CHAPTER 2

CHAPTER 2

The demand for skills in agribusiness and agriculture in Australia

2.1        Agriculture and agribusiness are key employers and export earners for the Australian economy. In 2009–10, the gross value of agriculture, forestry and fisheries was $43.6 billion, or three per cent of Gross Domestic Product (GDP).[1] The agriculture sector also has impacts beyond the value of its production through its support of the wider food supply chain. This includes food and beverage processing, manufacturing, distribution, wholesaling, retailing, food services and trade. The turnover of food and beverage processing alone is in excess of $70 billion per year.[2] Clearly, agriculture and agribusiness[3] are key components of the Australian economy. Despite this, a critical skills shortage has developed which threatens the ability of the agricultural sector to continue to grow and meet increasing global demand for food and fibre.

Employment in agriculture and agribusiness

2.2        Agriculture and Agribusiness are major employers in Australia, in rural, regional and metropolitan areas. Three per cent of the Australian workforce (approximately 327 000) is directly involved in the agriculture, forestry and fishing industries.[4] However, agribusiness extends far beyond primary production and it is estimated that once ancillary employment in fields such as warehousing and manufacturing are considered, up to one-in-six Australian jobs (around 1.6 million) depend on agricultural production.[5] Between 2001 and 2011 however, employment in agriculture declined by 27 per cent as 119 300 jobs disappeared through drought and other hindrances on industry.[6] As agribusiness expands and the primary production sector recovers from the prolonged drought, the Department of Education, Employment and Workplace Relations (DEEWR) forecasts employment growth in agriculture at a rate of 1.5 per cent per annum.[7]

2.3        The agricultural and agribusiness workforces are extremely diverse and fragmented. This is because of the expansive value-chain and the large number of small enterprises that constitute the sector. Geographically, agribusiness has a presence is all major cities and constitutes a large part of the economy in regional, rural and remote areas.[8] Agricultural enterprises and agribusinesses require all manner of workers ranging from unskilled labour through to highly-qualified and experienced academic researchers. Furthermore, this spread of employees is split into all manner of specialised fields that go beyond traditional 'agricultural' professions and encompass advertising, marketing, product development, economics, law, biotechnology, and mechanisation among others. 

2.4        In spite of the increasingly complex and demanding value-chain structures that characterise the industry, of all economic sectors, it has the lowest number of workers with post-secondary qualifications.[9] In 2009 only around 7.8 per cent of the agricultural industry had tertiary qualifications compared with 25 per cent for the wider community.[10] The employment of apprentices in the Agriculture, Forestry and Fishing industries is also lower than other industries.[11] Skills Australia argued that this is partly a reflection of the higher age-profile of the sector compared to others, but is also likely to be an indication of industry's preference for 'on the job' skills development and traineeships instead of formal 'apprenticeship style' education arrangements.

2.5        The committee heard that for a long time human capital has been regarded by industry as a non-strategic cost rather than an asset, and that overall, education and training are misunderstood and undervalued.[12] The way in which training is viewed by industry has a critical impact on the shape of the workforce. The Tasmanian Farmers and Graziers Association – the peak body representing farmers and agriculture more broadly across Tasmania – argued that the agribusiness sector has traditionally been very poor in promoting training and education in the existing workforce.[13] It was argued by Skills Tasmania that the low perceived value of training in agricultural production and agribusinesses generally contributes to the low use of formal training mechanisms. Some education providers also indicated that industry has provided minimal, or at least haphazard, support for agricultural skills development and higher education.[14]

2.6        The Australian Council of Deans of Agriculture (ACDA) – a council comprised of universities in Australia that offer a degree course in agriculture – summarises the current educational situation facing the agricultural and agribusiness workforce:

[P]rofessional education in agriculture has not been a priority for the industry over many decades. As a consequence the industry has fallen well behind the community at large, and international competitors, in levels of education...[H]owever the complexity of modern day living, the high tech nature of modern agriculture, the high levels of compliance, the complexities of business and marketing produce, high expectations and environmental management...make the case very much stronger for higher levels of education and training than has hitherto been necessary.[15]

2.7        Despite low levels of formal qualifications, 62 per cent of the agribusiness workforce is classified as managers or professionals.[16] Recent research conducted by Marcus Oldham College provides some insight into the importance of education to successful agribusinesses. Successful farmers conceptualise themselves as business people with technical knowledge of their particular field. Knowledge of business structures, finance, and strategic planning were listed as valued knowledge by successful farmers, and it was their business knowledge that defined their success.[17] In today's world, these skills are developed through a combination of experience and formal learning.

