Canberra is a weird little microcosm as its existence is purely because the 2 largest cities in Australia couldn’t agree on who could be the capital of the country and they instead decided to meet, almost literally, in the middle. Much like Washington DC this means that all of the national level government agencies are concentrated in this area meaning that the vast majority of the 360,000 or so population work either directly or indirectly for the government. This concentration of services in a small area has distorted many of the markets that exist in your typical city centres and probably most notable of them all is the jobs market.
To put it in perspective there’s a few figures that will help me illustrate my point more clearly. For starters the average salary of a Canberran worker is much higher than the Australian average even beating out commodity rich states which are still reaping the benefits of the mining boom. Additionally Canberra’s unemployment is among the lowest in Australia hovering around a staggering 3.7%. This means that the labour market here is somewhat distorted and that’s especially true for the IT industry. However, like the manufacturing industry in the USA, there are still many who will bellyache endlessly about the lack of qualified people available to fill the needs of even this small city.
The problem is, as it always has been, simple economics.
I spent a good chunk of my career working directly for the public service, jumping straight out of university in a decent paying job that I figured I’d be in for quite a while. However it didn’t take long for me to realise that there was another market out there for people with my exact same skills, one that was offering a substantial amount more to do the same work. Like any rational person I jumped at this opportunity and have been continuing to do so for the past 6 years. However I still see positions similar to mine advertised with salaries attached to them that are, to be fair, embarrassing for anyone with those kinds of skills to take when they can get so much more for doing the same amount of work. This has led to a certain amount of tension between Canberra’s IT workers and the government that wishes to employ them with many agencies referring to this as a skills shortage.
The schism is partly due to the double faceted nature of the Canberran IT market. One the one hand the government will pay you a certain amount if you’re permanently employed with them and another if you’re hired as an outside contractor. However these positions are, for the most part, identical except that one pays an extraordinary amount more at the cost of some of the benefits (flex time, sick/annual leave, etc.). It follows that many IT workers are savy enough to take advantage of this and plan their lives around those lack of benefits accordingly and thus will never even consider the lower paid option because it just doesn’t make sense for them.
This hasn’t stopped the government from trying however. The Gershon report had been the main driver behind this, although its effects have been waning for the past 2 years, but now its the much more general cost reductions that are coming in as part of the overall budget goal of delivering a surplus. The problem here however, as I mentioned in the post I just linked, is that once you’re above a certain pay grade in the public service you’re expected to facilitate some kind of management function which doesn’t really align with the requirements of IT specialists. Considering that even outside of Canberra’s arguably inflated jobs market such specialists are able to make far more than the highest, non-managerial role in the government it comes as no surprise that the contractor market had flourished the way it did and why the implementation of the Gershon report did nothing but decimate the government’s IT capability.
Simply put the skills/labour shortage that’s been experienced in many places, not just Canberra, is primarily due a disconnect between the skills required and the amount organisations are willing to pay for said skills. The motivation behind the lower wage costs is obvious but the outcome should not be unexpected when you try to drive the price down but the supply remains the same. Indeed many of the complaints about a labour shortage are quickly followed by calls for incentives and education in the areas where there’s a skills shortage rather than looking at the possibility that people are simply becoming more market savy and are not willing to put up with lower wages when they know they can do better elsewhere.
I had personally only believed that this applied to the Canberra IT industry but in doing the research for this post it seems like it applies far more broadly than I had first anticipated. In all honesty this does nothing but hurt the industry as it only helps to increase tensions between employers and employees when there’s a known disconnect between the employee’s market value and their compensation. I’d put the challenge to most employers to see how many good, skilled applicants they get if they start paying better rates as I’d hazard a guess their hit rate would vastly improve.
I used to have a lot of pride in the idea of big corporations. After spending much of my life working for the public service (and indeed I still am although in a different capacity) and lamenting at the inefficiencies the private sector looked like the greenest pastures I’d ever thought of. It was then interesting to note that when it came time for me to make the jump into the private sector my initial impressions were pretty much as I had expected. After a while though it all started to morph into the same story I had experienced for the past few years.
Take any large organisation and the one thing you’ll notice is the increase in bureaucracy and this is not necessarily a bad thing. As organisations grow larger they will require more people to lead and facilitate communication between disparate sections. However what I traditionally saw in the public service was that restructures often caused redundant positions to retained instead of removed. This often lead to the too many chiefs problem where you get a lot of people who are in charge of something or someone which tips the management to underling ratio unfavourably. This is not to say I didn’t see the same thing happen in the private sector, it was just less common as when you’re trying to turn a profit from your business it becomes much easier to remove those people who aren’t really adding value to the business.
More recently I’ve encountered this in my own personal financial matters. A couple years ago my fiancée and I took the plunge and bought our first house here in Canberra. The process was actually pretty easy for us and we managed to find our beautiful home in the first week, although we held off making an offer for a while to make sure it was the one we wanted. After a couple quick signatures and a couple of phone calls to our broker the process was over and done with in a matter of weeks. Needless to say we were pretty impressed with everyone involved.
Naively believing that it would be the same deal the second time around we took the plunge yet again to buy an investment property. Now I know most people would be telling us we’re crazy for trying this (I did the figures, and believe me it still surprises me how good an idea this was) but we went ahead anyway. We found a beautiful place that would rent fantastically which unfortunately fell through. We since then found another house which was in good shape for its age and was in a great location. So we went ahead and decided to purchase.
Queue the last 2 months of my life spent dealing with the bureaucracy that is one of the big 4 banks of Australia. Our first loan was from a smaller bank that was from outside of our state and was a painless process. Our new bank had so many different sections that communications between myself, my broker and the bank would usually hit at least 3~4 different sections, all of which were responsible for different things. Not only was settlement delayed over a month because of a simple question I asked they also lost several critical loan documents twice over, something I’d never experienced before from a professional institution (let alone a bank). I was left pining for the smaller banks, at least then there would only be one central location that dealt with everything.
And so marked the end of the idea that a bigger corporation could do something better. It seems that there’s a sort of bell curve phenomenon going on here. When you’re too small you can’t do all the things that the big guys do. Once you’re at the peak you’re doing just as well as the big guys without the inefficiencies. After that it’s all down hill and whilst your company might be more successful you’ve traded in your efficiency to achieve that. It does keep the stock holders happy however.
I guess now its time for me to put my money where my mouth is and start my own company and do better then them. I’ll take the easy route out and blame the global financial crisis for it instead 🙂