Special investigation: This skills shortage is different to the post-GFC and will need a different solution

The story behind the current skills shortage, which has triggered an emergency summit by Premier Mark McGowan, has had several chapters. Chapter 1 — The age of uncertainty (2008-09): A five-year bull run on commodities comes to a shuddering halt when Lehman Brothers collapses. The world economy seizes up and banks around the globe are nationalised to keep the financial system solvent. WA’s export-driven economy is hit disproportionately hard. Colin Barnett takes office just in time to see supply exceed demand, everywhere. Chapter 2 — The age of hope (2009-10): China pump-primes its economy though the biggest infrastructure program since the Romans. The new ports, railways, roads and towers require extraordinary amounts of steel and iron ore. Following the iron ore carriers north from WA to China are LNG cargo ships, which fuel Asia’s steel mills. The prices of iron ore and natural gas, WA’s most important exports, start climbing fast. Chapter 3 — The age of the tradie (2010-2014): Businesses rush to build new iron ore mines able to feed China’s economic expansion. LNG projects worth more than $100 billion are constructed to supply the energy to drive the turbines that are powering Asia’s industrial heartland. A construction boom the likes of which has not been seen since Paddy Hannan rode into Coolgardie 120 years earlier is under way. Concreters, chippies, sparkies and plumbers head north chasing the big bucks. In Perth, the Barnett government continues its own infrastructure drive, building new hospitals, a stadium, and Elizabeth Quay. Demand for labour drives wages beyond the wildest imaginations. The people on the tools wearing stubbies and singlets are no longer the poor cousins of the engineers in their chinos and Penguin shirts. Enticed by the prospect of six-figure salaries, school leavers re-embrace the trades. While the rest of the world endures GFC-induced austerity, WA becomes a modern-day El Dorado. Backpackers flock west as the cashed-up miners and energy giants outbid everyone for workers. Mr Barnett stokes the fever by discouraging people from using the the word “boom”, saying WA has entered a new and enduring age of prosperity. Commodities analysts say $US120 a tonne for iron ore and $US100 a barrel for oil are the new normal. The median house price in Perth pips Sydney for the first time in history. Chapter 4 — The age of uncertainty Part 2 (2014-2018): The price of iron ore crashes to $US40 a tonne. The big resources companies lay off staff as they cut deep into budgets to stem the bleeding. Listings for jetskis fill Gumtree as tradies realise a fire sale of toys is the only thing that will keep a roof over their heads. Hundreds of thousands are plunged into negative equity when the value of their houses plummets. The State Government, paralysed by debt and deprived of royalty income, can do little except sit and watch the carnage. Thousands of school leavers who signed up for trades courses a few years earlier graduate but cannot get jobs. The economists who said iron ore would forever be at $US120 a tonne now say it will never rise above $US70. In 2016 a barrel of oil, something worth $US170 before Lehmann Brothers collapsed, fetches less than $US40. Chapter 5 — The age of hope Part 2 (2018-2020): A crackdown on safety standards in Brazil, Australia’s only iron ore rival, re-writes the supply-demand equation. The Chinese economy shows more resilience than expected and prices stabilise, then start to grow, as the world realises the commodity was wildly oversold. Gold, for so long the backbone of the WA economy, comes back into vogue and starts an extraordinary bull run that sees its value double in less than two years. Chapter 6 — The age of the tradie Part 2 (2020-21): COVID- 19 plunges the world into recession. For China, and then WA, it is a brief one. The price of iron ore eclipses anything thought possible at a time when housing construction goes through the roof on the back of State and Federal building incentives. With migration on ice, companies can’t take the easy way out and bring in workers from other countries. The State and Federal Governments rush to plug the skills gap, creating more positions in trades courses, discounting or abolishing fees and giving cash bonuses to employers who take on apprentices. A different style of crisis The current skills shortage is different from the post-GFC crisis, which was solely about construction. Employment last decade was defined by the resources mega-projects (think Chevron’s Gorgon and Wheatstone LNG projects, the expansion of Rio, Fortescue and BHP operations and the greenfield construction of Gina Rinehart’s Roy Hill mine). In Perth, we had the Perth Children’s and Fiona Stanley hospitals, new schools and TAFEs, the stadium at Burswood and the development of the Swan River foreshore. Projects worth more than $300 billion were under way. If you knew how to tear something down or put something up, you got a well-paid job. They were happy days for demolition experts, construction engineers, chippies, sparkies, plumbers, surveyors, riggers, crane operators, brickies and concreters. We needed people who could assemble the giant pieces of kit that were manufactured in South Korean factories and floated across the ocean to the Pilbara. And we needed people who were good at building temporary accommodation, fast, in the middle of nowhere, for those workers. Fast-forward 10 years and the skills shortage, at least in resources, relates to the maintenance of those big projects. Companies now need workers who can ensure steady-state production keeps ticking along with as few hiccups as possible. It’s reflected in the job vacancy rosters at Fortescue Metals Group (heavy diesel fitters, auto electricians, reliability engineers, process control engineers and geographic information systems data analysts) and BHP (which needs most of those, and people who understand railways: train drivers, controllers, track signal technicians and track engineers). Where the miners are refining their processes and working for incremental efficiencies, the oil and gas sector is pulling things apart, hitting them with WD-40, and putting them back together. The State’s big LNG projects