Description
This paper was presented to a meeting of the Wellington Exchange, an international group of higher education officials, in December 2008. One of the topics of the meeting was around the issue of possible skills shortages emerging as a result of demographic trends, with the ageing of the population of developed countries. The paper argues that this is not an issue about which we need to be alarmist. There is little evidence of impending skills shortages. This is not to say that there will be no skills shortages in specific areas. In any case, the business cycle could have a much more dramatic effect on the demand for skills than demographic trends.
Summary
About the research
This paper was presented to a meeting of the Wellington Exchange, an international group of higher education officials, in December 2008.
One of the topics of the meeting was the issue of possible skills shortages emerging as a result of demographic trends, with the ageing of the population of developed countries. The session consisted of this paper as a discussion opener, followed up by commentary by Sue Richardson (Australia), Constantine Curris (United States), and Herb O’Heron (Canada).
The conference organisers had set the scene with a series of questions:
The global skills crunch: A case of dog eat dog?
- Are we facing a demographic time bomb?
- How are countries addressing skills needs through higher education?
- Can we meet the needs of the labour market and emerging industries?
This paper argues that these are not a set of issues about which we need to be alarmist. There is little evidence of impending skills shortages, although it certainly will be the case that the ageing of the population will impact on the structure of the economy. While the labour market of the future will favour the highly skilled, there has been a significant increase in the proportion of the workforce with a degree, and graduate salaries have been increasing at a very modest rate. We have observed increasing proportions of graduates in a whole range of occupations. In any case, over and above the market mechanisms that act against the emergence of skills shortages, there are various mechanisms that can ameliorate an inadequate number of graduates: increases in labour force participation rates of graduates, a reduction in the number of high Year 12 achievers who do not go to university, an increase in the number of overseas students, and skilled migration.
This is not to say that there will be no skills shortages in specific areas and that we should not be at all concerned about the issue. We need to monitor relative wages and starting salaries, and pay particular attention to those degrees which are considered to be particularly critical (for example, medical specialists). We also need to be aware that the business cycle can have a much more dramatic effect on the demand for skills than demographic trends.
Tom Karmel
Managing Director, NCVER