Introduction

In 2017, Cisco and Oxford Economics teamed up to construct a ground-breaking labour market modelling tool to explore the future skills challenges facing the US economy in response to technological change.¹ Leveraging the objective views of a broad panel of Cisco technology experts, this multi-layered modelling framework was designed to simulate how the nature of occupations and the shape of the labour market might evolve in response. It provided us with a platform for exploring the reskilling implications for policymakers, businesses, technology companies and workers seeking to smooth the transition.

In this report, we use this unique modelling tool to analyse the skills challenges facing the Australian economy. With technological change unfolding more rapidly than ever, no-one is invulnerable to disruption. Stakeholders across all sectors of the economy are asking what Australian workers must do to be ready for the opportunities and challenges that digital technologies present. How will healthcare, a fast-growing sector and the biggest employer in Australia, be affected by the wave of new technologies that could be implemented in the next 10 years? How exposed is the construction sector, another cornerstone of the Australian economy, to technological automation? This study projects how Australia’s labour market will most likely evolve around the changes technology will bring.

Many jobs will be displaced, but many others will be created, as productivity gains drive the Australian economy forward. Some prominent roles in today’s economy, such as finance managers and bartenders, may continue to play a significant role in a decade’s time, while others, such as lorry drivers and office clerks, reduce in number in a more digitalised economy. We explore what the implications will be from the bottom to the top of the Australian skills hierarchy, assessing the reskilling challenges that workers across all sectors will face. We also contrast these results with our previous analysis of the US and selected ASEAN countries², to test the relative future-readiness of the Australian labour market.

Our modelling tool takes us forward in time to 2028, where we simulate the impact of technological advancements on the nature of work and the shape of the jobs market. While, in reality, these changes will be gradual and simultaneous, we report our analysis in four distinct sections, as follows:

In Chapter 2, we assess the jobs that will be displaced by technology.
In Chapter 3, we look at the jobs that will be created.
In Chapter 4, we map these dynamics together, to explain the overall impact on jobs in each sector of the Australian economy.
Then in Chapter 5, we model the transition from today’s balance of employment to that of 2028, using Oxford Economics’ Skills Matching Model to analyse the skills transitions that Australian workers will have to make.
In Chapter 6, we present the conclusions of our study.

1 The AI Paradox: How Robots Will Make Work More Human, Oxford Economics/Cisco (2017) 2 Technology and the Future of ASEAN jobs, Oxford Economics/Cisco (2018)

Box 1: Modelling the long-term impact of technology on jobs

This study uses the modelling apparatus developed by Oxford Economics and Cisco as part of our 2017 study, The AI Paradox: Making Work More Human. In order to develop a bespoke analysis for the Australian context, we have adapted that framework to detailed Australian employment and macroeconomic data. We assess not only how the shape of the Australian labour market will evolve in response to technological change, but also which workers will move where during the transition—and the skills challenges these moves will raise.

Our methodology can be described in five parts:

Assess productivity implications for workplace tasks

We leveraged in-house expertise from a range of Cisco technology experts to explore the implications of technological change on jobs. We developed a comprehensive set of assumptions about the impact that technology could have on the tasks and functions people perform in the workplace. In this study, these expert insights are applied to the Australian context.

Modelling the implied ‘displacement effect’

We developed occupation-specific task profiles for 433 occupations in the Australian labour market, based on a 41-task typology produced by O*NET (see Appendix 3). We modelled the scale of technology-induced displacement implied by our technology assumptions to assess the impact on different workers. We found that many fewer hours would be required to perform the same range of tasks, reflecting technology-driven productivity gains.

Modelling the long-term ‘income effect’

The productivity gains implied by technological change will lead to faster economic growth, and the dividends of that growth will be spent on more goods and services in the economy. We used Oxford Economics’ Global Industry Model as a basis for estimating how these productivity gains will be distributed across Australian industries. We then estimated the extra workers that would be required to meet that demand, even in the context of technology improvements.

Forecasting the 2028 labour market

We brought these two perspectives together to forecast the new shape of the labor market in 2028. We then used the Oxford Economics Skills Matching Model to predict how today’s workforce will make that transition to the future. Our model simulates how workers move through the labour market, away from redundancies in some occupations and into vacancies in others, in response to these changing conditions.

Analysing the reskilling challenge

Finally, we delved deep into our labour market projections to trace the moves that workers are likely to make to adjust to this changing landscape. Based on the occupational background and skill level of those workers, we identified the reskilling challenges they would face in their new jobs and examined what this would mean for the Australian economy as a whole.