The aim of this study is to investigate two issues related to meeting the demand for skills in the future.
The first issue regards understanding the types of skills that are important at work. This information can be invaluable for the design of future initial training courses and learning activities to deliver these courses. The types of skills used at work (cognitive and non-cognitive), particularly in leading edge industries, could provide a leading indicator of the types of skills that would be more broadly in demand in the future. This study will first investigate the types of skills used at work, by whom and in what jobs and industries.
The second issue relates to the information on future job openings for new entrants, particularly in the occupations and industries where they are likely to exist. Information on job openings is part of the overall information, including qualifications, wages and conditions, that should be available to all participants in the training market (students, career counsellors, training providers and training agencies) as they make decisions about what courses to provide and to enrol in and on where to target future public investment. This study will produce medium term forecasts of the demand for labour by industry and occupation. In particular, it will estimate the number of future job openings for new entrants by occupation and industry.
The project will involve two stages:
Stage 1: Investigate the use of cognitive and non-cognitive skills at work
The study will use the Australian version of Programme for the International Assessment of Adult Competencies (PIAAC) data to statistically investigate the patterns of skills use in the workplace. PIAAC is a global assessment of adult skills, managed by the OECD and implemented by 25 countries in Europe, the Americas and Asia. The Australian version of PIAAC was conducted in 2011-12. The PIAAC data for Australia relates to a random sample of about 8,000 individuals. The data are rich in information about each individual’s background, job and firm characteristics. More importantly it includes an assessment of each person’s literacy, numeracy and problem solving abilities in technology-rich environments and also self-reported assessment of their use of ICT, reading writing, numeracy, planning, influencing, and task discretion activities at work and at home.
Stage 2: Modelling job openings for new entrants in the workforce
(a) Determination of medium-term forecasts of industry demand for labour by industry and occupation.
A computational general equilibrium model of the Australian economy will be used to derive forecasts of employment by industry and occupation. In brief, the model is a sequence of models, linked through time by the behaviour of capital and labour markets. It has three main elements—a database, theory and parameters—that are embodied in the model’s system of equations. These equations describe how industries and consumers respond to changes in policy. The core of the database is a large input-output matrix, which shows how each sector of the economy is linked to other sectors.
The model specifies likely growth paths of industry output, public and private consumption and investment, and international trade as the economy moves through demographic change, productivity growth, changes in preferences, and changes in policy.
(b) Net replacement demand forecasts.
New jobs from growth in demand account for only a fraction of all jobs that are expected to be available for newly trained graduates. Many existing workers will leave their jobs for a variety of reasons, such as ill-health, retirement or transfer to another occupation. Others will return after a period of absence, for example, after maternity or paternity leave. The departures from an occupation net of those who return will create additional opportunities for new graduates. Net replacement is thus a measure of the departures net of returnees and which when added to jobs created due to growth in demand provide a more complete picture of job openings for new entrants.
The study will use a model to estimate net replacement demand. The model is based on the cohort component method. In essence the method compares the stock of workers by cohort (defined by age and sex to reflect the differences in the turnover behaviour of males and females in the labour market) in each occupation over two time periods to calculate net inflows and net outflows (net separations). The sum of net outflows provides a measure of net replacement needs for the occupation.
(c) Job openings for new entrants.
Forecasts of job growth and net replacement demand will be combined to obtain job openings for new entrants by occupation. Occupations in which demand is negative (contraction in employment), the source of job openings for new entrants is only from net replacement demand. As net replacement demand by industry cannot be directly estimated with current data, job openings for new entrants by industry will be approximated.
The study will produce medium term forecasts for a baseline scenario and also for an alternative scenario in which technological change will be assumed to be above historical trend level.
About the organisations
Chandra Shah has extensive experience in labour market forecasting. Over the years he has produced reports on the subject for numerous government agencies. He has conducted research on employer-supported training, job mobility, occupational replacement needs, migration, skill shortages, course completions and social inclusion.
The Centre of Policy Studies (CoPS), Victoria University
The Centre of Policy Studies (CoPS) is an independent research centre in the Faculty of Business at Victoria University. Researchers at CoPS have a forty-year history of continuous achievement in the development, application and dissemination of large-scale economic models. CoPS models and software are used around the world to analyse a diverse range of economic issues. CoPS’ clients include federal and state government departments in Australia, government departments in overseas countries (e.g. U.S. and China), international development agencies, private firms and universities. CoPS’ GEMPACK software for solving large economic models is used at more than 700 sites in over 90 countries.