the resources sector labour demand for each state and territory (excluding the ACT). The table indicates that Western Australia and Queensland will have the strongest demand for labour, followed by New South Wales and South Australia. The strong demand for labour in Western Australia and Queensland reflects the locations of the high growth commodities of copper, nickel and bauxite. Figure 4: State labour demand in These workforce projections for 2015 clearly pose a serious challenge for the resources sector in Australia. In the next section we provide an account of the occupations and skills that are likely be required by the main commodity groups in

16 4. OCCUPATIONS AND SKILLS REQUIRED IN Occupational Structure in the Resources Sector Prior to this report, the only indicative model of occupational structure in the resources sector was the Argus (2004) Model. Based on 2001 ABS Census data, the Argus Report (2004) provided a template of occupational structure within mining (at the ANZIC one digit level) by indicating the percentage of the mining workforce in each occupational category (at the 1 digit ASCO level). While the model is useful for providing a comprehensive and broad profile of the competencies and level of skill across the minerals industry, it is lacking for our purposes here on two accounts. First, it does not take into account inter-commodity differences of occupational structure, and second, it does not encompass different intra-commodity occupational structures across different operational activities. In order to determine the occupational structure of each commodity, we conducted a survey of firms. Twenty-seven resources firms were approached to participate in a survey of occupational structure (see Appendix A for the survey letter and questions), to which fourteen companies responded. The firms were asked to indicate what percentage of their workforce were in the categories of labourer and related workers, semi-skilled workers, tradespersons, technicians, professionals, and management, across the operational disciplines of production, processing, maintenance and exploration. In addition, the firms were asked to indicate if the skill sets and tasks of occupations on site were undergoing changes, and if so, what types of changes. Only one responding company indicated a change in skills, all others indicated stable skill sets. The change in skill set was in the bauxite commodity, where it was indicated to us that, process operators are receiving more extensive formal TAFE training. The participating companies consisted of single and multi-commodity mines across the range of commodities included in this report. The survey resulted in coverage of 33,304 workers, which is approximately 36 per cent of employees in the relevant commodities. Table 3 displays the occupational structures of the nine commodity groups. The Argus Report (2004) template is included for the purpose of comparison. 16

17 Table 3: Occupational Structure by Commodity compared to Argus Model OCCUPATIONAL CATEGORIES Argus Report COAL IRON ORE BAUXITE COPPER GOLD NICKEL URANIUM LEAD ZINC W/AVERAGE Managers Professionals Technicians Tradespersons Semi-skilled workers Labourers & related workers Note: Lead and Zinc were calculated together since we received raw data for the commodities in combined form only. Table 3 reveals considerable differences in occupational structure between commodities. For example, Uranium, Nickel, Gold, and Lead/Zinc appear to have proportionally more tradespersons, while Coal, Nickel and Iron Ore have a higher proportion of semi-skilled workers. Table 3 also indicates some departure from the Argus Model of occupational structure across the individual commodities. Moreover, if we compare the weighted average 2 across all nine commodities, it appears that the Argus Model overstates the proportion of highly skilled occupations and underestimates the proportion of tradespersons, semi-skilled workers, and labourer and related workers. It is important to note that our calculations are based on two assumptions. First, we have assumed that the occupational structures evident in Table 3 are representative of all sites in a given commodity. Second, we have assumed that the ratio of occupational structure will remain the same over time; for example, the ratio of tradespersons per professionals will not change over the next decade. This second assumption indicates that the projections of occupations in 2015 needs to be treated with caution, since cycles of expansion and exploration in the resources sector indicate that the ratio may differ according to the life-cycle stage of each operation. Figures 5 and 6 reveal the occupational structure and workforce size for each of the commodities in 2015 (with the caveat in regard to uranium, as mentioned earlier). 2 The weighted average was calculated by using the total number of responses received for each commodity. 17

18 Figure 5: Occupational Structure by Six Commodities for

19 Figure 6: Occupational Structure by Three Commodities for

20 Figures 5 and 6 clearly show the predominance of the trades, semi-skilled and labourer occupations across the commodities in Broad occupations required in each of the commodities While Figures 5 and 6 shows the projected growth and the occupational structure for each of the main commodities, additional insight related to projected occupational requirements is gleaned from examining employment and occupational structure in each commodity for 2005 and Coal Figure 7a: Coal - Projected Employment Growth and Occupational Structure Australia is geographically well placed to take advantage of the coal supply shortage in East Asia. Investment in coal mine capacity has increased dramatically, with increased production already coming on stream (BIS Shrapnel, 2005). It is projected that overall, an additional 15,785 employees will be required in This comprises the following: 716 additional labourer and related workers 7872 additional semi-skilled workers 4,107 additional tradespersons 20

