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Delivering Public Service for the Future

Australia: For Richer, For Poorer? Government’s Role in Preserving Standard of LivingLearn about creating high performing labour markets in Australia

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Accenture’s Delivering Public Service for the Future programme is a series of research papers and perspectives on what public service for the future could mean, and what it will take to get there. Our goal is to inspire and support public service leaders: to take a fresh look at the problems they face, to highlight innovative solutions to emulate, to present paths to progress they may not have considered, and to show how all of the pieces can fit together.

Accenture’s flagship study, Navigating the Shifts1 identified four profound structural shifts—moving from standardised to personalised services, reactive to insight driven, public management to public entrepreneurship, and piecemeal efficiency to mission productivity. Organisations doing this are delivering public service for the future—supporting a flourishing society, safe and secure nation, and economic vitality for citizens.

Our latest Delivering Public Service for the Future research explores how governments can apply these four structural shifts to help ensure prosperous labour markets and national well-being. We analysed the implications of demographic changes in 162 countries and surveyed jobseekers, employers and public employment service officials in Australia, as well as 10 other countries, 12 U.S. states and the Canadian province of Ontario. Accenture focused on this burning platform: If governments do not respond with urgency and decisiveness to address the fundamental challenges in their labour markets, they will see declines in productivity growth and a shrinking workforce. That, in turn, will result in a decline in overall living standards in the future.

In Australia, a convergence of forces will continue to compound labour market challenges and threats to standard of living. Those forces include an ageing population, as well as the impact of explosive growth in China and India. Beyond the mining boom, Australia faces a transition to an economy with strong focus on services and exports—and the ability to guide and promote the right skills for meeting the changes ahead.

Now is the time to act. We believe that by applying the structural shifts to the labour market—embracing greater transparency, nurturing stronger connections, enhancing flexibility and enabling people to go where the jobs are—Australia’s government can play a pivotal role in preserving standard of living.

Foreword

Catherine GarnerManaging Director – Health & Public Service, Australia and New Zealand

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In analysing Australia’s labour market, Accenture identified three factors threatening the fundamental assumption that future generations will be better off than their parents: profound demographic changes resulting in fewer people available to work, a stagnant participation rate and declining productivity growth leading to lower personal income and a less wealthy society.

Although the public expects its standard of living to continue improving, Accenture predicts standard of living in Australia will decline 8 per cent by 2030 assuming no productivity growth and no increase in the participation rate. See Figure 1. We have based that prediction on a three-factor model that combines demographic, workforce participation rate and productivity data.

Our research points to a number of factors affecting the labour market and threatening Australia’s standard of living:

1. Geographic dislocation of jobs.

Dislocation of work for certain industries can make it difficult for people to find gainful employment and the right type of jobs—leading to under-employment and lack of productivity. Regional disparities in Australian employment exist, with unemployment rates in Tasmania (6.7 per cent) and South Australia (7.4 per cent) being twice as high as in the Australian Capital Territory (3.4 per cent) and Northern Territory (3.7 per cent).2 Generally speaking, unemployment is high in the two southern states where traditional industries are in decline, and policy makers are stressing issues other than economic growth – and government subsidies underpin economic performance of the two territories. Meanwhile, Queensland and Western Australia have large growth sectors, including mineral development, which have prospered in the new globalised economy. New South Wales and, to a lesser extent, Victoria have large diversified economies that are flexible enough to transform their activities. In 2013, the proportion of vacancies filled varied across Australia from 66 per cent in New South Wales to 81 per cent in South Australia; however, all states and territories saw an increase or stabilisation in the rate of filled vacancies compared to 20123. In the face of these regional differences, Accenture’s Job Seekers Survey found that regional mobility remains fairly limited, with only 11 per cent of unemployed jobseekers willing to relocate to another territory or state within

Australia (the second-lowest percentage globally, after Japan at 8 per cent). Overall, employers find it easier to fill vacancies in metropolitan than in non-metropolitan regions4. The rise of Fly-in-Fly-Out (FIFO) work practices has provided a solution to this dislocation in industries such as mining. However, the long-term impact on local communities will need to be managed5.

