Technology and the Future of Australian Jobs
The future of work will change, as technology evolves. There will be an impact to jobs and skills across the economy – but what does that look like from an
Technology and the Future of Australian Jobs
What will be the impact of AI on workers in every sector?
The recent pace of technological advancement is unprecedented. Australia is in the midst of a major economic, social and political transition driven by global competition and rapidly expanding digital platforms and technological innovation.
Automation, Artificial Intelligence (AI), and the Internet of Things (IoT) is having an impact almost everywhere, in all industries, jobs and everyday life. Given this pace of change, it is important to understand and anticipate what this means for the future: jobs, youth, government and society more broadly, so that everyone has an opportunity to participate in the digital economy.
Over the next decade, more widespread adoption of existing technologies, plus rapid improvements in emerging technologies such as AI, networked computing and advanced robotics, will drive the real costs of automation down and create opportunities for economic growth, whilst increasing productivity. There will also be a shift in what we know of as jobs and relevant skills, today. The future of work will change, as technology evolves. There will be an impact to jobs across the economy – but what does that look like from an industry perspective in Australia?
To uncover key insights and build our understanding, we worked with Oxford Economics (initially in the United States (US) and the Association of Southeast Asian Nations (ASEAN)) to develop a model that estimates how both displacement and job creation will be spread across the economy in the future. We also took a deeper look into key industries in Australia that contribute to GDP and employment, to understand which work activities and occupations will be affected, along with how individuals can move around the labour market. The results highlight the need for technology skills across jobs and industries as most jobs in the future have a technology focus. In addition to technology skills, the model highlighted that human skills will be most in demand, such as listening, speaking, critical thinking, negotiation, and persuasion skills. As technology takes care of repetitive tasks, the way is paved for the human factor to increase in importance and value.
At Cisco, we want to understand future research and contribute to the continuing dialogue on technology’s future impact. We believe Cisco has a role to play. We hope to serve as a catalyst for driving an inclusive digital economy. Our Digital Readiness Index, launched in September 2018, highlights that although Australia has been ranked one of the most digitally ready nations in the world, there is a significant ‘digital divide’ across states and territories. The time really is now to be taking action.
This study is a rich asset for policymakers and other stakeholders seeking to prepare Australians and industry for the skills demands of the future. As well as exploring technology’s impact on jobs, we analysed the skills many of today’s workers will need to develop, if they are to find sustained employment in the digital economy. These insights enable us to make investments that not only help meet industry demand for a digitally skilled workforce, but also help shape entirely new ideas and industries to fuel the digital economy and create the jobs of the future.
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.
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.
Technology displacing Australian workers
The technology that exists in the modern economy is already powerful enough to replicate and improve many of the functions workers spend their days performing. Over the next 10 years, these technologies will become more powerful and efficient, and will find new applications across many different industries as more businesses use them to their full potential.
In this chapter, we use a task-based lens to assess the potential impact this change could have on the jobs landscape by 2028. The impact on each worker will depend on two factors:
1. The task-profile that defines each occupation. This refers to the specific balance of tasks a worker performs in their job each day.
2. The extent to which the application of technology will outperform a human worker on each specific task in 10 years’ time.
Our modelling assumptions are informed by a technology scenario developed with a range of Cisco technology experts — see Appendix 1 for more details.
2.1. Displaced workers: Impact by industrial sector
Our modelling suggests that 630,000 workers could be displaced by technology by 2028. This means that, after a decade of technological advancement, today’s level of economic output could be produced by 7% fewer workers across the Australian economy.
This ‘displacement effect’ is most apparent in the transport sector, in relative terms. We calculate that 7% of its workforce will be displaced over the next decade3 — equivalent to 57,000 full-time equivalent (FTE) jobs.
Both the construction and agriculture and mining sectors also face displacement levels exceeding 10% of their workforces (see figure 2).
The relative vulnerability of these sectors to technology-driven displacement is a result of the nature of their work. Workers spend more time operating vehicles, handling objects and controlling machines, all of which have the potential to be completed more efficiently with the application of new and existing technologies, such as advanced robotics and machine learning.
In absolute terms, we find that business and professional services will be the most severely affected sector, accounting for more than 100,000 of the country’s displaced workers.4 This is largely because business and professional services is the largest sector in Australia, employing almost 20% of today’s workforce. In comparison, the construction, manufacturing, and transport sectors together are projected to see 210,000 workers displaced — a third of the overall displacement effect.