21 410 additional technical employees 1232 additional professional employees 1448 additional managers and administrators It is important to note that these projections assume the ratios remain unchanged in This type of caveat applies equally to each commodity group discussed in this section. According to our survey with coverage of 33, 304 employees, the occupations in coal are distributed across the activities of production, processing, maintenance and exploration in the following way: Figure 7b: Coal - Occupational Distribution by Operational Activity From Figure 7b, semi-skilled workers dominate in the mining and processing of coal, while tradesperson play a large role in maintenance activities. Iron Ore Iron ore production is currently at record levels, with an estimated 12.7 per cent growth in Major expansions in Western Australian production and export capacity and high prices, have enticed new producers into the market with added funding from Japan and China. This investment will underwrite continued growth in production till 2015 (BIS Shrapnel, 2005). As a result it is projected that 21

22 13,441 additional employees will be required. These includes additional workers in the following broad occupational groups: 573 additional labourer and related workers 5,887 additional semi-skilled workers 3,073 additional tradespersons 1,288 additional technical employees 2,048 additional professional employees 573 additional managers Figure 8a: Iron Ore - Projected Employment Growth and Occupational Structure in 2015 Our survey revealed that semi-skilled workers were mainly concentrated in mining (production) activities, while the trades were more pronounced in maintenance: 22

23 Figure 8b: Iron - Occupational Distribution by Operational Activity Gold According To BIS Shrapnel (2005) production growth in gold is forecast to reach 14.1 per cent in 2006, largely due to the Telfer mine in Western Australia coming on stream. Other smaller mines will help boost production, however it may be the case that production growth may plateau in 2009 to 2010 (BIS Shrapnel, 2005) According to our projections, 7061 employees will be required: 786 labourer and related workers 765 semi-skilled workers 4,560 tradespersons 159 technical employees 668 professional employees 124 managers 23

24 Figure 9a: Gold - Projected Employment From Figure 8b, it can be seen that tradespersons dominate in the activities of maintenance and processing, while the lower skill levels are found in mining (production) activities. Figure 9b: Gold - Occupational Distribution by Operational Activity 24

25 Bauxite Bauxite production is heading into a strong period of growth, related mainly to the extent of demand from China for Alumina to feed their Aluminium smelting industry. Overall, it is predicted that bauxite production will grow at an average rate of more than 9 per cent per annum to 2010 (BIS Shrapnel, 2005). Figure 10a: Bauxite - Projected Employment As a result, it is projected that 10,712 additional employees will be required. These includes additional workers in the following broad occupational groups: 3,019 additional labourer and related workers 3,424 additional semi-skilled workers 1,118 additional tradespersons 1,353 additional technical employees 1,757 additional professional employees 42 additional managers Figure 10b reveals that semi-skilled workers in bauxite predominate in mining processing activities, however, unlike the commodities examined so far, labourer and related workers are strongly represented in mining production, processing, 25

26 and maintenance, and play a stronger role in maintenance activities than tradespersons. Figure 10b: Bauxite - Occupational Distribution by Operational Activity Copper Copper demand has surged in recent years, and the strong growth will continue, largely due to the increased production at Olympic Dam in South Australia. The Olympic Dam Expansion Project is currently preparing a pre-feasibility study for dramatic growth of the site. Commissioning of the expanded site is expected to occur in 2013, and it is estimated that production will more than double by Our projections indicate that additional workers will be required in 2015: 863 additional labourer and related workers 3201 additional semi-skilled workers 4361 additional tradespersons 469 additional technical employees 992 additional professional employees 487 additional managers 26

27 Figure 11a: Copper - Projected Employment Our survey revealed that semi-skilled workers dominated in the mining of copper, but tradespersons were more likely to be found in maintenance, processing and mining production activities respectively. Figure 11b: Copper - Occupational Distribution by Operational Activity 27