2.8        The committee heard that capacity for innovation is largely determined by workers' characteristics such as education, business acumen, financial resources, skilled labour and access to public and private extension services.[18] Therefore, it stands to reason that the more educated the sector's workforce, the more successful and innovative it will become.[19]

Skills shortage

2.9        It is now widely recognised that there is a skills shortage in Australia. A skills shortage occurs when the demand for a particular occupation is greater than the supply of workers who are qualified, available and willing to work under existing market conditions. Skills shortages may be confined to a particular geographic area, and may coexist with high levels of unemployment. Generally, shortages are more likely to occur in fields which require significant periods of training and experience.[20]

2.10      Skills shortages are difficult to quantify across sectors as diverse and fragmented as agriculture and agribusiness. It is evident that different components of the sector are facing different shortages to different degrees. Skills Tasmania reported that larger corporatized farms are in need of management and strategic skills; horticulture is lacking seasonal harvesting labour; and the viticulture industry is searching for additional allied business skills such as marketing.[21] Different locales also face different labour markets. In Queensland and Western Australia where the impacts of the mining boom are especially pronounced, farmers and agribusinesses report significant trouble recruiting and retaining staff. Mining typically pays significantly higher wages than agriculture.[22]

2.11      Despite the difficulties in identifying every shortage, it is clear that many sectors of the industry are facing severe shortages. Grain Producers Australia (GPA) – the national representative body for the grains industry – relates that in the area of agronomy there are around 10 jobs for every graduate.[23] Elders – a 172 year-old national agribusiness company – provided the committee with some telling statistics regarding the skills shortage, especially of agricultural scientists:

In the agricultural sector, there is an ongoing labour market shortage in the field of agricultural science. In 2010, only 40% of advertised positions were filled and there were 1.1 applicants for each job. This is down from 65% filled vacancies and 1.4 applicants per job in 2009.[24]

2.12      Similarly, Agriplacements Australia – a business dedicated to sourcing people for agribusiness, bioscience and agricultural industries – related that many employers are reporting increased difficulties in securing staff.[25] The committee heard that some jobs advertised in isolated areas received no response whatsoever from prospective workers.[26] Agriculture and agribusiness education institutes have been receiving calls from businesses trying to recruit current students.[27] The Rice Growers' Association of Australia (RGA) – whose members have reported difficulties recruiting 'across all levels of skill' – argued that the true extent of the skills shortage has been masked by the recent prolonged drought and is only now becoming fully apparent as agricultural enterprises have moved back to full production.[28]

2.13      One causal factor of the skills shortage is that tertiary completions have fallen far behind industry demand. It was reported to the committee by the University of Western Australia (UWA) that, due to a shortage of students, the university has struggled to maintain a cohort commensurate with industry and research needs.[29] According to ACDA:

There has been a continual decline in graduate completions in university agriculture and related degrees for the last two decades (currently <300 in agriculture and <700 in agriculture and related courses) whereas the job market for graduates, as evidenced by job advertisements, indicates that there have been in excess of 4000 positions per year consistently over the past four years.[30]

2.14      The committee was cautioned by ACDA that the decline in graduate numbers has implications for the productivity of the industry, and the sustainability of agricultural research and education.[31] Due to the difficulty in attracting degree qualified candidates for jobs, many organisations are now employing diploma-level graduates to undertake work previously completed by university graduates. The committee heard that there is some concern regarding the ongoing viability of this practice.

2.15      As well as the on-going shortage of agricultural matriculations, the committee heard concerns that existing courses do not adequately prepare those students who do graduate for the workforce, thereby necessitating further training before they can be effectively used by industry.[32] The content of agribusiness education is discussed in the following chapter.  

2.16      It was put to the committee that the most effective way to address the skills shortage in the short- to medium-term is by 'up-skilling' existing employees in agriculture and agribusiness.[33] Another option is to enhance the training of young workers in rural locations as the most efficient students in agriculture and agribusiness tend to come from those areas.[34]

The imperative of addressing the skills shortage

2.17      Skills shortages impact upon the entire supply chain. Although food security has not been a prominent topic in Australia in recent times, this is changing. On 27 October 2011 the Minister for Agriculture, Fisheries and Forestry announced further details regarding the development of Australia's first National Food Plan (Plan).[35] The Minister listed the objectives of the Plan, among others, as:

2.18      The challenges in feeding a growing population require a productive and versatile industry.[37] Skills Australia reported to the committee that a lack of appropriate skills could impact agricultural production or put upward pressures on prices which have a flow-on effect across the economy and Australia's trade partners.[38] 

2.19      Relatively low levels of formal qualifications suggest that the existing workforce may not have the right skill set to fully adapt to the future challenges facing the industry.[39] Some skills shortages present significant medium-term threats. Skills Australia maintains a list of occupations in shortage which if not addressed could have significant economic impacts on industry. That list currently includes such professions such as forestry scientists, land economists, and cartographers; all clearly related to agriculture and agribusiness.[40]

