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By Peter Dyball, Founder & Managing Director at Pit Crew Management Consulting Pty Ltd on 18 Jun 12

Could resistance to EMAs actually be a bigger threat to the long term future of Australian workers? Are you after some logical analysis rather than hysterical rhetoric? This commentary by major project labour market expert Peter Dyball, appeared in the latest edition of Pit Crew News, June 2012… 

The ink is hardly dry on Australia’s first Enterprise Migration Agreement (EMA) and its announcement has resulted in considerable attention, which is surprising given the fact that such agreements have been a long time in the making and the process by which they were conceptualised and defined was exhaustive.

The National Resources Sector Employment Taskforce (NRSET) was established in November 2009 with the objective of helping secure skilled workers needed for major resources projects over the next five years. The Taskforce was chaired by Hon Gary Gray and consisted of representatives from government departments (state and federal), an industry reference group (largely union representatives), and a skills reference group which consisted of universities and TAFE representatives, indigenous and other training entities. In addition the taskforce received 97 public submissions in response to the Resourcing the Future Discussion Paper. In July 2010 the Taskforce presented their final report – Resourcing the Future, which contained 31 recommendations. Recommendation 4.2 related to Enterprise Migration Agreements.

In March 2011, the Minister for Tertiary Education, Skills, Jobs and Workplace Relations announced that the Australian Government has accepted all 31 recommendations presented in Resourcing the Future.

The EMA concept was flagged as one of the 31 recommendations. What did the other 30 recommendations cover? They addressed a comprehensive list of issues, primarily relating to local labour resources. Items such as labour market data and workforce planning, training and apprenticeships, qualifications and up-skilling, education, 457 visa processing, increasing workforce participation rates, vocational awareness in schools and education facilities and housing and infrastructure.

The Resourcing the Future document is a sound and comprehensive document which successfully addressed the issues it set out to cover. Subsequent to the recommendations, the Department of Immigration and Citizenship (DIAC) released clear guidelines to the EMA submission and evaluation process.

Let’s look at the facts on EMAs:

An EMA can only be granted to so-called ‘mega’ projects – where capital expenditure is in excess of $2 billion

  • The peak workforce for a project awarded an EMA must be more than 1500 workers
  • Migrant workers brought in under an EMA must be paid Australian wages and provided the same working conditions as any other Australian worker
  • These skilled migrants will enter Australia on temporary work visas, not permanent residency visas
  • EMA guidelines are very specific with regard to the need for training. An employer bringing in migrant workers has an obligation to train a similar contingent of Australian workers. To address the skills required for the project, the guidelines articulate the requirement for training scope and numbers to commensurate with the  size and skills of the overseas workforce utilised on the project.

The Australian government has designed EMAs to benefit the Australian workforce for the long term, while ensuring the short-term needs of the construction projects are filled. 

The irony of the recent reactions to the first EMA, which have the pretext that the jobs of Australians must be protected, is that in essence this argument will prevent Australians from getting jobs and training as well as benefitting from the economic benefits this country needs from the resources boom to prop up other sectors until the global economic situation and Australian non-resources sectors improve.

What do major projects really mean in terms of jobs?

At the moment there is over $424 billion worth of committed major resources, energy and infrastructure projects happening in Australia, we also have over $316 billion of projects in the pipeline. During construction at peak these projects have the potential to engage onsite around 130,000 construction workers and over 20,000 workers in engineering and technical roles.

Now that’s just the workers going through the gate every day – our anecdotal research also tells us that during construction, for every individual onsite role, there is a factor of four workers engaged in roles supporting these projects, but not working onsite. These are workers with jobs in fabrication and component manufacturing workshops and material suppliers, as well as roles like road-train drivers, airline pilots and crew, fuel and provisions providers and business services such as lawyers, accountants, trainers and consultants.

The math’s isn’t hard – 150,000 x 4 = 600,000. On top of this, further demand is created in the broader community for those working in retail, hospitality, tourism, public services, education and the health sector.

An interesting side note on the so-called ‘billionaire mining magnates… When we put their holdings into perspective, out of the $740 billion of projects either underway or in the pipeline in Australia, by value the ‘billionaire mining magnates’ control is around 4% of the $740 billion.

Without much imagination it’s possible to see the direct impact and the multiplier effect of these projects having a defining impact on millions of Australians over the next five years. Additionally, during the next two years, these projects will engage up to an additional 40,000 operations workers and this will increase to around 100,000 by the year 2017. These operational roles aren’t just for a few months or a year or so, they are for 10 or 20 or 30 years.

Anything which impacts the progress of these projects has the potential to impact millions of Australian jobs and tens of thousands of training opportunities for Australians. Furthermore this is not restricted to onsite jobs in remote areas, this relates to jobs in every part of the country.

How might EMAs impact job numbers?