Our modelling identifies hotels and restaurants and education as the least-vulnerable sectors to technological displacement over the next 10 years. There are opportunities for technology to enhance productivity and raise the quality of service in these two sectors, such as automated hotel check-in and virtual learning environments. But for many roles in these sectors, from bartenders to primary school teachers, elements of the day-to-day work such as social interaction, team-building and resolving conflicts are critical. These human-facing, non-routine activities are less vulnerable to automation according to our technology scenario, and therefore, despite advancements in technology, humans will still tend to outperform in these tasks.
3 The timeframe of our analysis was 2018 to 2028.
4 Business and professional services is an aggregation of the following sectors; IT and communications, Finance and insurance, Real estate, Professional services, Administration and support services.
2.2. Displaced workers: Impact by occupation
The displacement potential of technology on different industries is driven by their specific mix of employment, and the nature of the work they conduct. In fact, it is the unique blend of tasks performed by different occupations – what we refer to as their “task-profile” – which determines a given worker’s exposure to technological displacement. We analysed 433 Australian occupations to understand which occupations bear the greatest burdens of technological displacement.
According to this occupational analysis, jobs categorised as vehicle and machine operators and assemblers6 are most vulnerable to the predicted technological developments, in relative terms. More than 16% of these workers—who include lorry drivers, taxi drivers, and machinery operators — are projected to be displaced by technology in the next 10 years (see Fig. 3).
In absolute terms, craft and related trades workers — which includes mechanics and carpenters — will be most affected, followed by technicians and associate professionals. Both categories are projected to see more than 100,000 workers displaced under our scenario. For further insights into how new technology will affect different types of occupation, see Box 2 overleaf.
5. Government and community services consists of public administration, arts and entertainment, and other services.
6 This is a relabelling of the ISCO Rev4 category “plant and machine operators, and assemblers”, which was done to provide more clarity that vehicle drivers, a prominent type of occupation in Australia, is included in this category.
2.3. How does australia compare to other countries?
Australia’s workforce is relatively less vulnerable to job displacement than the United States and most of the ASEAN countries we have analysed. Under the same set of modelling assumptions, we expect 7.3% of Australian jobs will be subject to displacement by 2028, compared with 8.4% of the US workforce (see Fig. 4). In relative terms, Australia is much less vulnerable to automation than Vietnam — which faces 18.8% displacement — Indonesia, Thailand, the Philippines, and Malaysia. In contrast, Singapore, an urbanised, heavily service-sector oriented economy, appears to be more resilient than Australia to technological change, with only a 5.5% displacement of its current workforce predicted under the same assumptions.7
7 Displacement effect reported here may differ from published results because modelling assumptions were harmonised across regions for sounds comparison.
Australia’s relatively advantageous position in the face of major technological disruption is the result of the structure of its labour market. Relatively fewer people in Australia are employed in jobs whose task-profiles are most vulnerable to technological change, such as capturing and monitoring information, and manual labour.
Nonetheless, the Australian workforce will still face significant challenges, as its jobs landscape shifts in response to labour savings and productivity gains. In the next chapter, we explore where the growth of new jobs will be concentrated (both in terms of sectors and occupations), before going on to assess how difficult the transition for displaced workers will be.
8 The same assumption regarding the extent to which technology will alter the productivity of workers undertaking certain workplace tasks are applied to each country.
Box 2: How does new technology change the nature of work?
To model the impact of technological change on the Australian labour market, we developed 433 unique task-profiles to describe the full range of occupations. Each profile contains a basket of tasks classified “important” to performing that particular job. While more complex occupations tend to require a balance of multiple important tasks, no occupations are entirely dependent on a single task. The displacement effect is determined in part by the make-up of tasks for a given occupation.
To shed further light on our analysis, we have selected an occupation at either end of the “vulnerability spectrum” in Australia— nurses and construction labourers. Figs. 5 and 6 illustrate how the nature of work in these occupations changes over the next 10 years.
The healthcare sector is the biggest employer in Australia. Its strong recent growth is predicted to continue along with the country’s ageing population. Nurses are the largest occupation in this sector and, despite significant advances in technology's use in healthcare, are among the least vulnerable to technological automation. Nurses spend a large proportion of their time making human connections that are very difficult for a robot to replicate and this will continue to be a pivotal aspect of their work. However, we predict nurses will spend less time engaging in routine administration and communication, with more time instead spend critical thinking and interacting with computers.
The construction sector is Australia’s third-largest employer. Unlike nurses, the nature of work conducted by construction labourers means they are more vulnerable to technology-driven displacement. Today, construction labourers spend a significant amount of time engaging in physical activities and capturing information. In 10 years’ time, we predict that these tasks will typically constitute a smaller share of their working time. More of their time will be taken up by critical thinking, and by repairs and maintenance of the additional technological equipment that is used across the construction sector in 2028.
