Executive Summary

630,000

Number of jobs that could be
displaced by new technologies
over the next decade.

This equates to more than 7% of Australia's current workforce.

Over the next 10 years, the pace of technological change will be highly disruptive to the world of work. This era has the potential to deliver great rewards to the Australian economy through productivity growth. But as increasingly powerful Artificial Intelligence (AI)-led technologies are applied across industries, there are also understandable fears about the impact this will have on jobs. Significant parts of the workforce are at risk of being left behind if they are not prepared with the guidance and skills demanded by an evolving economy.

Our analysis suggests that 630,000 jobs could be displaced by new technologies over the next decade. This “displacement effect” equates to 7.3% of the country’s existing workforce. It represents the reduction in Australia’s overall employment level that could be accommodated while still generating today’s level of economic output in 2028.

The parts of the economy most likely to displace workers over the next decade in our scenario are typically those that show the greatest potential for productivity growth. As technology drives productivity upwards, this also creates an “income effect” on jobs. An expanding economy demands more workers to service its needs, not only in technical positions - designing, developing, creating and repairing new technology equipment, but much more broadly across industries. A shift in the labour market is caused when the sectors of the economy creating jobs do not map to the sectors where most jobs are lost.

Our analysis suggests healthcare will be by far the biggest net job creator in Australia over the next decade, expanding by 80,000 jobs (see Fig. 1). In this sector, the new job creation derived from higher consumer spending by far outstrips the displacement effect of new technology. The tourism and wholesale & retail sectors are also predicted to experience significant net increases in the sizes of their workforces, increasing by 22,000 and 20,000 workers respectively.

But other sectors will see their levels of employment shrinking. According to our model, the fastest-shrinking sector will be construction, which is predicted to lose more than 70,000 jobs (net) over the next decade - equivalent to around 8.4% of its current workforce. A further 33,000 jobs are predicted to be lost (net) in the manufacturing sector as a result of technological change, equivalent to 5.5% of that sector’s workforce.

Fig.1. Net effect of technology scenario on jobs, by industry
(number of workers and share of workforce, 2018-2028)

We are also able to analyse the changes in the labour market by occupational types. This tells us the greatest absolute burden from technological change will fall on “craft and trades workers” – a category that is projected to shrink overall by 80,000 jobs (net) over the next decade. In contrast, the category that will experience the largest expansion, with more than 90,000 net jobs created, is “professional occupations”, which includes nurses, teachers, as well as software developers.

Where will the skills shortfalls hit hardest?

We use Oxford Economics’ Skills Matching Model to simulate how the Australian labour market will evolve around this technological change. This model simulates the dynamics of the labour market to match workers to vacancies iteratively, based on historical job-matching probabilities and skills compatibility. By tracing the many incremental job moves that together realise the overall structural shift in the labour market, we can better understand the skills transitions that workers will be required to make.

We find that there is a clear and acute shortfall in science, technology and mathematics skills that must be filled if the Australian economy is to realise the promises of technology-driven growth. Our analysis suggests that the best available candidates would have to overcome a significant skills shortfall to meet the requirements of IT-related jobs. On average, they are 57% short of the programming skills requirements, projected for 2028. In sophisticated cognitive skills, such as maths and science, the best available candidates are up to 30% short of the skill levels new position require.

An acute future shortage is also apparent in maintenance, installation, and technical repair skills. The best available candidates to fill such vacancies, according to our model, will typically be 25 to 35% short of the skills demanded by these roles.

But the Australian labour market will evolve in a way that demands more widespread skills transitions. For example, our model suggests more than 350,000 workers will be moving into jobs that require an upgrade to their listening, speaking, and critical thinking skills over this period. Some 150,000 workers will need to upgrade their negotiation, persuasion and learning skills. We see these softer, more human skills becoming increasingly in demand in the more technologically advanced economy of 2028.

Implications for policymakers, educators, and employers

This study highlights important implications for the stakeholders responsible for preparing Australia’s workforce for the future. Policymakers face a dilemma between seizing the economic advantages new technologies will bring and managing the repercussions they will have for the workers that bear the brunt of the transition. Many workers will have to adapt not only their skillsets, but potentially their working habits and location, to meet the demands of the new economy. Policymakers must ensure that they understand how the implications will vary across different cohorts of the labour market and have measures in place to provide support where it is most needed to aid the transition. In parallel, the government must create an environment in which the skills demanded by businesses as they integrate the next generation of technologies can be delivered quickly.

In this context, educators and employers play a critical role. Education providers must ensure a pipeline of skilled workers is in place to feed into the workforce. This includes relevant formal training for new entrants to the labour market, as well as a much broader base for lifelong learning and more flexible training provision. This includes embracing technology solutions to deliver timely and relevant training in unison with employers. In addition, employers must take responsibility for smart, on-the-job training solutions required to retain the institutional knowledge of existing staff, whilst upskilling their wider workforce in parallel.