The IT shortage and the Universities

The nation is facing a growing shortage of IT specialists.  While there are numerous causes and solutions, the key lies with the universities.

Over the last decade, the demand for IT professionals has grown at a phenomenal rate -- in excess of 10 per cent per year.  While universities and TAFE colleges have expanded enrolments, they have failed to keep up with demand.  Moreover, Australian IT professionals are being lured offshore in growing numbers by big pay cheques and a low Aussie dollar and there have been restrictions on immigration of IT professionals As a result, there is currently a shortage of people with IT skills.

This has proven to be a boon for the IT profession.  IT graduates command the four highest starting salaries amongst university graduates.  Unemployment is virtually non-existent in the industry.  And average wage rates for experienced IT professionals exceed those of seasoned lawyers.

The expectation s are for demand to continue to out-strip supply with a shortage forecast of between 27,000 to 40,000 IT professionals over the next five years.

Given the big role IT plays in the boosting productivity throughout the economy -- with about one-third of productivity growth in recent years being generated from the use of IT -- a skills shortage of the forecast magnitude will have a deleterious impact on the nation's growth prospects.

One solution is to allow higher immigration of people with IT skills.  The simplest way to do this is to make it easier for the thousands of foreign students studying IT in Australian universities to stay.  The Howard Government has recently moved in this direction by increasing the number of immigration places for IT professionals and allowing overseas IT students to apply for immigrant status.

Another solution lies with increasing places in private training courses -- whether at universities, private college or within firms.  The return on IT training is -- at 30 per cent -- high enough to encourage people to pay and the scarcity of staff should induce employers to contribute.  Though as long as governments continue to pick-up the tab on higher education generally, few people or firms are going to want to do so.

The main solution lies in getting greater through-put out of the universities -- which supply 47 per cent of IT professionals.  To do this at least three changes need to be made.  First, the universities must be allowed to pay competitive wage rates.  Currently, they are forced by DEETYA to apply a uniform band of wages across all disciplines.  These wages might be fine for a sociologist or biologist but they fall far short of the alternatives available to good IT people.

Second, universities must be allowed to be more responsive to student demand.  Universities are currently funded by the Commonwealth according to fixed numbers of places calculated using a fixed and arbitrarily set of relative costs factors.  Since there is excess demand for all courses, the universities are under no pressure to reallocate resources to higher valued areas.  Since the cost factor allotted to IT understates the true cost to the university, there is a strong fiscal incentive not to shift resources to IT courses.

Third, more funds should be allocated to the universities.  However, this is unlikely to solve the IT shortage, unless the funding structure and incentives are changed first.

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