While there are up to 30 projects which meet the criteria for EMAs over the next five years, Pit Crew have undertaken some preliminary modelling based on 17 projects having EMAs in place in 2013 and 2014. Given the criteria, these 17 projects are representative of the largest and most significant projects in the country. This is reflected in a total capital value of $263 billion as well as their proportion of total demand. Of these projects six are committed ($148 billion) and 11 are in the project pipeline ($115 billion). The table below looks at semi-skilled roles on all major projects and also the 17 modelled EMA projects. 

The second point represents the total forecast shortage of the respective roles as per our most recent modelling.

  • Semi-skilled peak demand all projects: 42,900
  • Semi-skilled peak shortage (demand – availability): -27,000
  • Semi-skilled demand from 17 EMA Projects: 24,400

This modelling demonstrates that if all projects proceed, even if the EMA projects used 100% temporary overseas labour to fulfill their semi-skilled labour needs – which would never be a reality – a shortage of 2,600 workers would still result.

Now let’s run a scenario and say that some sort of worst-case/best-case scenario hits the market and suddenly we find a supply of Australian workers, qualified and experienced, happy to work onsite and ready to take up positions, let’s imagine 6,000 new entrants are mobilised (a 38% increase in the current forecast availability). Let’s also say that 25% of yet-to-be-committed projects vapourise, leaving a demand peak of around 35,000 jobs (if this really happened it would mean around $80 billion in projects cease to proceed). Balancing these figures will change the peak shortage to around 13,000. This means for the labour market to break even the EMA projects need to aim for fulfilling around 50% (12,200) of their semi-skilled resources from overseas. 

These construction peaks occur in a two year window from 2012. During this same period of time – even allowing for our best/worst scenario – there will still be a need for an additional 10,000 to 12,000 semi-skilled operations roles.

If you can accept logic like this, it’s apparent it doesn’t matter how you cut the cake, even with EMA projects in place using overseas labour, the Australian labour market will still struggle to keep up.   

Surely it makes more sense to use temporary overseas labour to get the projects constructed, and to capitalise on the resources, time and funds to train Australians to ensure ongoing operations resources?

If Australia can bring these projects to market in time, years and years of prosperity can be secured. The only conceivable way this can be achieved is with temporary labour. The EMA system is structured so that for each worker brought in from overseas a similar commitment is made to training Australians. These Australian workers are the ones who will benefit from the resulting long term work – the work that will really define the next 30 years.  

There have been some cheap, throw away lines about labour market analysis!

In terms of information sources, the foundation data for Pit Crew’s modelling is a list of major resources, energy and infrastructure projects. The Major Project List includes committed and highly probable projects in the market.  Information in the list comes from publicly available sources but, in many cases, this is supplemented by information direct from project owners. Publicly available sources include: ABARE/BREE, Chamber of Commerce and Industry, ASX reports, industry publications, union publications, company websites, industry briefings, media reports, subscriber-based project data services and websites, as well as the Australian Bureau of Statistics and a range of web-based information searches.

Data provided by clients and project owners is commercial-in-confidence. For Pit Crew’s subscriber based products any data provided by project owners is used as a comparator against the outputs of Pit Crew modelling rather than being incorporated into the modelling, thus eliminating confidentiality issues.

What is labour market testing?

Labour market testing is the process of advertising a position in Australia to try and fill a vacancy with an appropriately skilled Australian citizen or Australian permanent resident. The DIAC guidelines specifically acknowledge that EMAs will be negotiated ahead of attempts to recruit labour, and therefore labour market testing is not required.

Imagine it’s a hot summer day in January and someone is dipping their toe into a swimming pool, the water temperature is lovely. This is the labour market test. What is illogical is when this person goes on to conclude there will be no need for a water heater or a pool blanket or a wet suit… for the swim they are planning in the bitter cold of July!

Labour market testing is the thermometer, where labour market analysis is the barometer. While a thermometer is a useful instrument, its application is in immediate real time. A thermometer cannot read the temperature in the future. While neither can a barometer, the barometer is a far more complex instrument – it uses other information then combines this with a raft of knowledge of previous trends and patterns and provides a forecast on what may lie ahead.   

There is a place for labour market testing, and it’s once the project has commenced, this has already been recognised in the EMA guidelines. However at this early stage, labour market analysis will provide the forecasts needed to predict the labour market over the next two to three years and to provide foundation data for workforce and training plans.

Labour market analysis assists with identifying potential skill shortages so that mitigation strategies can be developed and implemented. This is undertaken as part of identifying commercial and other risks to projects as part of final investment decision. Skills shortages are a risk that requires strategies and EMA’s are a potential strategy, but not the only one, to address this risk.

Source: Pit Crew News, Issue 04, June 2012

http://www.theresourcechannel.com.au/blog/enterprise-migration-agreements-are-they-really-such-threat-0

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