Skills utilisation in the workplace: the other side of the coin

Description

Summary

About the research

While skills development has long been a focus of policy-makers, ensuring the use of those skills has received much less attention. Skills utilisation, however, is a key component of workforce development, leading to increased productivity, higher levels of staff satisfaction and retention, and maximising the return on investment in skills development.

Through an analysis of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, this research examined patterns of skill underutilisation across all Australian workers, with a focus on two industry sectors: manufacturing, and early childhood education and care. Interviews with employers from these two industry sectors further explored what high performing organisations are doing to understand the skills of their workers and what, if any, mechanisms are in place to maximise skills utilisation.

Key messages

• Around 19% of Australian workers report that they are not using all of their skills at work. About 35% of workers are overqualified, potentially contributing to this level of skill underutilisation.


• The likelihood and perceived importance of skills utilisation appears dependent on the type of job held. High-skilled, complex jobs provide more opportunity for workers to draw on a broader range of their skills than low-skilled jobs.

- Employers in the early childhood education and care sector believed that all employees were using their skills. Analysis of HILDA data, however, showed that around 16% of workers in selected occupations from that sector reported they were not using all of their skills.

- Employers in the manufacturing sector were less confident that employees were using all of their skills, depending on the specific occupations considered. The HILDA Survey shows that around 14% of workers in selected manufacturing occupations report that they are not using all of their skills, with the highest level being metal engineering process workers (31.3%).

• Employers believe that skills utilisation is important for staff satisfaction and retention, but there were very few formal mechanisms in place in the case study organisations for understanding workers’ skills and ensuring their optimal usage. Where mechanisms were used, they tended to be aimed at understanding skills needs, rather than ensuring skills utilisation.


• Employers were unsure whether support from government (or other bodies) would help them to be more active in utilising the skills of their employees. There was no sense that the lack of such support was the reason why these organisations were not addressing skills utilisation more actively. Instead, most turned the conversation towards skills development, including interest in financial support for training, which they see as higher priority.

Executive summary

As a complementary concept to ‘skills development’, ‘skills utilisation’^[1] is important in maximising the return on investment in training and increasing productivity in businesses and the economy. Most policy attention has traditionally focused on skills development, with an emphasis on developing the skills most needed in the workforce, both at national and local levels. While skills utilisation has seen increased attention from policy-makers and researchers in relatively recent times, the fact that employee skills use is mostly the purview of individual businesses means it is difficult to influence at the policy level.

The focus of public policy on skills development over the past several decades has seen increasing levels of participation in vocational education and training (VET) and higher education (HE), and the attainment of increasingly higher-level qualifications (O’Dwyer & White 2019). While the share of young adults holding a university degree has increased dramatically over the past 35 years (Norton & Cherastidtham 2018), the 2012 shift to a demand-driven market in HE further fuelled levels of university participation (Kemp & Norton 2014). At the same time, although the composition of the Australian labour market has also changed, the level of skills commensurate with the change in the mix of occupations in the labour market (O’Dwyer & White 2019) has been outstripped by the expansion in the proportion of people with higher-level qualifications and skills. While it is more desirable for the workforce to be overeducated than undereducated since such a situation provides opportunity for higher-level skills to be used in the workplace, it is not unreasonable to suggest that skills development policy has potentially resulted in a surplus of skills in the workplace and therefore increased levels of skill underutilisation.

Skills utilisation valued by employers, but there are other priorities

Interviews with a small sample of employers at high-performing ^[2] organisations from two industry sectors — manufacturing and early childhood education and care — revealed that, while ensuring high levels of skills use among their workers was generally considered important, very few formal mechanisms for understanding the skills of workers or for enabling optimal skills utilisation were in place. Any understanding was assumed to have emerged from existing processes such as performance reviews (both sectors) or informal interpersonal contact, especially in small team environments (commonly reported among the early childhood education and care organisations interviewed). Where formal mechanisms existed (reported in some manufacturing case studies), these were geared towards understanding skills needs, rather than ensuring skills utilisation.

Formal processes to understand workers’ skills and to ensure skills utilisation tended to be deemed unnecessary, particularly where organisations felt their informal processes sufficed, or represented a lower priority than other activities requiring resources. In the case study organisations, skills development appeared to be of higher priority than skills utilisation. Indeed, interviewees often turned discussions back to skills development, demonstrating that filling skills gaps through training and/or recruitment is a more significant issue than skills utilisation.

Despite no formal processes to ensure skills utilisation, most of the interviewed manufacturing businesses and early childhood education and care organisations generally considered that it was beneficial for workers to use all of their skills, although this varied by type of role, especially in manufacturing, where it was thought less important for task-based operational roles. The reasons for this were mostly related to worker satisfaction (feeling valued in the workplace, for example) and worker retention. Notably, all of the reasons given were focused on benefits to workers, rather than productivity gains for the organisations, although this issue, along with the flow-on increases to productivity in the economy, is where government interest is more likely to lie.

