Submission DR41 - Austrade - Geographic Labour Mobility - Public Inquiry

7 February 2014

Ms Patricia Scott

Presiding Commissioner

Productivity Commission

LB2 Collins Street East

MELBOURNE VIC 8003

Dear Ms Scott

GEOGRAPHIC LABOUR MOBILITY

The Australian Trade Commission (Austrade) welcomes the opportunity to provide a submission to the Productivity Commission’s (the Commission’s) study into geographic labour mobility.

As part of the national long-term tourism strategy, Tourism 2020, the Australian Government is committed to working with states, territories and industry to double overnight visitor expenditure to between $115 billion and $140 billion by 2020. Increasing the supply of labour and skills is a key part of this agenda and facilitating more effective labour market mobility is a critical component in ensuring the tourism industry has access to the workers it needs at the time they need them and at a price they can afford.

The tourism industry is experiencing labour shortages, with a predicted shortage of 56,000 workers (including 26,000 skilled) by 2015. These shortages are constraining the industry’s ability to meet growing global tourism demand, increase export income and attract investment.

The seasonal nature of the tourism industry and the fixed location of the destination (i.e. the tourism destination cannot be shifted), means that matching labour demand with supply is a more complex exercise for the tourism industry than for other sectors of the economy.

There are a number of structural barriers restricting labour market mobility across the economy that are imposing economic costs on tourism and other industries. These include the remote location of areas with unmet labour demands, shortage of housing supply and lack of transportation in some areas, limited access to training and limited recognition of occupational certification across jurisdictions. Whilst these constraints exits, temporary migration and employment services systems need to be flexible enough to facilitate the movement of labour to areas of highest demand.

In this context, Austrade’s submission, which I have enclosed, makes the following recommendations for the Commission’s consideration to enhance labour mobility:

1) That the Commission make particular consideration of the impacts of housing supply on labour mobility and proposed new investment in tourism regions.

2) That COAG expand its national occupational licensing reforms to incorporate licensing and certification relevant to tourism and other industries.

3) That a review of transportation at a regional and inter-regional level be conducted to identify and remove barriers to labour mobility.

4) That consideration be given to improving access to training for regional and remote communities, including through the use of digital technology.

5) That the Commission’s full report on geographic labour mobility be provided to the Review of Indigenous Training and Employment, and any other future reviews in the employment and training space, to ensure consideration of geographic labour mobility for Indigenous people in future programs and policies.

6) That the Commission consider how the Australian Government’s review of employment services could enhance the job services system by improving the placement of people into casual work and identifying the benefits of industry-specific providers to assist labour mobility.

7) That the Commission consider how to increase the flexibility of temporary migration options (including the Working Holiday Maker program, Regional Migration Agreements, 457 visas and the Seasonal Worker Program) to enable them to more effectively meet labour market demands.

8) That the Commission identify a means to improve employment data at an industry-specific level, including a regular study of labour and skills shortages with seasonal labour trends and vacancies at the regional level.

9) That the Commission identify a means to undertake a study to determine the economic impacts to businesses, regions and the national economy if they are not able to source the required labour and impact on future growth including investment opportunities.

Should you have any questions or queries about Austrade’s submission, please contact Nicholas Dowie, Assistant General Manager, Tourism Policy Branch, (02) 6272 6815, or Elise Gordon (02) 6272 6820

Yours sincerely

Bruce Gosper

Chief Executive Officer

Enc.

Austrade submission to the Productivity Commission’s draft report on geographic labour mobility

The Australian Trade Commission (Austrade) is pleased to provide a submission to the Productivity Commission (the Commission) on its draft report on Geographic Labour Mobility.

Austrade is an executive agency of the Australian Government with responsibility for developing international markets, encouraging productive foreign direct investment and promoting international education. Following the recent Machinery of Government changes that followed the federal election in 2013, Austrade is now the Australian Government agency responsible for tourism policy, programs and research.

Tourism is a significant industry to the Australian economy. It is Australia’s largest services export, contributes $42 billion to gross domestic product and directly employs over 540,000 people[1]. There are nearly 300,000[2] businesses, ranging from accommodation, restaurants and cafes, to transport and travel agents, and the retail and education sectors.

However, research conducted by Deloitte Access Economics found that by 2015 the industry will be faced with a shortage of 56,000 workers (including 26,000 skilled workers).[3]

Labour shortages are creating capacity constraints that restrict industry’s ability to:

• Meet growing international demand for Australia’s tourism products and services
• Provide high quality service
• Compete internationally
• Grow export earnings
• Attract foreign investment.

There is evidence of some labour mobility in the tourism industry; however there are a number of structural factors that are preventing the seamless movement of labour that could otherwise act to fill the industry’s identified labour shortage. This includes the highly seasonal nature of the industry, competition for labour from other industries, lack of local workers, undesirable hours for some workers, and remoteness of many tourism destinations and workplaces from large population centres.