were always going to be due for scheduled maintenance around this time, and the current skills crunch was foreseen years ago. The State Government and the companies did their best to avoid the current predicament, going to the extent of winning permission from Australia’s competition watchdog to co-ordinate the shutdowns of gas processing lines. It was great in theory, but the policy hinged on each shutdown sticking to schedule. All it took was a few unforeseen glitches, such as Chevron discovering cracks on heat exchangers at the Gorgon plant, to throw that timetable out of whack. Now everyone is trying to hire the same teams of welders, as well as the scaffolders who can get them to the part of the plant they need to access. The hard borders inspired by COVID-19 have removed the pressure-relief valve of foreign and interstate labour. Mineral Resources boss Chris Ellison couldn’t get enough truck drivers because of the border disruptions at Eucla and Kununurra. Companies everywhere can’t import workers as easily as they used to, so they are having to outbid each other for the same pool of workers. Take Shell’s Prelude LNG facility as an example. There aren’t many engineers capable of stripping down and rebuilding a power turbine on that thing. Chevron, INPEX and Woodside have their own turbines to keep running and are competing with each other, Shell, and companies like GE, for those workers. When a service company is qualified and willing to work in the North West instead of the UAE or Texas, they usually insist on bringing in their own people. Taking a punt on a local grad is a big call when you are dealing with a $100 million bit of kit that might cause something to explode if it goes wrong. Even if you are committed to hiring locally, the training program required to get someone up to scratch is onerous. It takes between two and three years to train someone to work productively on an offshore gas facility. You need to obtain a mind-boggling array of licences, tickets, medical certificates, security qualifications and site induction permits, many of which are required by State and Federal departments. Just getting on the helicopter to get on site requires extensive training. The truth about training Here’s the dirty little secret of the resources sector: it’s cheaper and easier to outbid the competition and poach the skills you need than to train people yourself. There are two reasons for this. First, by the time you train them, the demand for your product has crashed and you need to lay staff off. That is exactly what happened after the last boom ended seven years ago. Second, even if demand stays strong, there’s a good chance a rival company will recruit the person you just spent 24 months training. That’s been happening to Dale Alcock for years and is happening now. He is busy training the apprentices he needs to build the homes we want because of the myriad State and Federal grants. As soon as they become productive, the mining companies offer them 50 per cent more. Resources companies will point out they have responded to political pressure by ramping up their internal training programs. Their poorer industry cousins point out that has meant the big players are now poaching training staff as well as those who are on the tools. Labour hire companies are complicit. They want to put forward prospective employees who aren’t risky. Putting a square peg in a round hole, like getting a laid-off flight attendant a job as a haul truck driver, will win you a newspaper headline when things are going well. But if the former Qantas worker drives a truck into a wet mess, you can bet there will be questions asked about the suitability of the candidate. And a lawsuit. Labour hire companies are also wary about whether a recruit will go the distance in their new industry. Are they putting up someone who is going to quit the moment things pick up in the sector they are fleeing? It’s a well-founded fear. How many real estate agents who jumped ship to a different industry two years ago when the housing market was tanking have quit their newish jobs to chase fat sales commissions today? Timing is everything Karen Ho is a busy woman. As acting director-general of the WA Department of Training And Workforce Development, it is up to her to ensure the pipeline of tradies is full. There are more than 72,000 students in vocational education and training courses in WA right now. That’s up more than 26 per cent on the 57,250 students in the system last year. Nobody can accuse Ms Ho of not having a crack at filling the skills gap. A big part of her job involves looking in a crystal ball, trying to work out which skills will be needed in a month or a year. It’s tough. “Last year we were looking at mass unemployment,” she tells The Sunday Times. “We never foresaw that within 12 months we would have unemployment under 5 per cent.” Getting the number, and mix, of enrolments right is only half the battle. Ms Ho relies on companies to take on the students and put the “employment” in “employment-based training”. On the unskilled and semi-skilled labour side, Ms Ho is under pressure to supply retail workers, labourers, truck drivers and aged care workers. On the trades side, she is trying to churn out people qualified to work as bricklayers, electricians, diesel mechanics, fabricators and chefs. TAFE’s Job-Ready program is the sharp tip in this battle. The four or six-week intensive training courses are designed to get you a foot in the door in your chosen field. The young men pictured above and on the previous page are enrolled in the bricklaying course at the Balga campus. They won’t walk out and immediately earn $2.50 a brick but they will have the basic skills that gets them on site. Full qualifications take years to earn. Ms Ho acknowledges the difficulty of marrying supply and demand. She understands we needed to enrol people three years ago to meet the current demand. It’s hard enough to get business executives to look past the current price cycle; try getting a 17-year-old to study something that’s paying nothing now because it might come back in demand when they are 20. “It’s important to remember that while it takes time to be fully qualified these people are out there working immediately and they are genuinely productive within a year,” Ms Ho says.