28 Nickel Nickel production in Australia is based solely in Western Australia. With the prospect of continued strong growth in the demand for stainless steel (the main use for nickel) and continued high nickel prices, nickel investment is set to increase. It is projected that 8842 additional employees will be required in the following broad occupational groups: 213 additional labourer and related workers 786 additional semi-skilled workers 6845 additional tradespersons 272 additional technical employees 520 additional professional employees 206 additional managers and administrators Figure 12a: Nickel - Projected Employment Figure 12b below reveals that for nickel, tradespersons dominate in all four operational activities of production, processing, maintenance and exploration. 28

29 Figure 12b: Nickel - Occupational Distribution by Operational Activity Zinc Zinc production is estimated to increase largely due to the demand from China. Expansion of existing mines as well as new projects will see strong growth over the next decade (BIS Shrapnel). Figure 13a: Zinc - Projected Employment 29

30 Our projections indicate that 2347 additional workers will be required in 2015: 103 additional labourer and related workers 86 additional semi-skilled workers 1689 additional tradespersons 137 additional technical employees 298 additional professional employees 34 additional managers Figure 13b below indicates that tradespersons dominate in the activities associated with processing, maintenance and production of zinc: Figure 13b: Zinc - Occupational Distribution by Operational Activity Lead Lead mine production is predicted increase by 64 per cent to 2015, however, the bulk of this increase is early in the projection period (BIS Shrapnel). 30

31 Figure 14a: Lead - Projected Employment We project that 944 workers additional workers will be required: 41 additional labourer and related workers 35 additional semi-skilled workers 680 additional tradespersons 55 additional technical employees 120 additional professional employees 14 additional managers As with Zinc, Figure 14b indicates that that tradespersons dominate in the activities associated with processing, maintenance and production of lead: 31

32 Figure 14b: Lead - Occupational Distribution by Operational Activity Uranium Uranium production is located in the Northern Territory and South Australia. As discussed earlier, the Olympic Dam Expansion Project is currently preparing a pre-feasibility study for dramatic and significant growth of the site. Commissioning of the expanded site is expected to occur in 2013, and it is estimated that production will approximately double by This is likely to be a conservative estimate. It should be emphasised that the Olympic Dam Project is potentially so large, that its employment will probably dominate the uranium industry in Australia over the next decade. 32

33 Figure 15a: Uranium - Projected Employment Based on the (in this case) conservative BIS Shrapnel predictions, our projections indicate that 654 additional workers will be required 3 : 64 additional labourer and related workers 3 additional semi-skilled workers 550 additional tradespersons 10 additional technical employees 25 additional professional employees 2 additional managers Figure 15b below reveals that tradespersons are concentrated in activities associated with the maintenance and processing of uranium. 3 These are highly conservative estimates and should be treated with caution 33

34 Figure 15b: Uranium - Occupational Distribution by Operational Activity The discussion above gives us some idea of the broad occupational classifications likely to be required in 2015, and the types of skills required in 2015 as revealed through our analysis of occupational distributions for each of the commodities. This study confirms recent research (NCVER, 2005) that suggests marked shortages in the trades and semi-skilled workers. This section has focused on the projected employment demand in defined commodities in the Australian resources sector in In order to more fully understand the implications of labour demand in the sector over the next decade, the following section explores the capacity of the economy-wide labour market to respond to these increases. 34

35 5. CAPACITY OF THE ECONOMY TO RESPOND TO GROWING DEMAND FOR LABOUR 5.1. Introduction Our projections indicate strongly growing demand for labour across the mineral resources sector with significant variations between commodities and occupational classifications. Given the labour shortages being experienced in many sectors of the economy and given that the large demographic group characterised as the baby boomers is reaching retirement age, we need to consider the capacity of the labour market to respond to these increases in demand. We examine here projections of employment growth across the relevant occupational classifications and characterise the extent of labour demand gaps that are likely to be experienced in specific commodity sectors Limitations of the analysis It is appropriate to begin by emphasising some fundamental conceptual and empirical limitations to such an undertaking. Since we have projected demand in six occupational categories we would ideally like to have supply data in corresponding categories. With these two sets of projections it would be possible to draw conclusions about the occupational classifications that are likely to experience the largest gaps between demand and supply. There is however, a fundamental conceptual issue, particularly for occupational categories that require lower levels of qualifications, which is: what are the criteria for determining whether persons are included in the supply for a particular occupational category? Take, for example, the occupational category unskilled workers. By definition almost any worker qualifies to work in this category. Should workers with, say, higher degrees or many years managerial experience be included in the supply for this category? Probably not, but where precisely should the cut-off point in terms of qualification and/or experience be? This conceptual problem places a significant limitation on our ability to meaningfully define supply. Another complication, which is primarily empirical, is that employment data cannot be relied upon to indicate labour supply because the short side dominates. This means that in situations where there is an excess supply of labour (demand is short ) measures of employment will reveal demand, and the excess supply will be manifested as unemployment. In situations where there is excess demand for labour (supply is short ) supply will be measured in the employment statistics (because some employment vacancies will remain unfilled). This means that observed numbers of employees can not be relied upon to indicate the supply of labour. 35