Furthermore, there are broader barriers to labour mobility that are imposing economic costs on tourism and other industries. These include limited availability and affordability of housing in regional and remote areas, limited transportation within and across regions, limited access to training in remote areas, and limited recognition of tourism-related qualifications across jurisdictions.

This submission will discuss labour mobility as it applies to the tourism industry, as well as current initiatives which seek to develop labour and skills capacity within the domestic workforce as well as increase labour supply through temporary migration. It will identify a number of areas that have the potential to enhance geographic labour mobility that are worthy of further examination by the Commission.

Tourism policy context

In 2011 the Australian Government, in partnership with state and territory tourism organisations, introduced Tourism 2020 which aims to double overnight visitor spend to between $115 billion and $140 billion by 2020. The strategy is a whole-of-government approach, working with industry, to deliver six strategic priorities:

1. Grow demand from Asia
2. Build competitive digital capability
3. Encourage investment and implement regulatory reform
4. Ensure tourism transport environment supports growth
5. Increase supply of labour, skills and Indigenous participation
6. Build industry resilience, productivity and quality

Addressing these priorities is crucial to ensuring the tourism industry can achieve its full potential. In response to priority five, the Tourism 2020 Labour and Skills Working Group is seeking to:

• Enhance recruitment and retention for the industry
• Enhance regional workforce planning and development to target employment ‘hot spots’
• Identify education and training gaps and potential mechanisms to address them
• Facilitate workforce mobility and expand the traditional workforce

Labour and skills issues in the tourism industry

Labour and skills shortages have long been identified as a concern for the tourism industry. Tourism is a labour intensive, seven-day-a-week industry, which depends on an adequately supplied and skilled workforce to service its global customer base. An important factor hindering the ability of businesses to fill labour shortages is seasonality. Almost half of Australian tourism businesses (47 per cent) are seasonal.

Seasonality impacts the industry’s ability to manage its workforce during peak periods where additional workers are required, particularly in regional and remote areas. The impacts of seasonality are compounded in regions where there is a mismatch of labour demand with supply or there is strong competition for labour from other industries.

The industry is attractive for both entry level and skilled workers. However, it has one of the lowest levels of post-school qualification, and indeed many frontline staff are either casual or part-time workers. As the Commission notes at page 10 of its draft report, low skilled workers may be less mobile because they have fewer resources to allow them to take advantage of employment opportunities when they arise, and this is likely to have disproportionate implications for tourism and other industries. The industry also supports many skilled workers, particularly in professional or trade qualification professions such as chefs and managerial positions.

The tourism industry is growing at a rate faster than most other sectors of the workforce; yet by 2015 it will be faced with a shortage of 56,000 workers (including 26,000 skilled) which will significantly impact on its ability to effectively service tourists[4]. Feedback provided to Austrade from foreign investors into Australian tourism has raised labour supply (particularly skilled labour), along with labour costs and flexibility, as major impediments to foreign investment[5]. While most Australian capital cities are currently enjoying record occupancy rates and good growth in average daily rates, Australian gross operating profit is much lower than a number of competing locations because of the higher cost of labour in Australia. Providing for greater flexibility, including measures to improve and remove barriers to geographic labour mobility, has the potential to reduce these costs and allow the industry to realise its full potential.

In 2010, Tourism 2020 commissioned the largest report ever conducted to profile the Australian tourism labour force. The Australian Tourism Labour Force Report (the Report) found that one in two tourism businesses are experiencing recruitment and retention difficulties and skills deficiencies. Key factors influencing the industry’s ability to recruit workers include a lack of applicants, lack of required skills and experience, while retention difficulties are often associated with a lack of career development opportunities, employees finding the role too difficult, and employees being recruited by businesses in other industries. A lack of experience in the sector and a lack of opportunity to gain experience were important reasons given for skills deficiencies.

The Report also identified current and projected shortages at a national, state and regional level. It found that while net tourism skilled labour shortages were most prominent in capital cities, tourism labour shortages in regional and remote localities were over-represented as a percentage of the region’s total workforce. This highlights the particular need for action at the regional and remote level to address labour shortages. The top ten regions for tourism shortages (as a percentage of the region’s total workforce)[6] are:

1. Petermann (NT) at 7.6 per cent6. Tablelands (NT) at 4 per cent
2. Kakadu (NT) at 5 per cent7. Melbourne (VIC) at 4 per cent
3. Sydney (NSW) at 4.4 per cent8. Southern (TAS) at 3.9 per cent
4. Arnhem (NT) at 4.3 per cent 9. Greater Hobart (TAS) at 3.8 per cent
5. East Coast (TAS) at 4.2 per cent10. Whitsundays (QLD) at 3.7 per cent

The Report highlighted that tourism employees were predominately local residents, accounting for 71 per cent of total employees (see Figure 1 below). Other significant sources of labour include intrastate workers (9 per cent), and working holiday makers and interstate employees (both 7 per cent), suggesting that some form of labour mobility is occurring with three out of every ten workers coming from outside the local area. However, there is disparity across regions in terms of the origin of tourism workers. The Report highlighted that the southern states and Queensland had the highest rate of local residents working in the tourism industry (NSW 74 per cent, QLD 83 per cent, TAS 83 per cent, SA 84 per cent, VIC 89 per cent). In contrast, 59 per cent of WA’s employees were local residents (with 16 per cent intrastate and 15 per cent international), and 34 per cent of NT’s employees were local residents (with 37% per cent intrastate and 27 per cent international).

