Training, the tax system and immigration: The skills shortage response

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In the past two weeks the words ‘skills shortage’ has only been matched for frequency of mention in the media as ‘Osama Bin Laden’.

Firstly there was the release of the Skills Australia White Paper Skills for Prosperity with its headline-making conclusion that Australia needs an additional 2.4 million skilled workers by 2015, to replace retiring baby boomers, and 5.2 million additional workers by 2025. And right at the moment the Vocational Education and Training (VET) sector is not doing well enough in producing enough workforce-ready trained students.

Highly respected Fairfax economics writer, Ross Gittins wrote an excellent summary of the White Paper, stating;

‘…we need to…increase our investment in ”human capital” – in educating and training our people. It worries a lot of us that digging stuff out of the ground and flogging it to foreigners seems a primitive and unsustainable way to make a living. What do we do when the stuff runs out or the boom busts?

Well, we don’t delude ourselves we can get back into manufacturing in a big way, in competition with high-tech countries such as Germany or low-cost ones such as China. That game’s over. No, if we’re recycling income from primary industry we’ve got to move it past secondary industry to tertiary – the services sector. Apart from minerals and farming, the main thing we have to sell the world (and meet our domestic needs) is labour.

We’ve got to make our labour as valuable as possible, which means making it as skilled as possible. And that means becoming obsessed with education and training.

We can solve this the lazy way by relying largely on bringing in skilled immigrants, or we can make sure more of our own people get to benefit from the resources boom by lifting our game on education and training. We really do need an education revolution at every level – from early childhood development to universities.’

Predictably enough, the Federal Government responded in the Federal Budget with the investment in skills development turning out to be the centre-piece of Wayne Swan’s fourth budget.

Here’s where the money is going, in an attempt to tackle the skills shortage (all data taken from this SmartCompany budget summary article):

$588 million for the National Workforce Development Fund with the goal of delivering 130,000 training places over the next four years.
$1.75 billion over five years, starting from 2012-13, to be shared among those participating states and territories that work to make the VET system more “transparent and productive”.
$100 million promised for training so apprentices can fulfill their qualifications sooner and $101 million is being set aside for a mentorship program. This funding also includes money for advising prospective apprentices on what would be the best trade for them to pursue.
$30 million for the More Help for Mature Workers initiative, which will see skills assessments, recognition and gap training provided for workers who are 50 years and older, with relevant skills but no formal qualifications.
$143 million for 30,000 additional commencements in the Language, Literacy and Numeracy Program.
$80 million for training places for single and teenage parents.
$20 million for the Workplace English Language and Literacy program, with $20 million to maintain the Australian Apprenticeships Access Program.
$233 million pledged for six-month wage subsidies for employers who employ those who haven’t been working for two years or longer.
$133 million is also being set aside for those who have spent two years in employment services to participate in work experience, two days a week for 11 months a year, up from six months a year at present.
$2 million as part of a $50 million package for the Personal Helpers and Mentors services to help employers employ and retain workers with mental illnesses.
Single parents will also be supported through an assistance package totalling $103 million over four years, with more training places, community-based support and counselling included.

Also, a number of changes to the tax system have been made in order to change work incentives:

Any person with a dependent spouse 40 years of age or under on 1 July 2011, will no longer be able to claim the Dependent Spouse Tax Offset.
Changing the taper rate on the income test for parents on the Newstart benefit from 50 or 60 cents in the dollar to 40 cents by 1 January 2013, which will let each worker on that benefit retain more money from part-time work.
An increase in the Family Tax Benefit A for dependent 16 to 19 year-olds in full-time study.

Immigration also received its share of changes:

The 2011-12 Migration Program will rise from 180,000 to 185,000. However, two-thirds of those migrants coming under the Program will be needed to fill shortages in regional areas.
Overall, 16,000 places will be allocated to the Regional Sponsored Migration Scheme and those regional visas will be given the highest priority.
The Government will also fast-track permanent residency for temporary business 457 visas for those who have spent more than two years in regional Australia and whose employers pledge to continue sponsoring them for another two years.
A new benefit called the Regional Migration Agreement will also see employers, local and state governments and unions, collaborate to determine local labour requirements.

For many recruiters and employers, these initiatives are very welcome but years overdue. Certainly, the biggest failing of the previous Howard Government was its complete lack of foresight and planning with respect to the changes in the demand for labour in the economy.

Let’s hope the latest Government response to the skills shortage does not prove to be too little, too late.

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