Australian businesses are underspending on training and risk falling behind international competitors if investment in human skills is not increased, economists have warned.
New research into the relationship between human skills and wage growth, released today by Deakin Co. and Deloitte Access Economics, finds a $2.5 billion gap between business investment in recruitment relative to training.
Aussie businesses are spending $7 billion each year on recruitment, but just $4.5 billion on formal training.
Meanwhile, the research also finds that by 2030, two-thirds of jobs in Australia will be “soft skill-intensive”, setting the stage for core industries such as government services, education, construction and professional services to be “adversely affected’ by skill shortages.
Deloitte Access Economics partner and report co-author David Rumbens tells SmartCompany the human skills base in Australia risks “treading water” if firms don’t invest in workers at a time of structural change in the broader labour market.
“[Investment] seems to be the wrong way around, particularly when a greater share of human capital in the workplace is really linked to these human skills,” Rumbens says.
“There’s been a greater focus on investing in new technology … the best way to utilise new technology is also to invest in people skills at the same time.
“There’s some short-sightedness in organisations not doing that.”
The study, called Premium Skills, concludes that in order to safeguard Australia’s economy, businesses need to double down on skills development within their workforces.
“In essence, human skills, complementing academic qualifications, will be the
secret to work success in the future,” Deakin Co. chief executive Glenn Campbell said.
“In order to propel the Australian economy forward and raise the average household income,
investment has to be spent in upskilling the current Australian workforce with soft skills, as well as
providing support in education to those looking to enter it.”
And if that doesn’t happen?
Rumbens says Australia’s already lacklustre labour productivity growth could worsen if training doesn’t pick up, particularly as keeping a competitive edge becomes increasingly defined by product quality over quantity.
“We risk being left behind,” he says.
The report finds that for every 10% improvement in human skills like teamwork, communication and critical thinking, Australian staff are seeing a 5% increase in wages.
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The high premium on workers with these skills is due to a lacking in their effective application in the workforce, the research suggests, noting the most commonly cited barrier to business performance in Australia is skill shortages, despite a third of workers having bachelor’s degrees.
The report comes in the same week as Oxford Economics estimates that some 630,000 roles will be lost around the world, displaced by technology, in the 2020s.
The Oxford report finds more than 7% of current Australian jobs will be displaced by technology, examining the increasing need for technical and soft skills among workers.