Jobs created by technological change
Businesses do not invest in new technology to put human workers out of a job, but to strive for greater productivity and higher performance. For every job displaced by technology under our 2028 scenario, there is a productivity gain achieved. By enhancing productivity, new technologies drive down the cost of production, which in turn lowers the prices of goods and services.
The consequential increase in demand for these products also creates demand for additional workers. This is known as the “income effect” of our technology scenario and occurs in parallel with the displacement effect analysed in Chapter 2. In this chapter, we forecast the income effect’s impact on each industry sector and occupation group over the next decade.
3.1. Jobs created: Impact by industrial sector
Our analysis suggests the main growth sectors for jobs over the next decade will be healthcare, wholesale and retail, and professional services. Across these three sectors, 280,000 new jobs will be created as a result of new technology’s income effect — 45% of the gross job creation over the next 10 years.9 Australia’s ageing population is a key driver of the growing demand for healthcare services, with the population aged 65-and-above predicted to grow by 34% over the coming decade, compared to 14% for the entire population. When the income effect is considered in relative terms, other sectors such as finance and insurance and IT and communication also rise to prominence (Fig.7).
9 Gross job creation refers only to increased demand for workers as a result of the “income effect”, not counting the displacement effect analysed in Chapter 2, which offsets this.
3.2. Jobs created: Impact by occupation
The impact of technology’s income effect on different occupations depends on the types of goods and services that people demand. Our analysis shows that rising levels of spending on healthcare and professional services in the next 10 years will result in a marked increase in demand for professional occupations, which includes accountants, lawyers, and marketing professionals.
We expect a similar relative increase in demand for service and sales workers (8.5%), despite the levels of automation taking place among this broad occupation type. This is because as the economy grows, people will spend much of their extra money within the wholesale and retail sector, which contains many of these jobs.
This evolution in the shape of the labour market will, of course, take place gradually. As businesses integrate technology solutions at different rates, the opposing processes of job displacement (Chapter 2) and job creation (Chapter 3) occur continuously. Significant new work opportunities will emerge in some sectors just as they are constrained in others, and workers will constantly adapt to the demands of the labour market.
In the next chapter, we illustrate how the twin forces of job displacement and job creation implied by our new technology scenario offset each other—and what this will mean for the future shape of the Australian labour market.
What will Australia's Labour Market Look Like in 2028?
Our 10-year technology scenario explores the competing effects of technological change on the Australian labour market. In some cases, the growing economy will create enough jobs in a given sector or occupation group to outweigh the displacement of workers brought about by new technology. In other sectors and occupation groups, the opposite will be true, and they will shrink. As the two forces interact across all strata of the economy, the new shape of the Australian jobs market will take shape.
4.1. The overall impact on jobs in each sector
Our analysis suggests healthcare will be by far the most notable net job creator in Australia over the next decade. We predict a net expansion of around 80,000 jobs in this sector (see Fig. 9 for a breakdown of the income and displacement effects for each sector). Tourism and wholesale and retail are both also predicted to experience significant net increases in their workforces, totalling 22,000 and 20,000 workers respectively.
Other sectors will see their levels of employment shrink. These are the sectors that are ripe for technology-driven productivity improvements which will outcompete workers in the completion of important tasks. According to our model, the fastest-shrinking sector in employment terms will be construction, where the use of drones, cloud-based software applications, and wearable technologies all have the potential to enhance productivity while also reducing the risks faced by workers. This is predicted to result in a net loss of more than 70,000 construction jobs in Australia over the next decade—equivalent to around 8.4% of the sector’s current workforce. A further 33,000 jobs are predicted to be lost overall in the manufacturing sector as a result of technological change, equivalent to 5.5% of that sector’s workforce.
4.2. The overall impact on jobs in each occupation
Observing the overall impact through an occupational lens, our analysis suggests the greatest absolute burden from technological change will fall on craft and related trades workers— a category that is projected to shrink by 80,000 jobs over the next decade. In contrast, the category that will experience the largest net expansion, with more than 90,000 jobs created, is professional occupations, which includes nurses, teachers, and software developers.In relative terms, demand for extra workers is predicted to be strongest in service and sales roles. Our scenario suggests a 5.1% net increase in the demand for these workers in 2028, compared to a decade earlier. In stark contrast, vehicle and machine operators and assemblers are in line for the largest net reduction in demand, with 10.6% fewer roles predicted in 10 years’ time (see Fig. 10).
