Botswana, according to a survey released this week, is the only country with a skills shortage worse than Australia's. For those who believe that government is the answer to every problem, this sort of evidence proves the failure of federal and state governments to plan for the future.
For those who understand that a free market is better than bureaucrats at allocating resources, there's a simple explanation for what's happening in Botswana and Australia. The economies of both countries are booming, and demand for skilled labour is exceeding supply.
Given that on almost every measure the coalition has done a good job at managing the economy (noting that the task of management is different from the task of reform), the only thing left that critics of the Prime Minister and Treasurer can complain about is the skills shortage.
For all of the debate about the skills shortage, few people have bothered to ask what exactly there is a shortage of. It is too simple to just say there is a shortage of skilled workers. In fact, there is a shortage of workers with the requisite skills willing to work at the wages and conditions being offered. It is this last part of the skills shortage equation that is being ignored.
According to the Department of Employment and Workplace Relations, in NSW, for example, there are job vacancies for mathematics teachers in secondary schools, bakers and hairdressers. If maths teachers earned an annual salary of $100,000, and we were willing to pay $10 for a croissant and $200 for a haircut, those vacancies would soon disappear.
Last week after the federal budget former Labor leader Simon Crean said not enough was being done to address skills shortages in rural and regional areas. "We've got terrible examples of imported labour being used, bringing people in from overseas, because the government has failed to invest in training Australian people to do the job", he said. The point of his claim is presumably that a few billion dollars of extra government funding to TAFE would fix the problem. But this is economic nonsense. A thousand additional people trained as pastry cooks living in regional Australia wouldn't solve anything if they weren't willing to work as pastry cooks at the wages employers were able to pay.
There's nothing new about skills shortages. The most notorious example is that of teachers. For decades it has been close to impossible to get sufficient numbers of teachers willing to work in the regions. State governments have tried a range of measures, even a form of industrial conscription that required teachers to serve in remote locations before being able to apply for a posting back in the city. The obvious solution of using price signals and increasing the pay of teachers in remote areas relative to those in the capital cities has, of course, been vetoed by teacher unions.
"Price signals" is a term that has almost disappeared from the policy vocabulary. We've had the paradox that although we have globalised and liberalised, prices in many parts of the economy are still not set by the market. Instead politicians insist on either determining prices themselves or the responsibility is handed over to regulators. Everything from telecommunications, to utilities infrastructure, to health services is subject to interference from government -- and education and training is no exception.
There's no lack of people willing to pay for the education required to become a doctor. Nor is there a lack of people who would then choose to work as a doctor in a regional area. The only thing stopping the training of more doctors for regional Australia is the law that prohibits universities from setting fees and offering places to match the demand of the market.
Price signals are almost completely absent in the education and training sector in Australia. Places in universities and TAFE colleges are centrally allocated by government. And the result of the absence of price signals is underinvestment (or overinvestment), which is precisely what has occurred in the sector. When this sort of system is then combined with an industrial relations regime that was founded on the principle that price signals in the labour market ought to be ignored, it is entirely to be expected that we should suffer skills shortages.
Certainly there is a skills shortage in Australia. But it is not the product of insufficient planning by government. Quite the reverse. The current situation is the result of too much planning.
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