Posts Tagged‘wage’

Dealing With The “Skills Shortage”.

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.

Salaries, Skill Shortages and Market Economics.

Over the weekend I was fortunate enough to be involved in a piece for the Canberra Times on salaries in the ACT, thanks wholly to my journalist friend who set up the connection.  Whilst the online version doesn’t show me in it (you’ll have to buy the paper for that!) the main thrust of it was that, for men at least, the highest paying industry you can be in is ICT. Whilst my part was merely to put the human element into the story it got me thinking about my career to date and why the IT industry in Canberra has been so lucrative over the past half decade or so. As far as I can tell it’s a local phenomena to Canberra thanks to a few obvious factors.

I’ve always been interested in computers but when it came time to choose my career I wasn’t really looking to end up where I am now. By training I’m technically an engineer and by rights I should’ve been seeking jobs in embedded systems or at the very least a software engineer role. It wasn’t for lack of trying however, after languishing on a help desk for a year and a half I finally struck out at my first programming job, applying for a junior developer position at the Australian Treasury Department. Funnily enough I actually got that role although instead of taking it I foolishly used it as leverage to get a similar job at my current work place. That of course was an unmitigated disaster as I was put into a team that didn’t want nor need me and less than 6 months later I jumped ship into my first system administrator role.

After making that jump the prospect of taking a massive pay cut to be an actual engineer didn’t look so appealing.

In fact the next few years saw me go on a roller coaster ride of several jobs in the IT industry. It wasn’t because I couldn’t hold a job down or I got fired for incompetence, more it was that I found people were more willing to pay market rates for new hires than they were to promote someone internally. The reason for this was simple, there’s has always been a shortage of skilled IT people in the Canberra area. The reasons behind that are twofold: all government departments have their head offices (and therefore the majority of their IT infrastructure) in Canberra and the population here is just over 350,000. This means it’s a seller’s market here when you’ve got skills in IT and it has been for the past 5 years.

Realistically it’s just another example simple economic principles in action. There’s a relatively fixed supply of skilled IT workers in Canberra and in order to increase that supply they have to make it attractive for people to consider making the move. The first, and usually primary, motivator for most people is base salary and when you’re competing against private industry in other states the wages have to be comparable for people to consider making the move. Over the years this quickly put the average IT wage well out of the reach of normal APS brackets and thus we saw the birth of the contractor industry in Canberra in order to keep the level of skills required in the region. There was of course the dark times when the Gershon Report was in full swing which kept the IT market down in Canberra for a short period of time but it rebounded with renewed gusto the second people realised work wasn’t getting done.

However I strongly believe that this is a local maxima, focused tightly around the Canberra region. Put simply the factors involved in driving IT salaries up just don’t exist in the same concentration outside Canberra as every other major city has a higher population and much smaller government presence. This doesn’t mean IT isn’t worth anywhere in Australia outside of Canberra, far from it. IT skills are amongst some of the most portable talents to have as nearly every industry in the world relies on IT for critical business functions. If you’re really trying to make the most of the IT industry in Australia (and you’re not an entrepreneur) then you really can’t go past Canberra, especially as a starting point.