To illustrate the implications of this shift in demand for workers, we present the net employment impact from an alternative perspective in Fig.11. Each dot on this chart represents an occupational category. Those located below the green diagonal line are the categories that will demand additional workers in our 2028 scenario, with new job creation outweighing the number of jobs displaced. The occupational categories expected to experience the greatest net job creation (in relative terms) are those that are horizontally furthest from the diagonal, including health professionals and ICT professionals. This distance represents the net level of job creation, relative to the size of each sector.
On the other hand, occupation categories situated above the diagonal line on Fig. 11 will experience net job redundancies, with the negative displacement effect outweighing the positive income effect. This is the case for machinery and metal workers, and drivers and mobile plant operators, for example, whose job functions are in line for considerable disruption from new advances in robotics and autonomous vehicles. For this group of occupations, the vertical distance above the diagonal represents the net level of job destruction, relative to the size of each sector.
4.3. Transitioning to the workforce of the future
Underneath the high-level rebalancing of employment across industries, more complex dynamics are taking place. Businesses will respond to new technology based on the characteristics of their own workforce and production processes. Workers will be drawn into new jobs based on the changing demand for goods and services. The effect within an industry, therefore, is not uniform for all employees. Similarly, the impact on a particular occupation group will differ depending on which part of the economy they are employed in.
For example, clerical support workers are expected to shrink in number considerably over the next decade, by more than 23,000 in our scenario. However, that is not the case across all sectors. Fast-growing sectors such as healthcare and hotels and restaurants are still predicted to recruit new clerical workers in our scenario, as the growth in demand in these sectors outpaces the potential for automation.
To shed further light on these patterns, we have pulled together our sectoral and occupational analyses in Fig. 12, overleaf. This table summarises the net changes in employment between every sector and occupation group, with dark red squares indicating the largest overall job losses, and dark green the biggest overall job increases.
The table thus provides a detailed insight into the way the Australian labour market will reorganise itself, with work gravitating towards roles in which humans can add most value working alongside technology, and towards industries that supply the goods and services for which there is most growth in demand.
All workers will be forced to adapt, but the transition will be much harder for some than others. Some workers will remain employed in their current field but will need to adapt to the evolving demands of their role. Others will need to transition to new roles or new industries altogether. The routes that these disrupted workers take to their new roles are what defines the skills challenge for the Australian labour market. In the next chapter, we employ Oxford Economics’ Skills Matching Model to analyse this skills challenge in greater depth.
The skills facing workers and employers
What does our projected change in the 2028 jobs landscape mean for Australian policymakers, employers, and workers as they ready themselves for the future demands of the economy? Today’s workforce does not possess many of the skills and experience that the future economy will demand of it. The better that these shortcomings are understood, the better prepared these various stakeholders will be to smooth Australia’s transition to a more technologically advanced, productive, and larger future economy.
For the next stage of our study, we used Oxford Economics’ Skills Matching Model to simulate iteratively how all the job vacancies that result from our technology scenario will be filled in 2028.
To do this, it is not enough to understand where, ultimately, jobs will be created and lost in the economy, since this misses all the incremental job changes in the middle. For example, we would not expect each displaced taxi driver to retrain as a healthcare assistant or software designer. Instead, there will be a “ripple effect” throughout the economy, as most affected workers seek out new jobs with task-profiles closely aligned to their own.
Our Skills Matching Model is designed to simulate the mechanisms that play out in the real-world labour market. This enables us to explore the routes to new employment that displaced individuals will most likely take, and the additional skills they will require to get there.10 (See Appendix 2 for more information on how this model works.)
5.1. Where is the skills challenge most acute?
Our analysis shows that today’s workforce faces the most acute challenge in terms of acquiring the required level of new IT skills. For example, the workers most likely to be pulled into occupations needing programming skills are found to fall 57% short of the overall level required in our 2028 technology scenario. Similarly, for technology design, workers are estimated to be 43% short of the economy’s future requirement.
For jobs requiring the complex cognitive skills of maths and science, employers will be drawing from a pool of labour that currently falls, respectively, 20% and 30% short of where it needs to be. Such highly technical occupations will be in great demand in future and are at the heart of delivering the kind of technological progress that define our 2028 scenario.
Relatively acute skills challenges also show up in other technical areas. Our model suggests today’s workforce is not sufficiently prepared for future jobs demanding operations skills such as equipment maintenance, installation, operations analysis, and technical repairs. In these skill areas, the best available candidates to fill emerging positions are currently 25 to 35% short of the levels required, overall. In Fig. 13, below, we set out the Australian labour market’s full skills challenge, with the skills grouped into six overarching categories.
10 The Skills Matching Model focuses on those workers that change occupations as a result of the creation and displacement of jobs across industries and occupations.