36 Having stated these two caveats, our pragmatic approach is to use the numbers employed historically in each occupational category as a projected indicator of the labour market s capacity to respond to demand growth and thereby identify in what occupational categories supply bottlenecks are most likely to occur. Before presenting the occupational categories projections we provide an overview of trends in the Australian labour force Australian labour force trends Australia s aging population Australia is in the process of a demographic transition characterised by rapid ageing of the population, with an increasing proportion of the population accounted for by older age groups. In addition, the size of the working-aged population (aged 15 to 64 years or over), which also represents the upper limit of the potential labour force, has generally been growing at a decreasing rate over time. Any change in the working-aged population can be regarded as a first approximation of future labour supply changes. Figure 16: Total Working Age Population and Annual Percentage Change, Australia 1990 to Data source: Data sources: Population projections of the Productivity Commission (2005) for 2004 to 34; ABS Australian Population Statistics (cat. no ) for earlier years. According to the Productivity Commission (2005), there will be a net growth of around 2.4 million in the working-aged population from 2005 to The growth rate per annum of the 15 to 64 age group will continue to decrease from around 1.5% in 2005 to 1.3% in Moreover, after 2007 the working age population will grow more slowly than the total population (Figure 16). 36

37 We can examine the changes in age distribution in more detail if we further divide the 15 to 64 age group into three age groups: younger age (15 to 24), primary age (25 to 49), and older age (50+). The proportion of the younger age group in the total population will drop moderately from 17.2 to 16.5% from 2005 to The share of the prime-age group reached a maximum of 48.3% in 1996 and has maintained a downward trend since then. It will decrease from 46.9% in 2005 to 42.8% in By 2018, its proportion (41.7%) will be less than that of the older age group (42.3%). By sharp contrast, the proportion of the older age group in the total population will greatly increase from 36.0 to 40.7% from 2005 to The changing proportions of the different age groups will impact on the size and structure of the future labour force. Essentially, the labour force will continue to shrink relative to the total population and will consist overwhelmingly of the older segment of the working-aged population (Figure 17). Figure 17: Shares of Population, by Age Group, Australia 1990 to Data sources: Calculated from population projections of the Productivity Commission (2005) for 2004 to 20; ABS Australian Population Statistics (cat. no ) for earlier years. Future labour force Labour force participation rates are generally higher for men than for women, as evidenced by the historical data. Figure 18 compares male and female participation rates across the age spectrum relative to the rates of both genders across Australia for a single time period. It shows that the female participation rates decline during early prime-age as women reach child-bearing age and on average, do not recover to male levels. Labour force participation for both genders is concentrated in the ages between 20 and 54 years. Labour force participation rates vary significantly across different age groups. The participation rates for people in their younger age groups are comparatively 37

38 low as they engage in education (although many work part-time in unskilled jobs while they study). Older people s participation is also much lower than the participation rate of people in their prime age as they voluntarily or involuntarily retire from their jobs. Some older people, however, remain engaged in the labour market via part-time work or self-employment. Figure 18: Labour force participation rates in Australia, by sex (January 2005). Data source: Calculated from ABS Labour Force, Australia, Detailed (cat. no ). Aggregate labour force participation rates in Australia are anticipated to fall by 2.1 percentage points from 63.5% in 2005 to 62.7% in 2015 (Productivity Commission 2005). Over time there have been rising female, and declining male, participation rates across a number of the specific age categories. To date, this rising female participation has more than offset the trend toward declining male participation. As a result, the aggregate participation rate increased by around 3% over the last two decades. Male participation rates are expected to continue to decrease from 71.2% in 2005 to 68.0% in Female participation rates are expected to keep rising over the years between 2005 and 2013, increasing from 56.1% in 2005 to 57.5% in From 2013, female labour participation will shift downwards, reaching 56.8% by Except for those aged 40 to 44 years, all the other age groups are expected to experience an increase in their labour participation over the period 2005 to The older age group will experience the largest increase during this period. For instance, the increases in participation rates are expected to be some 8.5% for those aged 60 to 64 years, 6.9% for those aged 55 to 59 years, 3.4% for the aged 65 years and over, and 3.2% for those aged 50 to 54 years. In contrast, the participation rate for the youngest age group (15 to 19 years) will increase by only 1.9% over the same period. 38

