While many developed countries are currently facing serious skills shortages, Australia has remained relatively well off in terms of its labour market. While some industries, such as renewable energy, IT, and services have been feeling a pinch, most businesses are experiencing no serious difficulties in finding the labour they need to operate. Unfortunately this is likely about to change.
A recent report by PwC Australia found that a massive 79 per cent of “key workers” in Sydney and Melbourne feel that they’ll never be able to afford their own home. One fourth of these, or an estimated fifth of these cities’ key workers, are explicitly working to either change careers or leave the cities as a result. The roles that these employees are currently filling will be vacated, leaving businesses scrambling for talent that will face exactly the same incentives to leave. Affected businesses, who often lack the financial capacity to raise wages, need to consider the implications, and find ways to adapt.
Conditions are driving workers out of cities
The “key workers” targeted by the PwC report included teachers, nurses, paramedics, and fire and emergency workers. It might seem unclear what this has to do with businesses in general, since these are very specific occupations, but the issue is simply the ratio of wages to cost of living. While this survey focused on just these key occupations, the financial strain these workers are under is mirrored by all workers at or below their income level. Businesses who employ workers at similar or lower salaries are facing the exact same problems.
The combination of low wage growth and astronomical costs of living in Australia’s urban centers is making urban life increasingly unattractive for the workers those cities depend on. While the cost of living has grown rapidly, particularly with regard to utilities costs, wages have remained stagnant. As this trend continues, low and middle income workers will be increasingly forced out.
This is already happening today. Housing prices have now begun to drop due to the real estate slowdown, but rents have remained high so far. Because of this, workers earning middle class wages are estimated to need to save religiously for up to 12 years in order to afford a down payment on a home. In an attempt to shorten this period, many are turning to drastic measures. 47 per cent of key workers work overtime, and 29 per cent are delaying having a family. Many, are saving to leave.
Businesses will be forced to adapt
The larger systemic solution to the problem is clearly that workers in Australia’s cities need higher wages. Some industries will be able to respond to a tighter job market by raising salaries, but others, especially small businesses, won’t have that option. Many of Australia’s small business owners already earn less than their own employees, meaning that they’re under the same pressure to leave as their workers. To solve the problem, businesses need to get creative.
The reason cities have been so important as centers of business in the past is that they concentrate the talent they need to operate, while often providing excellent access to customers. If that talent leaves, businesses need to find other solutions. That doesn’t have to mean moving to a smaller, less expensive town, though some might opt to do so. Businesses can also simply change how they employ people.
Getting comfortable with flexible working
Today, workers aren’t just available in a business’ physical proximity. Many roles that are already in high demand in the tech, IT, design, marketing, and, to a lesser extent, engineering industries can be filled remotely, meaning that some of the workers that are departing cities may be able to keep their jobs. Businesses, for their part, will be able to hire many of the same workers that are currently planning to quit their jobs to leave cities behind, provided that they’re willing to hire remote workers.
What the future looks like
Real estate prices, including rent prices, aren’t set in stone, and an exodus of workers from Australia’s biggest cities will inherently take some of the pressure off of these housing markets. This will ultimately lead to price adjustments, which will eventually bring them to a new equilibrium where homes are affordable enough for the remaining workers. This transitional period, however, could be a difficult time for many businesses. Falling housing prices present an entirely separate problem for them, since small businesses frequently rely on personal real estate to secure the financing they need to operate.
In order to access the talent they need, businesses will rely on a combination of local and remote labour. Using remote workers will allow them to both access the labour they need, while keeping personnel costs under control during a potentially difficult time.