ACIF’s latest forecasts for the industry and some interesting ‘births and deaths’ numbers set me to thinking about our industry’s resources, and how we approach skills formation and retention.
Our May forecasts presented a strong (though geographically patchy) recovery in residential building, non-residential construction flat-lining overall, and a decline in new engineering construction, albeit with current workloads still at historically very high levels.
The employment story was at first glance perplexing, particularly given Australia's skills shortage before the global collapse of financial markets, followed by the very real concern of a jobs blood bath as more than $60 billion worth of committed projects were canned.
You would think that the employment numbers from 2008 to now would show big shifts as activity waxed and waned, but this is decidedly not the case. This graph tells the story of an industry with a remarkably stable workforce.
Sure, the year on year numbers change as GDP growth changes, but the swings were not severe – the biggest a three per cent decline in 2009-10.
Forecaster Kerry Barwise from ACIL Allen Consulting points to the mobility and transferability of skills as the key to understanding the stability of the labour market. The combination of strong existing engineering order books and the lifeline of the Building Education Revolution spending propped up activity enough to avoid a blood bath. As Western Australian and Queensland engineering declined after 2009, workers went east to find work funded by the BER spending, and more recently by a growth in residential building.
The next bit of interesting data came from the 2014 Road to Recovery report from RSM International. It used data from 38 key economies globally to explore global, national and industry-level trends in enterprise births and deaths. It reported that "construction represented the leading source of business churn in Australia in 2008-12, with cumulative enterprise births and deaths surpassing 400,000 companies."
Construction accounted for more than 16 per cent of new businesses, more than any other industry.
The report suggests that the high number of hatches is due in part to relatively low barriers to entry for smaller start-ups. That’s not news to us – the subcontracting system encourages tradespeople in particular to set up their own businesses. We know that most firms in the industry are small, employing less than five people. That helps explain the mobility shown up in the ABS numbers.
It also masks a larger issue. It seems that smaller firms have less interest in skills formation and in encouraging young people to enter the industry, than larger firms with more invested in capital and reputation. If the work dries up, or a contract goes bad, the small entity can fold up if need be, with another created to take its place when market conditions are more favourable.
It is, I confess, too easy to make these generalisations; the recent sad collapses of long established firms including architects Woodhead and electrical contracting conglomerate PSG show the fragility of the capital base of the industry, regardless of size and reputation. What those larger firms had to distinguish them from many of their smaller peers, however, was a track record for hiring young entrants to their industry.
So, mobility and size, and a reluctance to take on new young starters are only some of the challenges that face the industry as it seeks to address the inevitable future skills shortages. It’s part and parcel of the industry that work is cyclical, and we will again have more work than we candle with the resources we have.
In addition to these industry challenges shared with other sectors, our industry faces an additional challenge – the diversity of the industry and the need to develop skills for a very wide and complex range of requirements. The industry covers semi-skilled, vocational education training and university skills formation pathways. In developing solutions for the industry, it is important to encompass the wide diversity of sectors within the industry as well as the different skills formation pathways for the industry.
All of these challenges influence current skills shortages and have an influence on industry image and attractiveness of career paths.
These challenges and factors that contribute to skills shortages have been identified in many studies for the building and construction industry as well as for other industry sectors. What we need is a thorough, industry-wide approach to identifying better solutions than those we have at present.
It’s time we cared enough to have a proper, national and inclusive conversation that helps us to do that.