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Skills shortage in health sector an imminent catastrophe

13 November, 2007

“Skill Shortages in the Health Sector: An Imminent Catastrophe”, is the title of a recent speech by Kevin MacDonald, CEO of NSW Business Chamber To the Aged and Community Services Association (NSW & ACT) Conference.

"Thank you for the invitation to speak  to this Conference – and to speak about the future of workplace relations in Australia.

"Of course, when I agreed to speak at this conference back in May I thought the election would have been held by now – instead we are in the twilight zone, where we can only speculate about results and repercussions.

"It is on the public record that NSW Business Chamber is a supporter of workplace reform. We believe there is a compelling case for a national system – and there was a compelling case to change the balance in relation to unfair dismissal, union right of entry and so on. 

"Both sides have presented their policies – and we have produced a ready reckoner of where those policies converge, where they differ and our commentary of where there is divergence. That document is available to you all.

"But today I don’t want to talk about speculations about what might happen after the election, or indeed what business might want to happen. I don’t want to do that because I have an inherent trust in Australian to make informed decisions about their future.

"So today I would like to speak about certainties – and not speculations. I’d like to look at some of the drivers that will occur and shape workplace relations no matter what the election result.  The key driver in Australia’s workplace relations system is the diminishing supply of our labour force.

"The world has changed remarkably in the past decade – we have, as you all know, the lowest unemployment rate in over 30 years, the lowest number of industrial disputes on record and there are over 171,000 job vacancies in the Australian economy.

"To put that in perspective, the number of job vacancies is higher than the full time workforce of Tasmania. It is a fallacy to claim these vacancies are caused by the resources boom - 51,700 of these vacancies are in NSW and 14,000 vacancies are in the health and community services sector.

"This is also despite the fact that the participation rate has been slowly but steadily increasing to 65% and skilled migration has been progressively increased.  The fact is these “supply” pressures in the labour market are going to worsen in coming years. In fact, the sector facing the most challenging issues will be the health sector.

"Let me explain – the ageing of the population is somewhat of a misnomer – we all age, the population will always age – but what we are seeing is a change in the makeup of the workforce.  In the years 2000-2005, the working age population grew on average by 175,000, from 2005 – 2010 that number is expected to be 138,000 and by 2020 it will be just 57,000 per year .

"Yet each year our workforce loses people to retirement, to overseas migration, injury, sickness and parenthood – in a labour force of 10.5 million workers, if you lose 2% a year that is a loss of over 210,000 people each and every year. So, if you are losing 210,000 people a year and gaining a new intake of 57,000 new workers, each year your workforce is shrinking and skills are being lost.

"If you think we have skill shortages now – you ain’t seen nothing yet. And the health and community sector has to properly cope with this related and growing factor – that is, the competition for workers will not only exist within your sector, but from other sectors.

"We will see over the next 20 years, more stories about hospitals and homes not coping because of staff shortages, we will see many regional hospitals close because they can’t find the staff to safely keep them open, or scandals about levels of health care, hygiene or food preparation. One gets the sense of an imminent catastrophe, with issues like Royal North Shore being a warning signal of an entire system about to go into major distress.

"The skills crisis which will hit our country over the next decade will be most pronounced in the health and community services sectors for a number of reasons. Firstly, of all sectors in the Australian economy it is the health and community sectors that have grown the most over the past twenty years – in other words demand is increasing and will continue to increase. 

"According to the Australian Bureau of Statistics since 1987 employment growth in this sector has totalled 130% outstripping business services at 100% and the mining sector at 70% . There is no reason to expect this trend will change.  Secondly, the ageing of the population will mean there is increased demand for workers in this sector. The gap between supply and demand is going to worsen because demand for health services is going to dramatically increase in coming years.

"Thirdly, this is a sector that has a pronounced exposure to skill losses due to the age of its workforce. According to the Productivity Commission, 441,700 workers in the health and community sectors are over the age of 45.  It has the largest number of workers in raw and percentage terms over the age of 45 of any business sector in Australia .

"Or let’s put it another way, over the next 20 years, an average of 85,000 new workers will enter the Australian workforce every year – and if the health and community sectors is only to renew itself of the people that will retire – it will need 22,000 of them, or 26% of all new workers, to enter the health and community sectors.