2. Barriers to entry.

Lack of work experience, overqualification and lengthy commutes create barriers to entering the workforce—particularly among youth (aged 18-24) and women. Nearly half (45 per cent) of youth stated lack of relevant work experience and qualifications as the reason for not finding a job. Women cite insufficient pay (24 per cent) and overqualification (16 per cent), as well as significant commutes (28 per cent), as key reasons for not accepting a job offer. Indeed, the pay gap between genders in Australia has increased from 14.9 per cent in November 2004 to 17.6 per cent in November 20126. Meanwhile, indigenous Australians face barriers to entry in the labour market with an employment rate of just 47.8 per cent (inclusive of Community Development Employment Projects [CDEP]) compared to 75.6 per cent of non-indigenous workers. This significant gap in employment rates has even increased in recent years from 21.2 per cent in 2008 to 29.7 per cent in 2012/20137. Reasons for these disparities are, of course, contentious. Low educational attainment is the key barrier that limits the entry of indigenous Australians into the labour market. In 2011, 40.8 per cent of indigenous 20 to 64 year olds either had or were studying for a qualification. The figure was 64.6 per cent for the non-Indigenous Australians. It is observed that with increasing education acquired through completion of a vocational and education training (VET) course, the employment gap between indigenous and non-indigenous people becomes less prominent8.

3. Mismatch between skills and jobs.

As illustrated during its recent mining boom, mining centres such as those in Western Australia and Queensland attract skilled workers to meet rising output demand. The Australian Workforce and Productivity Agency (AWPA) estimates employment in the mining operations sector will increase 7.4 per cent between 2013 and 2018, whilst jobs in oil and gas operations are forecast to grow 9.4 per cent between 2014 and 2018. The transition of the sector to a more operational nature will lead to increased demand for highly-skilled specialist operators, however sourcing these skills domestically will be challenging9. While Australia has made headway in addressing the skills gap—jobseekers and employers still experience a mismatch between supply and demand of skills. Indeed, 44 per cent of jobseekers state that the reason they cannot find a job is a lack of opportunities matching their skills and capabilities. Meanwhile, more than 35 per cent of Australian employers surveyed state that the lack of suitable skills in the country leads them to slow down recruitment. However, 44 per cent would consider hiring more employees if the right skills were available. In addition, improving overall levels of literacy and numeracy is essential to improving workforce participation and labour productivity and reducing social exclusion. In 2011/2012, one in eight working-age people in Australia possessed the lowest level of literacy. Over the same period, the ratio for the lowest level of numeracy was one in five10.

4. Volatile business environments.

By reducing hours rather than laying off workers, the Australian labour market has shown resilience in the face of the 2008 to 2009 global financial crisis. Even so, employers point to rigidities in the labour market, including hiring and firing processes, with half of Australian employers surveyed indicating that there is too much regulation in the labour market.

Threats to Standard of Living

Figure 1: Accenture predicts that standard of living in Australia will decline by 8 percent by 2030.

Productivity Standard of LivingParticipation

20302014

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=Increase

Decrease

Same-8%

0.31%

0.40%annually

annually

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Compounding these problems, Australian citizens, employers, jobseekers and public employment officials expressed dissatisfaction and frustration with the institutions of the Australian labour market in our surveys:

Citizen trust in government is low.

More than 60 per cent (63 per cent) of Australian citizens have little or no trust in government’s ability to act quickly enough to address employment and skills issues. By contrast, just 36 per cent of Singaporeans share this view.

Employers are not engaging with public employment services.