39 If these patterns prevail, the shift in the age structure of the population over the period 2005 to 2015 implies that more Australians will be in age groups with lower labour force participation rates. The decline in labour participation is likely to be sharper after 2007 when the first of the baby boomer generation reach 65 years and start to move into retirement. In the next 10 years, the labour force is expected to grow by a net of around 1.5 million persons, amounting to approximately 11.2 million by 2015 (see Figure 19). The net addition to the labour force per annum is anticipated to fall, decreasing from 1.6% in 2005 to 1.2% in This indicates that potential supply of the overall labour will continue to rise but at a slowing rate. Figure 19: Growth of the labour force, Australia Data source: Calculated from the labour force projections of the Productivity Commission (2005) for 2004 to 20; ABS Labour Force, Australia, Detailed (cat. no ) for earlier years Projections of employees in occupational categories Table 4 provides projections of numbers of persons employed in the six occupational categories that we have used in the demand estimates. For more information of the projection method see Appendix C. It is emphasised that these figures show the economy-wide projected level of employment in each of the occupational categories and so the absolute numbers are not comparable with our projections of demand levels. It is useful however to compare the growth rates of demand and supply. 39

40 Table 4: Projected economy-wide employment in occupational categories (No. of persons) Managers & administrators Professionals Technicians Trades persons Semiskilled workers Labourers & related workers Total ,335 1,868,367 1,235,378 1,214, , ,413 6,748, ,228 1,919,548 1,279,798 1,225, , ,894 6,877, ,626 1,967,971 1,321,970 1,235, , ,479 6,998, ,638 2,014,015 1,362,073 1,245, , ,602 7,113, ,462 2,058,310 1,400,520 1,255, , ,711 7,226, ,169 2,101,171 1,437,505 1,265, , ,054 7,335, ,455 2,142,047 1,472,668 1,275, , ,470 7,441, ,818 2,179,891 1,505,304 1,285, , ,599 7,539, ,191 2,214,714 1,535,428 1,293, , ,487 7,630, ,887 2,247,421 1,563,683 1,302, , ,491 7,716, ,073 2,278,508 1,590,442 1,310, , ,792 7,798,700 Figure 20: Projected employment in occupational categories: growth rates 40

41 Figure 20 charts projected annual growth rates of employment for each occupational category for the projection period and the growth rates for the whole period. All occupational categories show declining but positive growth rates except for Labourers and related workers with projected low negative growth rates over the whole period this sector is projected to decline in absolute size over the period. Growth rates for Semi-skilled workers are close to zero over the period. Figure 21 shows the projected growth rates for total demand and employment for all six categories. This chart show that in 2006 the projected growth in demand in mining across the six occupational categories is per cent while for employment it is only 1.91 per cent. Although the gap between demand and employment growth rates decreases significantly after 2008 it should be emphasised that this implies, in terms of absolute numbers, a widening gap between demand and supply. Figure 21: Projected annual growth rates One way to illustrate this gap is to apply our projected employment growth rates to the 2005 demand estimates. Assume, for the purposes of this illustration, that in 2005 all occupational categories were in equilibrium, that is demand equals supply. From this point then assume demand and supply (with projected employment the proxy for supply) grow at our projected rates. Figure 22 illustrates this scenario. The blue area shows the projected increase in the number of persons employed in the six occupational categories and the orange area show the projected demand for persons in the mineral sector. The chart clearly shows the widening gap between projected supply and demand for labour. 41

42 Because Figure 22 is based on the total number of persons in all occupational categories there are cases of larger and smaller gaps for each category. Figure 23 shows the corresponding illustration of excess demand for the occupational category Labourers and related workers. By 2015 the gap for this category is more than half the size of projected supply. Note also that, in contrast to the Total figure, supply move slightly down over the decade. Figure 22: Gap between demand and supply: number of persons. 42

