Sydney’s unemployment rate is low, but the drought of workers continues to affect the city

Sheaves says labor shortages are affecting businesses of all sizes and in all sectors of her district.

“It’s the number one problem we have,” she says. “They can be large corporations that have lost hundreds of employees or a small business owner who is desperately looking for an administrative person. Almost everyone is struggling big time to get staff. It is a real crisis in this region.”

Businesses in many regions of NSW are also crying out for staff.

The shortage of workers will be in the spotlight when the Albanian government’s jobs and skills summit is held later this week. One of the goals of the meeting is to build a “bigger, better-skilled, and more productive workforce.”

After rising more than 7 per cent during the early stages of the pandemic in 2020, the unemployment rate in Greater Sydney has been well below 4 per cent since April this year.

The extremely low unemployment rate in much of the city is cause for celebration. The proportion of women in work in NSW rose to a record this year. There has also been a sustained decline in long-term unemployment.

But as unemployment falls, so does the labor supply, and businesses feel the pressure.

A key reason for the labor shortage is the collapse in migration numbers caused by prolonged border closures due to the pandemic.

Callam Pickering, an economist at job search firm Indeed, estimates that the working-age population in New South Wales would be 159,000 more than it is today were it not for border closures.

“The population deficit is concentrated in people under 35 years of age,” he says. “The reason for this is simply that immigration tends to be very concentrated in that age group. This has made recruiting particularly difficult for those industries that rely heavily on younger talent, such as hospitality and food services and retail.”

There are now more job openings in NSW than unemployed people to fill those vacant positions for the first time in the 40 years since the Bureau of Statistics began counting job vacancies.

A survey published in June by the apex body Business NSW shows that 93 per cent of businesses in the state were experiencing skills shortages compared to 55 per cent in 2019.

“Positions at all skill levels were reported as difficult or impossible to fill, from laborers to medical specialists,” the report says.

The shortage was especially acute for chefs and cooks, cleaners, housewives, waiters, boilermakers, fitters and turners, electricians and carpenters.

Business NSW Chief Executive Daniel Hunter says the NSW business community is grappling with the biggest workforce challenge in over 50 years: “Nearly half of businesses reported that it is equally difficult to fill entry-level positions as experienced positions.

Difficulties in recruiting and retaining staff, coupled with rising inflation and higher interest rates, are weighing on business confidence. One measure shows that business confidence in New South Wales had fallen again last month to lows hit during the pandemic lockdowns.

The shortage of workers is affecting many aspects of life in the city.

The queues of passengers leaving Sydney airport terminals earlier this month were a high-profile example. Airport CEO Geoff Culbert warned last week that the recovery in airline passenger numbers “continues to run ahead of the recovery in the workforce.”

He says the industry is working hard to rebuild staffing levels “but with the current labor shortage it’s going to take time”.

A number of less conspicuous interruptions caused by labor shortages have become common, such as reduced store opening hours, reduced restaurant menus and delayed deliveries. This has been exacerbated by high absenteeism rates caused by COVID-19 and the winter flu season.

Job offers are especially high in the accommodation and food sector, which includes many tourism companies.

Yesh Mudaliar, managing director of Holiday Inn Parramatta, says rooms sometimes can’t be cleaned to meet demand due to a lack of cleaning staff. On occasion, members of hotel management have helped clean rooms and serve food and beverages.

“Sometimes I wonder, where have all the people gone? We are a country of 25 million inhabitants. The hospitality industry is one of many facing labor shortages, highlighting the need for more flexibility in our immigration system,” he says.

James Scott, owner of Crucial Plumbing Services, says a recent renovation project was delayed for a month while waiting for a toilet seat to be delivered. He attributes the delay to staffing difficulties at the provider.

“I could have walked over there and gotten it,” says Scott. “Fortunately, the client had another bathroom that he could use, but it was really annoying.”

Scott wants to expand his small plumbing business, but says finding the right people has been difficult: “Trying to get materials is a joke and trying to get staff is a nightmare.”

A recent report by the Organization for Economic Co-operation and Development found that Australia was second only to Canada in having the most severe labor shortage in the developed world.

Hunter says there are cases where companies have offered sign-on bonuses of up to $5,000 in a bid to fill entry-level positions.

“Now it’s an extremely competitive environment among employers for staff,” he says. “It seems like a lot of companies are in the zone of desperation.”

Some Sydney businesses have decided that the only option is greater use of automation.

“To stay on top of it all, there is no doubt that some NSW businesses are exploring how they can increase the amount of automation in their operations to overcome staff and skills shortages,” says Hunter.

NSW Treasurer Matt Kean says the state is entering a “worker drought” that will result in a shortfall of 304,000 employees by 2025-26. He has called on the federal government of Anthony Albanese to speed up the pace of migration.

“I was informed that there are 65,000 workers ready and waiting to enter NSW,” Kean told the Herald.

“Small businesses are desperate for workers, especially in the hospitality industry that relies on foreign students and working tourists.

“It’s time to open borders and stamp passports so industries like hospitality, care and construction can begin to fill the crucial gaps that are holding back their business.”

A return to more normal levels of migration will help alleviate labor shortages, but deeper structural problems must also be addressed.

Research by Business NSW published in June found that 36 per cent of businesses identified housing affordability as a key long-term challenge to their staffing needs.

Many respondents identified the need for more affordable housing and limits on the number of properties used as temporary vacation rentals as a way to help address labor shortages, especially in regional areas. The aging of the workforce is emerging as another long-term challenge for labor supply.

Charging

Chronic skills shortages affected many sectors of the economy long before the disruptions of COVID-19.

A Federal Treasury document released ahead of the jobs and skills summit says that “in recent years, Australia’s skills and training system has not adapted to meet the needs of the economy.”

The government says one of the aims of the summit is to “address skills shortages and get our skills mix right”.

But Sydney businesses are likely to be dealing with labor shortages for some time.

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