Only about 15 per cent of Australian employers surveyed identify public employment services as the best source for information on prospective candidates. While 63 per cent of Australian employers surveyed have some contact with public employment services, nearly one-third (30 per cent) have no contact at all. That compares with the US, Canada and Great Britain, where 47 per cent, 49 per cent and 52 per cent, respectively, have no contact with public employment services.

Jobseekers need help understanding their skills, competencies and potential career pathways.

Nearly one-third (32 per cent) of Australian jobseekers feel they need a fair amount or a great deal of training to acquire the skills and job they are seeking. Only 8 per cent are not at all confident in their current skills level, with a majority (71 per cent) fairly or very confident that their current skill level is sufficient to find a job. These findings suggest that Australian jobseekers need to take responsibility of becoming ‘job ready’ and transitioning from education to employment.

Public employment service officials are not connected to employers and educators.

In our survey, 41 per cent of Australian public employment service staff consider a lack of engagement with the business community to be a key challenge impeding their work—above average (35 per cent) for all countries surveyed. Almost one-quarter (22 per cent) cite lack of engagement with educational institutions as a main obstacle.

Though only one of many stakeholders in a labour market, government has an opportunity to play a pivotal role in orchestrating Australia’s jobs and skills environment, supporting a world-class labour market and helping address the potential decline in standard of living. To its credit, the Australian government has recognised the need to address the many challenges in the labour market and has undertaken many policy initiatives and measures, including the Core Skills for Work Developmental Framework (CSfW) and the National Workforce Development Strategy (NWDS). However, as Australia faces declining productivity growth rates, a shrinking demographic workforce and structural shifts in its economy, government will need to take concerted, decisive actions to counter the persistent challenges.

Accenture believes that a new comprehensive approach is needed to address these threats and deliver a world-class jobs and skills environment—one that requires a transformation not only of government, but also of education and skills providers, jobseekers and employers.

Help Wanted: Eliminating Frustration Among All Stakeholders

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Based on experience and our latest research, Accenture has developed three recommendations to increase participation rates, drive productivity and help achieve world-class labour markets. To deliver public service for the future, Accenture believes high-performing labour markets must be:

Achieving World-Class Labour Markets

1. Transparent and Insight DrivenAccenture’s research highlights a lack of access to information on job opportunities as a major problem for Australian jobseekers. Leveraging Labour Market Intelligence (LMI) with all relevant stakeholders—including the Australian Workforce and Productivity Agency (AWPA), Job Services Australia, the Department of Human Services and the Department of Employment, as well as employers and trade unions—will drive transparency and information sharing. High-performing governments that embrace greater transparency, intelligent forecasting and data insights will help deliver better outcomes and shift labour markets from reactive to insight driven.

2. Connected and Collaborative A connected labour market requires open sharing of information and strategies across a complex jobs and skills environment—along with greater engagement among public service officials, employers and educational institutions. Digitally enabled collaboration fosters a greater understanding of each stakeholder’s role and contributions in the labour market. It also provides opportunities to better understand the skills employers require—and develop those competencies through highly targeted training programmes. For example, by promoting information exchange with private employment services, employers and job aggregators nationally, the Job Services Australia Network can add more information about job openings and skills—supporting the important shift away from piecemeal efficiency toward mission productivity. Digitally enabled collaboration also reinforces a stronger focus on what really matters: building a labour market characterised by shorter lengths of unemployment, better alignment of skills to jobs, and higher participation rates and productivity levels.