Employer understanding about skills utilisation depends on the sector and type of job

There were some differences in how employers from the two sectors viewed the skills utilisation of their employees. Employers in the early childhood education and care sector were confident that all employees were either using, or had the opportunity to use, all of their skills, even if they were technically overqualified for their role. The nature of the roles in this sector seems to provide employees with the freedom to draw on their full complement of skills, including those arising from personal passions and hobbies.

Employers in manufacturing were less certain about whether employees were using all of their skills. This is likely to be due to a combination of factors, including:

• limited formal processes for determining the skills of employees (although the same was true in the childcare organisations). Where processes were in place, they tended to be focused on identifying skills needs for development or recruitment
• larger staff sizes within the manufacturing companies (by comparison with the childcare organisations). Large numbers of staff make it more difficult for individual interviewees to have knowledge of how all workers are using their skills, particularly in the absence of formal mechanisms
• broad arrays of job types in these organisations, ranging from relatively low-skilled production roles to high-skilled engineering roles. Workers in low-skilled production roles have less scope to use additional skills, whereas workers in high-skilled roles such as engineering have more opportunity to draw on a broader range of skills.

Some employees report they are not using all of their skills in their jobs

While the early childhood education and care employers interviewed believed all employees were using their skills, the analysis of the HILDA data showed that around 16% of workers in selected occupations ^[3] from that sector report they are not using all of their skills.^[4] Child carers (18.9% overskilled) and childcare centre managers (11.3%) were more likely to report this than early childhood teachers (4.2%). The disparity between these data and the employer views presented above could be due to a disconnect between employers and employees in their understanding of what skills workers have and use, or it could be that high-quality childcare providers (such as those selected as case studies in this project) are more effective at ensuring a high degree of skills use.

The analysis of the HILDA data showed that 14% of respondents working in selected manufacturing occupations ^[5] reported that they were not using all of their skills in their jobs. Of the six selected occupations, those who reported the highest levels of overskilling were metal engineering process workers (31.3%), science technicians (25.6%) and plastics and rubber workers (23.9%). Interestingly, these occupations have a broad range of educational requirements, with modal qualification levels ranging from Year 11 (that is, no formal qualification) for the workers in both metal engineering and plastics and rubber, to bachelor degree for the science technicians.

When looking at all 4-digit ANZSCO occupations across the HILDA dataset, around 19% of workers are considered overskilled.

Pathways into ‘overskilled’ or ‘overqualified’ jobs

Being overeducated is one way by which a worker can be overskilled in their job, although this does not always hold true. With increasing credentialism occurring across Australia (O’Dwyer & White 2019), it might be assumed that increasing numbers of workers are overqualified in their roles and potentially not using the skills and knowledge they have gained through their qualifications. In a complex role, however, it may be possible for a worker to draw on the full complement of their skills despite being overqualified for their job.

Employers in the early childhood education and care sector provided several examples where they had appointed job applicants who were overqualified for the available role. These employers were confident that any additional skills held by these workers would be used in their roles, including in a mentoring capacity. In the manufacturing sector, however, employers were more likely to hire underskilled or underqualified workers and train them in house rather than appoint applicants who are overqualified. This was often due to concerns about staff loss after short periods in the role.

The analysis of the HILDA data shows that workers across all occupations who report they are overskilled in their current job are more likely to have been overskilled in their previous job. Of currently overskilled workers, 44% were overskilled in their previous jobs, compared with 21% of workers who are not currently overskilled but were overskilled previously. This pattern holds true for most of the selected occupations in both case study sectors. This finding supports previous research describing the persistent nature of overskilling (Mavromaras et al. 2012).

Looking at all 4-digit ANZSCO occupations in HILDA, around 35% of workers are overeducated (based on the modal qualification level for their occupation).

The potential for government or other supports to increase skills utilisation

A review of the Australian and international literature reveals examples of programs established for the purpose of increasing skills utilisation. The types of initiatives include:

• financial or practical support to review and improve existing business practices or implement new ones
• the creation of skills ecosystems or the facilitation of partnerships to enable skills issues to be addressed in a more integrated fashion
• efforts to promote skills utilisation as a strategy to improve business performance.

Very few employers from either of the case study sectors were able to offer suggestions for how government (or other bodies) could support skills utilisation. While some were supportive of the ideas presented, there was no sense that the lack of these opportunities was the reason why these organisations were not addressing skills utilisation more actively. Instead, most were more likely to turn the conversation towards skills development, including an interest in financial support for training.

1. There is no broad agreement on a definition of ‘skills utilisation’. Following Skills Australia (2012), this report adopts a broad definition of skills utilisation: the ways in which the skills, abilities and aptitudes of employees can be harnessed to benefit business outcomes and, by extension, those of individual workers.
2. See appendix A for a full description of the methodology, including how organisations were selected for inclusion in the study.
3. The early childhood education and care occupations selected for analysis were child carers, early childhood teachers (pre-primary school) and childcare centre managers.
4. These HILDA Survey respondents disagreed with the statement ‘I use many of my skills and abilities in my current job’.
5. The manufacturing occupations selected for analysis were production managers, plastics and rubber workers, science technicians, aircraft maintenance engineers, metal engineering process workers and metal fitters and machinists.