Labour mobility in the tourism industry

Labour mobility within the tourism industry operates at a number of levels. As the Commission notes at page 9 of its draft report (see Figure 2 below), matching labour supply and demand is a complex mixture of local labour, labour relocation measures and/or job relocation.

*Source: Draft Report: Geographic Labour Mobility, 2013, Productivity Commission, page 9

The seasonal nature of the tourism industry, and the fixed location of the destination (i.e. the tourism destination cannot be shifted), means that matching labour demand with supply is a more complex exercise for the tourism industry, with only a few of the strategies at Figure 2 directly relevant. Job relocation is not an option, meaning that businesses are dependent on sourcing workers from the ‘local labour force’ and from ‘labour relocation’ rather than physically shifting the product offering to areas of higher labour supply. Additionally, with the nature of tourism work and its narrow profit margins, arrangements that have been implemented in other industries (e.g. fly-in, fly-out for the mining sector) are not applicable to tourism.

As noted earlier, there is labour mobility occurring within the tourism industry. Local labour accounts for 71 per cent of total employees in the tourism industry (see Figure 1). However, the rate of local labour falls in regions where competition with other sectors is high or there is a limited labour supply (such as in WA and NT). This creates a stronger dependence on other forms of labour, such as temporary migration, particularly during peak seasonal periods and in regional and remote locations.

Labour relocation occurs at a number of levels within the tourism industry and is a very important source of labour for the tourism industry. This includes inter-regional (e.g. travelling across a city to get to the workplace), intra-regional (e.g. travelling from one region to another to follow the peak season), and across different industries (e.g. working during the tourism peak season then transferring to agriculture for its peak season). There are also international workers who fill tourism jobs, including 457 and Working Holiday Maker visa holders, which makes access to this group of labour important in meeting seasonal labour constraints for the industry.

Barriers to labour mobility

While labour mobility is occurring to some degree within the tourism industry, there are a number of structural and broader economic barriers that need to be addressed in order to enhance the level of labour mobility to address shortages. The inability to get workers into regions has economic costs, and impacts employment, competitiveness, quality of service, export earnings and attractiveness to foreign investors.

Evidence attained through consultations with industry in developing the Tourism Employment Plans (TEPs; discussed below) has indicated that tourism workers have been reluctant to relocate due to the short-term nature of the work (i.e. many jobs are seasonal or part-time), undesirable hours for some workers, and remoteness of many tourism destinations. Such jobs are not seen as desirable enough to encourage people to relocate and take advantage of the employment opportunities. International workers, on the other hand, offer greater flexibility for the tourism industry and are more likely to move to regions to source work.

The TEPs have also highlighted that there are a number of other significant barriers impacting industry’s ability to attract workers to regions. This includes a lack of available, suitable and/or affordable accommodation, particularly in regional and remote areas where many of the tourism industry’s vacancies exist. Housing affordability, in particular, is a major constraint to the relocation of job seekers[7]. Foreign investors have also advised that they are reluctant to invest in high-end tourism resorts in remote areas due to difficulties in providing housing for staff. Austrade supports the Commission’s draft recommendations 12.1, 12.2, 12.3 and 12.5 in relation to improving housing supply and affordability, and further recommends that the Commission make particular consideration to housing supply needs as they apply to the tourism industry and proposed new investment in tourism regions.

A lack of transportation and supporting infrastructure is also causing barriers to getting workers to and from the workplace. The hours of work within the tourism industry are varied, and often occur outside of regular peak transportation services. Transportation is an issue at an intra-regional level (e.g. workers required to commute vast distances within regions, such as from one side of a city to another, and lack of parking and cost in areas of high tourist amenity such as central building districts), and at an inter-regional level (e.g. costs and availability of transport between regions).

These issues are complex and not tourism-specific; indeed, the same issues have been identified within the agriculture and resources industries which also experience labour shortages and are likely to require a whole of economy solution[8]. It is likely that these barriers are having a broader economic cost; yet it is unclear as to the quantum of this cost as it applies to workforce productivity and participation in the regional economy, investment decisions and broader productivity gains across the Australian economy. This suggests the need for greater collaboration between governments and industry. Austrade supports the Commission’s recommendations for policy review in the area of housing affordability and supply, and suggests that this can be further extended to consider policy review in the area of transportation at a regional and inter-regional level.