3. Flexible and AccessibleHigh-performing labour markets can be defined as those with responsive regulatory environments that allow business to be flexible and adapt to the inherently dynamic nature of business. Governments that shift from a public management to public entrepreneurship mindset will also be better positioned to adjust to new demands. For instance, Australian officials can provide incentives to employers to form industrial partnerships and collaborate with employees, colleges and training providers. An example is the National Resources Sector Workforce Strategy, which helps address the growing demand for skilled labour in the Resources industry. Officials also have opportunities to overhaul the Fair Work system with a view towards improving labour market flexibility. Above all, government can support the labour market in further enhancing the ways it fulfills its primary role of matching the supply of labour with the demand for labour. These improvements will necessitate the movement of some labour from low-growth, low-opportunity regions to those with higher growth and better prospects. In the shift from standardised services to personalised services, Australia’s government can use digital tools to increase access to tailored training and upskilling. For example, Australia can further leverage and promote the Core Skills for Work Developmental Framework (CSfW), which provides a mechanism for those who develop standards and learning and assessment resources to more clearly articulate employable skills and qualification levels. More personalised training and support enables people to create and achieve their individual ‘paths to prosperity.’

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DemographyFor the purposes of this research, demography is the share of working-age population (aged 16 to 64) in the total population. Demographic trends can be predicted with high confidence using the United Nations’ age-based demographic projections as the main driver of this analysis. Accenture obtained demographic data from the United Nations, Department of Economic and Social Affairs, Population Division (2013), World Population Prospects.

ParticipationParticipation is defined as the share of working-age people who are employed. Only those who are working produce income. Thus, this analysis uses only employment participation data and excludes unemployed job seekers. To keep the model simple, there is no differentiation between full- and part-time jobs. Accenture obtained participation data from the World Bank World Development Indicators (retrieved December 2013).

ProductivityProductivity is defined as workers’ contribution to a country’s GDP—more specifically, real GDP (in constant 2005 US Dollars) per worker. Accenture obtained productivity data from World Bank World Development Indicators (retrieved December 2013).

About the Research

Accenture analysed trends related to demography, workforce participation rates and productivity in 162 countries. Together, these factors add up to gross domestic product (GDP) per capita, used as the measure of standard of living:

Accenture’s analysis provides evidence that unless Australia achieves marked improvements in both participation and productivity growth, standard of living will decline by 8 per cent.

Personalised Services

PublicEntrepreneurship

ConnectedTransparent

MissionProductivity

Insight Driven

Flexible

By aligning to the four fundamental shifts necessary to deliver public service for the future, Australia’s government and public officials can help create a jobs and skills environment that is more transparent and connected—and that offers greater flexibility and accessibility. See Figure 2. In doing so, they can play a pivotal role in achieving a world-class labour market that preserves the standard of living.

Figure 2: Four fundamental shifts are the foundation of the characteristics of high performing labour markets.

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Given that most countries’ long-term productivity growth rate is trending toward the zero-percent line, the base scenario assumes that productivity and participation growth rate is maintained at zero. Under this scenario, Accenture estimates that within the sample of studied countries, standard of living—defined as real GDP per capita—is set to fall up to 12 percent by 2030 in some countries.

In addition to providing a diagnostic tool to highlight an emerging burning platform, a three-factor model evaluates the potential impact of changes in participation and productivity. See Figure 3. To customise Accenture’s projection, interactive parameters were built to manipulate the participation (annual employment participation growth in percentage points) and productivity (annual growth in real GDP per worker) assumptions underpinning a range of standard of living scenarios.

Accenture’s standard of living model provides participation and productivity outcomes required to counter the impact of projected demographic headwinds. However, it does not offer insight into the most effective way of achieving these outcomes. To that end, Accenture conducted four surveys in 11 countries (Australia, Brazil, Canada, France, Germany, India, Italy, Japan, Singapore, the United Kingdom and the United States), 12 US states (California, Florida, Illinois, Indiana, Massachusetts, Michigan, Minnesota, New York, North Carolina, Ohio, Texas and Washington) and the Canadian province of Ontario. These surveys provide a 360-degree view on the jobs and skills environment:

Accenture Citizen Survey:

General population (aged 18–64), 10 questions, 500 interviews per country excluding boost. Boost for 12 US states + Ontario (n=400 per state).

