Australia's Skill Shortage -- Is the clever country clever enough?

There's little doubt Australia faces a shortage of skilled information technology and telecommunications workers over the next few years. But is the current situation severe enough to justify describing it as a ‘crisis'?

Maria Schafer thinks there is. Schafer is the US-based senior research analyst in the human capital management division of the Meta Group. Last year she visited Australia, among other countries, to research Meta's IT staffing and compensation report. She said that while she was here, ‘people were talking non-stop about the skills shortage'.

Australian Telecommunications Users Group managing director Allan Horsley agrees there's a crisis. He said: "The telecommunications industry is growing at about three times the rate of GDP and the technology is changing rapidly. This means the people already in the industry are having trouble keeping up to date. The new people pouring into the industry simply don't have enough technical skills and there aren't enough people coming in at the bottom."

Some skills are more in demand than others. Schafer said: "The shortage is particularly acute when it comes to networking technologies. There's a specific requirement for Windows NT (now called Windows 2000) expertise and anything to do with the Internet, though especially e-commerce. Though none of these shortages are unique to Australia. It's an international problem and it has been building for some time."

Prins Ralston, ACS President, said: "Most Australian IT work involves customisation and implementation. The local shortages reflect this. Right now the highest demand is for SAP skills, which is pure implementation".

It's hard to get a firm grip on the size of the shortfall. The most widely quoted number comes from Telstra group managing director Gerry Moriarty. Late last year he said the shortfall could be as many as 200,000 skilled workers. That's a lot of unfilled seats in a country where the total workforce is only 8.6 million and it is likely to have serious implications for our ability to compete on a global scale. To put things into perspective, the US is short of anywhere from 350,000 to 500,000 skilled IT workers in a workforce of around 90 million.

However, Moriarty's estimate includes people in support roles that are not necessarily highly skilled. For example, call centre staff need to be computer literate, but they don't generally need formal tertiary IT qualifications.

Ralston says he thinks Australia's IT industries could absorb around 40,000 people a year. This squares with the view of AIIA corporate relations manager Michel Hedley, who mentions the same number. Estimates put the number of currently open vacancies at around 35,000. Drake International's IT recruitment operation looks at the numbers differently. Drake says 43% of companies are looking to hire IT staff and an extra 15,000 jobs are likely to be created ‘over the next few months'.

International forces

While the skills shortage is global, there are a few twists making the problem worse in Australia. We're affected by the same Y2K problem as other nations. Although the extra Y2K workload will start to wind down in coming months, there's enough testing and nursing systems through the crucial dates to keep people occupied for at least the next 18 months. Once that's over, there's a considerable backlog of development that was put on hold during the Y2K program.

On a more positive note, the introduction of e-commerce and the retooling of industries for Internet activity are pressuring global job markets. Shafer said that US companies have a particular need for IT skills as companies Web-enable applications and information technology continues to push its way into more and more areas of every business. She said that Australia is a little further behind on the curve and is yet to encounter the full impact of this. Even so, Drake International estimates that 90% of its 15,000 newly created positions are Internet related.

In addition to these global pressures, Australia faces a switch to GST which will require a huge amount of work on financial systems over the next two or more years. Many financial experts are already predicting it simply won't be possible to cope with this added burden in any likely timetable.

Moreover, there's pressure on our talent pool from overseas. Shafer said, "It would appear that poaching is in full swing. There're a lot of British and US companies actively recruiting in Australia."

She says the taxation system is partly, but not entirely, to blame for this. It's a problem that, ironically, the introduction of GST will ameliorate. She said: "The incentives are missing in Australia. It's a highly skilled workforce, but undercompensated both in terms of recognition and remuneration." In particular, Shafer says the relatively high level of income tax, coupled with capital gains tax and fringe benefit tax makes it hard for employers to construct the kind of creative packages that retain key staff.

Given that we have an industry that is losing experienced people at one end and finding it hard to recruit new blood at the other, you might be forgiven for thinking that you could solve the problem by throwing money at it -- or at least at the people in it. While there's an element of truth in this, all of the people spoken to explained that, in reality, matters are more complicated.

Take for example, the leakage of skilled people to the USA. America is acting to close its skills gap by allowing an extra 170,000 skilled immigrants into the country. US employers already have Australian workers in their sights.

On the surface, this looks set to suck a huge amount of expertise out of Australia. US IT salaries are typically 25% to 50% higher than comparable Australian packages and their income tax regime tops out at 40%, though Shafer said few IT people need pay that much. In effect this means a skilled Australian IT worker can take home twice as much performing the same job in the US.

However, ATUG's Horsley points out that what Americans don't pay in income tax, they pay in various indirect taxes. And the cost of living can be higher than expected. Moreover, Australians used to four or five weeks paid leave might have trouble adjusting to the two weeks that is typical in the US.

At the end of the day, the threat from the US is not that American firms pay higher salaries; it is that Australian IT workers can expect to find more interesting work and better opportunities to gain further skills and experience.

HorsleyÊsaid:Ê"WhatÊattracts young people overseas is the development work. The kind of skilled people we're talking about want to do that."

Michel Hedley says this overseas ‘leakage' is not new. He said: "It's not all bad news. After all, it represents a high level of satisfaction with Australian employees. And many of those people eventually return to Australia bring skills with them."

One interesting trend is that some American companies are using Australian IT skills without relocating workers to the USA. There are some development and customisation shops here, working on US projects. Americans are attracted to such deals by the high skill levels and relatively low costs of doing business here. The only reason there aren't more of these projects is, you've guessed it, the skills shortage.

Perhaps the area where the industry has performed badly is in convincing young people to sign up for a career in IT. Prins Ralston said this contrasts with the US, where people see IT as both ‘sexy' and as a real profession. "It's an attitude thing. We don't do enough to sell the industry. However, we're not helped by those we serve. For example, very few senior managers or people in government come from an IT background. This wouldn't be the case in the US."

At the same time, Ralston says that the demand for places on courses is not being met by our educational system. The problem lies in educational resources. He said, "Computing courses don't get all the funding they require. People think computing can be taught relatively cheaply. They don't realise it is a laboratory type course and that the establishments need to keep up with the latest hardware and software."

We've got good teaching staff, but we can't always retain the best because they can earn more in industry."

ATUG's Allan Horsley says that industry might talk about training, but isn't willing to allow staff time to complete courses. He says a return to the old system of day release could solve a lot of skill problems.

It would be good to end this feature on an optimistic note, but the reality is that even if all the issues were addressed immediately (and what are the chances of that) it will take a number of years for the effects to flow through. If anything, matters will get worse before they improve. On the other hand, as Prins Ralston puts it; "the good news is that we're not likely to be short of work for the foreseeable future".

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More about ATUGAustralian Computer SocietyAustralian Information Industry AssocAustralian Telecommunications Users GroupDrakeHorsleyIT PeopleMeta GroupSAP AustraliaTelstra Corporation

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