"Projections undertaken by the Department of Education, Science and Training make similar predictions – indeed the Department argues that on current policy settings there will be a shortage of nurses in the order of 40,000 within a few years .

"The Australian Institute of Health and Welfare estimates that of the nation’s 291,600 registered nurses – over 140,000 are over the age of 45, and worse, the total numbers under 35 is only 36,000 . This is like playing cards against a loaded deck. With each hand the position is going to get worse.

"So if this is the demographic tidal-wave coming our way, what does it mean for the aged and community services sector – and let me make five observations from someone outside your sector looking in.  First, it means the fear campaign generated by the Nurses Association about workchoices is nonsense. The greatest protection for Australian nurses, and indeed any employee in the health and community services sector, is going to be the old fashioned law of supply and demand.

"If a sector is experiencing skill shortages and these are going to dramatically worsen, will any employer cut wages and conditions? – will any sane employer run the risk of losing staff and then not finding replacements?  The fact is, at a pure economic level, people in the health sector will be in the best bargaining position of any business sector over coming years. 

"I might also make the observation, and recent media coverage about hospitals in NSW reflects this, these shortages place and will be placing greater pressure on those who are working in an area where there are ongoing staff shortages.  The great danger is that the pressures on the staff in this sector will mount, and in turn exacerbate the situation as people leave to seek a saner and more balanced working existence.  Finding solutions to this issue seems a significantly more meaningful role for health sector unions than trying to claim the sky is falling under workchoices. 

"Second, migration will be seen as an increasing source of meeting these shortages. Already the Federal Department of Immigration has identified NSW Health as the highest user of 457 visas in the health sector . I would argue this will continue to increase – and that creates real issues in relation to dealing with recognition of prior learning, overseas qualifications and so on. We have seen in Queensland, what happens when that process is not rigorous.

"Third, increasing attention and debate will be needed in areas such as job design and training. Your sector is going to have to debate and work through the challenging issue of maintaining standards whilst identifying ways of redesigning the nature of many jobs. When shortages are so great, the pressure will be on to find ways of fast tracking training, or modifying training to meet very narrow and specific jobs. 

"NSW Business Chamber has argued in other sectors for a shift in training from a focus on time served to one of competency gained. Whilst it is an approach that might work well with hotel catering staff, mechanics and hairdressers, I am not convinced that it is the right approach for nursing. What I can say is that we do need a debate on how to make training more relevant and attractive without lowering standards.

"As I have already said, I am not a health expert, and I do not have the expertise of those in this room about how best to structure health work, but what I do know is that you will need to debate these issues now, because when the crunch time comes – and it will, then the pressure for quick solutions will be great.

"Fourth, and this applies to all Australian industries, we need to find ways of making the workforce more attractive for those who have left it, or those contemplating leaving it. 

"The “one size fits all” approach to employee relations, that has been the hallmark of work in the public sector, no longer works. When you have shortages of tens of thousands of workers, you have to start thinking outside the old models of uniform employment conditions. If you think that is alarmist, keep in mind this sector already has over 12,000 vacancies, and that number is increasing with every year.

"One of the reasons I have been so supportive of instruments like AWAs is because I believe part of the solution for many workplaces is developing individual contracts that suit the unique needs of individual staff members. For some it might mean they get their holidays during school holidays, for others it might mean early access to their long service leave and for others it might be idiosyncratic hours.

"Some have said that employees, or average employees, do not have these skills to negotiate with their employers. I’m not sure that’s true and it doesn’t hold water in the type of labour market I have described. It might also be said that many employers don’t have these skills either. For years the award did the work, which did not encourage employers to find ways of directly tailoring the jobs they were offering to staff. The human resources role is becoming as important to the strategic success of an organisation as the chief financial officer’s. 

"Ladies and gentlemen, these are difficult issues and present major challenges for all health and community services organisations – the organisations that will flourish are those who best manage their people. Its no longer, if it ever was, about only watching dollars and cents, but it is about recognising that your people have a value that is in demand and is escalating – and that value has to be managed, if your organisation is to grow and prosper."

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