43 Figure 23: Gap between demand and supply: number of persons. Figure 23: Gap between demand and supply: number of persons. Table 5 summarises annual growth rates in employment and demand for each occupational category for the projection period and the growth rates for the whole period, The projected growth rate of total employment for the six categories is 15.6% while the projected growth in demand is 76.2%. The highest growth rate is in the demand for Tradespersons at 87.7% over the 10 years of the projection period. The growth rate of supply for Tradespersons is expected to be 28.7%. Table 5: Projected employment and demand in occupational categories: growth rates Managers & administrators Professionals Tradespersons Semi-skilled workers Labourers & related workers Labourers & related workers Total demand supply demand supply demand supply demand supply demand supply demand supply demand supply

44 Figure 24 shows that the three occupational categories that will experience the greatest labour supply shortage are Labourers and related workers, Semi-skilled workers, and Tradespersons. It should be noted, however, even at the bottom of the supply shortage range, Managers and administrators, will still experience supply shortages. Figure 24: Growth rates by occupational classification Demand-supply ratios Another approach to summarising relative demand and supply is to calculate a ratio. We have calculated a demand supply ratio (DSR). The DSR is the ratio of projected demand from the mineral sector divided by the projected supply of labour for the corresponding occupational category (economy-wide). The value of the DSR is set to one for the base year of If the growth rate of projected demand exceeds the growth rate of projected supply (as it does for all occupational categories) the value of the DSR will increase. The values of the DSR for the six occupational categories from 2006 to 2015 are shown in Figure 25. The extent to which the DSR line rises above one shows the extent to which demand will exceed supply. Figure 25 shows that the extent of excess demand for labour is likely to be greatest for the occupational classifications Labourers and related workers, tradespersons, and Semi-skilled workers. The DSR rises to its highest value of 1.84 for Labours and related workers in

45 Figure 25: Demand Supply Ratio, by Occupational Categories: All Commodities. Because coal is the biggest single employer in the mineral sector it is no surprise that its projected supply shortages broadly mirror those of the sector. Figure 26 shows that again, Labourers and related workers and Semi-skilled workers are projected to face the most acute shortages while, in the case of coal, Technicians represent the lowest level of shortages. 45

46 Figure 26: DSR, by occupational categories: coal. Figure 27 shows that iron ore mining is projected to experience an almost identical pattern of shortages to coal but at a higher level. Note that the DSR for Labourers and related workers reaches 1.93 by

47 Figure 27: DSR, by occupational categories: iron ore. Figure 28 show that bauxite again has a similar patter of labour shortages but these shortages are project to be even more intense than those in iron ore mining. The DSR for Labourers and related workers reaches a value of almost 2.1 by Figure 28: DSR, by occupational categories: bauxite. 47

48 Figure 29 shows the DSRs for copper and they reach their highest values in this case the DSR for Labourers and related workers reaching a value of 2.6 by 2015 and Tradespersons reaching 2.4. Figure 29: DSR, by occupational categories: copper. Figure 30: DSR, by occupational categories: nickel. In the case of nickel, the highest level of shortage is reached for Semi-skilled workers 2.2 by This is because of the very low numbers of Labourers and related workers involved in the mining of nickel. 48

49 Figure 31: DSR, by occupational categories: gold The distinctive shape of the DSR curves for gold reflect the projected decline in output of this mineral. Labour shortages peak in 2010 but still are present at lower levels for all occupational categories by In the case of uranium the shapes of the curve over time are again driven by the projected output. The future output of uranium is particularly uncertain at this time due to the potential future impact of the Olympic Dam project. 49

50 Figure 32: DSR, by occupational categories: Uranium The DSR curve for lead and zinc have identical pattern because they are based on the same occupational distributions. Lead, however, is projected to experience slightly more intense labour supply shortages because of its higher projected growth rates in output. 50

