Wages to rise in next three years on recovery, skills shortage – report

August 16, 2010


“Average annual earnings are set to rise by $8200 within the next three years as the Australian economy continues to recover and acute skills shortages start to appear” according to a report by KMPG Econtech.  Other labour market measures suggest a 5.4 per cent annual increase in wages over the next three years and an unemployment rate below 5 per cent by early 2011.

Shortages are strongest in the construction, engineering and building professions, and trade occupations, with other sectors nearing shortage conditions.  Many factors are behind these predictions of wage increases and labour market shortages, including Australian population growth, a reduction in temporary skilled worker visas issued to overseas immigrants, and education and training policy, as well as the relatively strong domestic economy.

For this reason analysts argue that the private sector needs to be prepared and must plan and compete for its future skills needs while the public sector needs to adjust government policy to anticipate these needs across the economy rather than wait for them to happen.

  1. What does the existence of ‘skill shortages’ suggest about the state of supply and demand for labour in particular Australian labour markets?
  2. How is the market likely to adjust to these skill shortages?
  3. In what way is both the formation of skills and skills shortages generally related to the concept of ‘human capital’?
  4. Should, as some argue in the article, the government intervene with policies to correct for these skills shortages or will the market ‘take care of itself?’

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