Accenture Job Seekers Survey:

Currently unemployed and seeking work, employed but with experience of three months’ unemployment in last five years, and employed but seeking another job. 31 questions. 500 interviews per country, excluding boost except US (1,000), India (400), Singapore (250). Boost for 12 US states + Ontario (n=400 per state).

Accenture Employers Survey:

Range of company sizes—small, medium and large. 28 questions. 300 interviews per country excluding boost. Boost for 12 US states + Ontario (n=100 per state).

Accenture Public Employment Services Officials Survey:

Senior executives and decision makers of public employment services/agencies. 23 questions. 100 interviews per country.

Ipsos Mori and MGuire Research Services executed the surveys between September and November 2013.

Three-factor Standard of Living Model

Demography

ParticipationFactor 2

Factor 3 Productivity

Standardof Living

Total working age population / Total population

Total population in work / Total working age population

GDP / Total population in work

GDP / Total population

x

x

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Factor 1

Figure 3: A three-factor model evaluates the potential impact of changes in participation and productivity.

References1 Delivering Public Service for the Future: Navigating the Shifts – Global Study, October 2012, http://www.accenture.com/us-en/Pages/insight-delivering-public-service-future-navigating-shifts.aspx

2 Australian Bureau of Statistics, Labour Force Commentary, February 2014, http://www.abs.gov.au/AUSSTATS/abs@.nsf/Previousproducts/6202.0Main%20Features2Feb%202014?opendocument&tabname=Summary&prodno=6202.0&issue=Feb%202014&num=&view=

3 Australia Department of Education, Employment and Workplace Relations, Skill Shortages Australia 2013, published 2014, http://docs.employment.gov.au/system/files/doc/other/skillshortagesaustralia2013.pdf

4 Australia Department of Education, Employment and Workplace Relations, Skill Shortages Australia 2013, published 2014, http://docs.employment.gov.au/system/files/doc/other/skillshortagesaustralia2013.pdf

5 Australian Bureau of Statistics, Towns of the mining boom, Australian Social Trends, April 2013, http://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/4102.0Main+Features10April+2013

6 Australian Government, Workforce Gender Equality Agency, “Gender pay gap statistics, February 2013” https://www.wgea.gov.au/sites/default/files/2013-02-Gender%20pay%20gap%20statistics.pdf

7 Australian Government, Indigenous employment rates, 2008 and 2012/13, http://www.indigenous.gov.au/economic-participation/indigenous-employment-rates-2008-and-201213/

8 COAG Reform Council, Skills in Australia 2012: Five years of performance, Report to the Council of Australian Governments, 21 October 2013, http://www.coagreformcouncil.gov.au/reports/skills-and-workforce-development/skills-australia-2012-five-years-performance

9 The Australian Workforce and Productivity Agency, “Resources Sector Skills Needs report 2013”, December 2013, http://www.awpa.gov.au/our-work/sector-specific-skill-needs/resource-sector-skills/Pages/default.aspx

10 COAG Reform Council, Skills in Australia 2012: Five years of performance, Report to the Council of Australian Governments, 21 October 2013, http://www.coagreformcouncil.gov.au/reports/skills-and-workforce-development/skills-australia-2012-five-years-performance

For more information contactCatherine Garner Managing Director – Health & Public Service, Australia and New Zealand

+61 7 3117 4108

catherine.m.garner@accenture.com

About Delivering Public Service for the FutureWhat does it take to deliver public service for the future? Public service leaders must embrace four structural shifts—advancing toward personalised services, insight-driven operations, a public entrepreneurship mindset and a cross-agency commitment to mission productivity. By making these shifts, leaders can support flourishing societies, safe, secure nations and economic vitality for citizens in a digital world—delivering public service for the future.

Connect with us to learn more on delivering public service for the future on Twitter @AccenturePubSvc

About AccentureAccenture is a global management consulting, technology services and outsourcing company, with approximately 289,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$28.6 billion for the fiscal year ended Aug. 31, 2013. Its home page is www.accenture.com.

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