51 Figure 33: DSR, by occupational categories: lead Figure 34: DSR, by occupational categories: zinc 51

52 The foregoing discussion shows the future labour shortages across the nine commodities examined in this report. Table 6 provides a pointed summary of this information. From the table, it can be seen that tradespersons required by the resources sector in 2015 are almost one third of the projected economy-wide tradesperson pool. The situation is even more significant for semi-skilled workers and indeed, labourer and related workers. Table 6: Economy-wide capacity to respond to demand for labour from the resource sector Managers Professionals Technicians Tradespersons Semiskilled Labourer & related Total Projected economy-wide employment growth Projected growth in labour demand in resources sector Workers workers 198, , ,064 96,296 6,207-16,621 1,049,825 2,930 7,659 4,154 26,983 22,058 6,377 70,161 These figures are even more problematic when we consider that broad sectoral changes in the Australian labour market (e.g. the decline of manufacturing industry, the rise of the feminised service sector, the globalisation of the production process and the introduction of new technology) has been attributed to a decline in the numbers of prime aged men, men aged between 25-54, who are actually participating in the labour market (Gregory 1991; Hancock 2002). It has been shown that in Australia that at every age group, at least 20 per cent of men without post-school education are not entering the work-force (Richardson 2003:1). That is, they are not just unemployed they are not even looking for jobs. National and international research that has examined the causes of this decline suggest that the changes in the employment share of different industries (decreased manufacturing employment to increased service sector employment) over recent years have significantly reduced the employment opportunities for low-skilled workers and have increasingly shifted traditional wage earners blue-collar, male workers - outside the new economic order. The little research that has been done to understand this phenomenon (Moskos 2004; Nixon 2005) suggests that low skilled men would rather opt out of the labour market than to take jobs that they associate with being female work (call centre, sales positions etc.) or more importantly for purposes here, jobs that they find to be demeaning and devaluing of their perception of the value of their labour. It is interesting then, when considering the future capacity of the economy to respond to labour demand in the mining industry, and the projected reliance on semi skilled and unskilled labour, to consider the future potential of men who are experiencing this labour market exclusion and explore the possible ways in which this cohort of men can be reengaged with the labour market, in particularly the Australian mining labour market, to fill the future occupational gaps identified in this research. 52

53 6. CONCLUSIONS AND RECOMMENDATIONS Based on output forecasts supplied by BIS Shrapnel (2005), the resources sector in Australia will undergo significant overall expansion over the next decade. Increased output is projected for all commodity groups, with nickel, bauxite, copper and iron ore having a significantly higher level of predicted output in The increase in predicted output is reflected in projected labour demand. By 2015, in the absence of any sophisticated technology that would reduce the need for the number of workers, the resources sector workforce in Australia will be in the vicinity of 162,000 employees, representing an increase of approximately 70,000 workers over the next decade. The increase is most dramatic in copper, nickel bauxite and potentially uranium, where the workforces are projected to more than double in number. Our weighted average occupational structure constructed for this study indicates that semi-skilled workers and tradespersons constitute approximately 73% of employment in the nine commodities covered in this report. This is vastly different from other models of occupational structure in mining such as that found in the Argus Report (2004), which indicated that semi-skilled and trades workers constituted only 53 per cent. It is thus likely that other studies which have used the Argus Model in projecting skill needs have understated future requirements for tradespersons and semi-skilled workers. By 2015, it is projected that an additional 22,058 semi-skilled workers will be required in the resources sector nationally. In the mechanical and electrical trades (with the emphasis on the former) an additional 26,983 workers will be required by This picture is set against the current skills shortages in the area of the trades in the resources sector, as well as a national skills shortage in all areas of the trades. Competencies associated with mechanical and electrical trades are thus a high priority for the resources sector, as are skills associated with semi-skilled workers such as operators. The projections in this report indicate that the commodities of copper, nickel and bauxite are likely to take a disproportionate burden of new job creation in the resources sector. For example, copper and nickel together are projected to require an additional 11,206 tradespersons in 2015, which is 42 per cent of the projected number of tradespersons required across the commodities in Copper and bauxite taken together are projected to require an additional 6,625 semi-skilled workers by 2015, which is nearly a third of the additional semi-skilled workers projected to be required in the resources sector in Moreover, our findings indicate that the economywide capacity to respond to shortages in these occupational classifications is not optimal. At the other end of the spectrum, professionals account for approximately 10 per cent of employment in the commodities explored in this study (compared to the Argus 53