Many displaced workers are in fact “re employed” in the same occupation and industry in our 2028 scenario as today, as a result of the income effect offsetting the displacement effect, and they are therefore excluded from this analysis.
Box 3: A real-world application of our skills shortfall analysis
To illustrate how skills shortfalls are estimated, we present an example of a common job move in our model: a contact-centre clerk becoming an advertising and marketing professional. The contact-centre clerk has adequate skills to complete some aspects of the advertising role, such as those relating to social perceptiveness and speaking. But the clerk would face a significant learning curve in others. The advertising and marketing jobs typically require higher skills in operations analysis, systems analysis, and judgement and decision-making.
In order to estimate the size of her “skills shortfall”, we quantify the skills profiles of both occupations, using O*NET data (see Appendix 3) and the difference between them. The clerk’s shortfalls for each task are illustrated by the light-blue areas in Fig. 14.
Figure 14. Skills shortfall for contact-centre clerk becoming an advertising professional
5.2. How widespread is the skills challenge?
From the point of view of the numbers of workers affected, it is the softer human and elementary skills that pose the largest challenge for today’s workforce. While the skills shortfall is typically narrower for this category — making the individual challenge typically less acute — the number of workers falling short of various softer skillsets is much greater.
A much larger share of future jobs will demand interactive, communication skills than they do today. While technological innovation is driving change, and many workers will be required to work more closely with technology, the biggest shift in employment levels in Australia will be into jobs requiring more of these softer skillsets.
Our model shows that more than 350,000 workers will find themselves moving into jobs that require an upgrade to such skills as active listening, speaking, and critical thinking skills. More than 150,000 will need to upgrade their ability to negotiate, persuade, and learn—functions that are much less important to their roles today.
This largescale softer reskilling requirement poses a very different challenge to stakeholders in the Australian labour market to the need for STEM skills training. The mode, method, and frequency of training will differ accordingly, which is a critical consideration for businesses, policymakers and educators in how they should prepare to provide the necessary skills training.
Fig. 16 illustrates the relative acuteness and breadth of the skills challenges in each of our six overarching categories. The length of the segment represents the relative size (acuteness) of the skills shortfall for each category, while the angle represents its share of the total skills gap.
IT skills and operations skills protrude from the pie, emphasising the difficulty of preparing today’s workers with such sophisticated skills. However, the largest share of the pie is taken up by elementary and human skills — categories that are characterised by relatively small skills shortfalls but on a vast scale. For this reason, the Australian economy has as much of a job to do in readying today’s workers for these new demands as it has in training the next generation of STEM specialists.
How will technology evolve the sector?
Australia’s agriculture sector already faces significant challenges thanks to slim profit margins, inefficient supply chains and unpredictable weather, while poor connectivity has meant that until recently the sector has been unable to take advantage of many of the benefits of digitalisation. But as network issues begin to be resolved, the sector finds itself lagging other industries in terms of its capability to wield digital technology to boost its economic performance.
The challenge now is to quickly build up capabilities within the agriculture sector to utilise digital technologies such as connected sensors and data analytics to provide greater insights into farm performance and translate these into productivity benefits. Significant opportunities exist to boost farm performance by automating production and logistics processes, but only if the skills exist that enable appropriate solutions to be developed.
How will the demand for agriculture workers evolve over the next decade?
Almost 3% of today’s Australian workforce is employed in the agriculture sector. Its task profiles are dominated by physical interactions and capturing and monitoring information, which means many of these workers will be highly vulnerable to automation over the next 10 years.
Our analysis predicts a particular reduction in demand for crop farm labourers and mobile farm plant operators, falling 13% and 25% respectively. These jobs are highly vulnerable due to their routine and codifiable nature.
In contrast, we predict the demand for gardeners to grow by 8%, as they benefit from productivity gains elsewhere. These workers spend relatively more time on less routine tasks such as making human connections and thinking creatively.
The future of jobs and skills needed
How widespread are skills shortfalls for new entrants to this sector?
As well as an overall reduction in headcount in agriculture, the rebalancing of demand for workers within the sector will lead to a significant reskilling challenge as new roles emerge.
Our analysis suggests that more than half of the most likely talent pool to fill these vacancies (both from within and outside the sector) lacks some necessary skills, especially regarding monitoring, speaking and critical thinking. These skills are a core element of the available roles, meaning widespread retraining will be vital.
For emerging jobs that require more technical skills such as programming, technology design and science skills, we see that the most likely prospective workers are significantly under skilled. While the numbers of workers required for these roles are relatively few, the task of finding suitable employees represents a significant challenge for the sector. In contrast, for the wider set of skill requirements we predict in the sector the reskilling gap is actually smaller than for most other sectors of the Australian economy.