54 Report estimate of 25 per cent of the resources sector workforce). Over the last decade the Australian minerals industry has experienced a chronic shortage of minerals specialist graduates, especially mining engineers and metallurgical engineers (Minerals Council of Australia, 1998). Over the next ten years, 7,659 additional professionals will be required by the resources sector in Australia. While not as dramatic as the projected shortage of tradespersons and semi-skilled workers, this nevertheless poses a challenge to all stakeholders associated with the professions in the resources sector, particularly in regard to the attraction and retention of students in mining engineering and science programs at tertiary level Skills Shortage or People Shortage? Our examination of the economy to respond to the growing demand for labour in the resources sector indicates that there will be significant labour demand gaps. The findings here indicate that labour shortages are likely to be a major constraint on the growth of the mineral sector over the next decade. The resources sector clearly needs a continuing and vigorous program to attract and retain labour in the identified areas of skill shortages. Given that the projected gaps are largest in occupational classifications with low skill levels, the labour shortage problem identified here in the resources sector is not one that training policy can necessarily address. It is more a matter of attracting people to the industry, in other words, what the sector is facing is a people shortage, not necessarily a skills shortage per se Recommendations Against this backdrop of the findings of this study, we make a series of recommendations: Harnessing support by promotion of a better understanding of the extent and composition of the shortages It is common knowledge that the resources sector faces labour supply shortages, however, the extent and composition of the shortages have been less widely understood. The industry needs to promote a broader understanding of these aspects of the labour shortage in order to encourage broader support for policies to deal with the problem. Design of appropriate attraction and remuneration systems The identified demand gaps suggest that there may be pressure on compression of wage differentials especially between professional and non-professional employees, and that the sector will need to investigate ways it can accommodate such changes in income differentials. 54

55 Matching of training systems to required skill levels The finding that the projected shortages will be most acute in the area of semi-skilled employees suggests that a heightened focus on the development of appropriate training systems is required, with a particular emphasis on designing systems for quality on-the-job training provision. This means ensuring the identification and cultivation of appropriate in-house trainers as well as the design of appropriate onthe-job training evaluation systems. Increased training efforts in the area of leadership and supervision skills should also be considered, since a larger workforce will ultimately require increased levels of leadership and supervision. Identification and targeting of alternative labour reservoirs The shortfall of workers is so large that all alternative labour reservoirs need to be identified and targeted. One alternative labour reservoir is the manufacturing sector, which is projected to experience a further decline in non-professional occupational categories over the next decade. This decline is likely to result in a pool of available labour with broadly compatible skill sets to that required by the resources sector. For this source of labour to be accessed by the resources sector, there are significant locational issues to be overcome. Women also constitute an alternative labour pool for the resources sector. Crucial challenges associated with targeting women are likely to be ensuring the provision of childcare in remote locations, the design of family friendly policies including flexible rosters, and changing the traditionally masculine culture associated with mining. Another labour reservoir lies in the rural, regional and remote communities, including indigenous communities, in close proximity to many of the mine sites. This raises a number of fundamental issues related to attraction, provision of training, and retention; Importing labour from outside of Australia is another option, but we emphasise that the numerous long-term implications of this must be investigated and such a strategy should not replace growing our own workforce locally. Develop an understanding of socio-economic drivers of labour supply We believe it is in the resources sector interest to develop an understanding and expertise in determinants of labour supply in the Australian economy. This means understanding not only the economic data, but deeper socio-economic trends that underpin the supply of labour, particularly in non-professional occupational groups. 55

56 7. Appendix A 22nd March 2006 Ms.. Human Resources Manager PO BOX Via Dear Ms.. DEMAND FOR LABOUR IN THE MINERALS SECTOR TO 2015 A RESEARCH PROJECT FOR THE NATIONAL SKILLS SHORTAGE STRATEGY The Chamber of Minerals and Energy WA and the Minerals Council of Australia have commissioned the National Institute of Labour Studies (NILS) to undertake a research project on the demand for operational labour in the minerals sector to This project is being funded by the Department of Education, Science and Training through the National Skills Shortage Strategy. Over the course of the research, NILS has gathered current employment data and projected overall employment levels in the minerals sector. In order to refine the projections for the resources sector, NILS now needs to gain detailed information on the industry s occupational structure and operational activities. To assist in gathering this information a survey has been provided which you are asked to complete for your site only. The data provided will be used to group mines of a particular type and commodity and the information will be averaged to give a skills distribution for each commodity and mine type. Only aggregate data will be used in the final report, and no individual site data will be published. All information will remain confidential. If you have any queries regarding this survey please contact Dr. Diannah Lowry at the National Institute of Labours Studies on (08) Please return your completed survey via to Dr Diannah Lowry at the National Institute of Labour Studies diannah.lowry@flinders.edu.au by the 7 th of April, I thank you for your assistance with this important research project. Yours sincerely Tim Shanahan Chief Executive Chamber of Minerals and Energy WA Mitchell H Hooke Chief Executive Minerals Council of Australia 56