2.20      As well as representing a medium- to long-term threat to agricultural production, skills shortages also present a more immediate concern. The RGA reported that vital machinery is sometimes left idle for days or weeks because there are no qualified mechanics available to repair it when breakdowns occur.[41] The committee heard that, should there be a bumper harvest in the near future on the East coast of Australia, industry will suffer 'massive crop losses' because of a shortage of labour and machinery.[42] Furthermore, the shortage of labour has meant that the existing workforce is required to work excessive hours to compensate, thereby creating additional workplace health and safety hazards. SunRice – one of Australia's largest branded processed food exporters and household name – reported to the committee that:

As a consequence of these acute labour shortages, SunRice relies on additional shifts and extended work hours to overcome the skills shortage. For these shortages to not cripple our operation, we depend on the good will of employees and their families to cover the requisite additional shifts and extended hours of work. The remuneration requirements for additional shifts and overtime, which are prohibitively expensive, mean they can only be economically viable as a last resort to satisfy customer orders and other business objectives.

2.21      The skills shortage also limits industries' ability to take advantage of opportunities that present themselves, and also constrains the growth Australia's export earnings. As explained by Queensland cotton farmer Ms Barbara Grey:

We are often not in the position to grow opportunity crops when seasonal conditions allow, owing to the shortage of skilled and semi-skilled workers. In our business, it is one thing to make an investment plan around your machinery, but another to make such a plan around your labour. It is increasingly difficult to attract capable staff to rural [and] regional areas.[43]

2.22      The committee received conflicting evidence on whether the current skills shortage will be resolved through market forces alone. Skills Australia anticipates that many current skills shortages will be resolved this way.[44] Although DEEWR is predicting employment growth in agribusiness over the coming years, this is unlikely to fully address the shortage. As Skills Tasmania explains, growth begets growth:

Growth in the Tasmanian agribusiness sector will lead to increased demand for skilled labour throughout the value chain. There is likely to be increased demand not only for entry level workers, but also for highly skilled staff in areas such as research and development, agronomy, laboratory technicians, food safety, food processing, marketing and business and personnel management.[45]

Productivity

2.23      The issue of agricultural productivity was raised by a number of stakeholders during the course of this inquiry.[46] Productivity growth means that resources – such as labour, capital and land – are being used more effectively and efficiently.[47] Improved productivity bestows significant economic advantage for businesses and the nation as a whole. The benefits of increased productivity are clear, over the last three decades, productivity growth in the agricultural sector has returned an estimated productivity dividend in excess of $170 billion.[48]

2.24      The committee heard estimates that productivity in agriculture has to increase by anywhere from 1–5 per cent per annum to remain competitive in both domestic and international markets, and to maintain levels of return for Australians in the sector.[49]

2.25      In terms of multifactor productivity – a measure that considers both labour and capital inputs – (MFP) growth in agriculture, Australia has performed relatively strongly over the last two decades compared to its international competitors, but has recorded lower productivity increases than countries such as Canada and Denmark.[50] Despite showing overall growth, advances in productivity in agriculture have not been evenly spread: at the same time as the cropping industry has shown strong gains, sheep and beef farms have been going backwards in real terms.[51]

2.26      For some time productivity gains in agriculture were double the national average. Between 1974–75 and 2003–4, MFP in the agriculture sector averaged around 2.3 compared to the national trend of one per cent.[52] In recent times the increase in agricultural productivity has levelled off.[53] Statistics from the Australian Bureau of Statistics indicated that since 2003–04 productivity in the agriculture, forestry and fishing industries has increased by less than three per cent over six years.[54]

2.27      Research and development has long been the cornerstone of increasing productivity across the food chain, and the committee heard that declining research and education funding was a significant threat to future gains. The Grains Research and Development Corporation (GRDC) put it to the committee that there exists a direct link between the decline in productivity growth and declining research funding.[55] Statistics from the dairy industry indicate that productivity growth has slowed at the same time as research funding has levelled-off from the late 1990s onward.[56]

2.28      The committee also heard that a strong link also exists between productivity and an adequate supply of labour.[57] People who are better educated, with increased competencies in relevant fields produce more from less and find opportunities amid complexity.[58] One study revealed that supplying a sufficient quantity of skilled workers to a region can increase productivity in that area by 3.2 per cent.[59] Testimony received from the National Farmers' Federation (NFF) argued a similar point:

Securing an adequate supply of suitably skilled labour is vital in optimising Australia's agricultural productivity. Improving the skill level of the agricultural workforce is essential to enhancing innovation, strengthening competitiveness, boosting resilience and developing a large capacity for the industry to capitalise on opportunities and contribute to global food security.[60]

2.29      The Productivity Commission supported the premise that the labour supply impacts upon productivity, arguing that: 'the educational attainment of agricultural workers has increased in recent decades, which suggests an increase in the quality per hour worked.'[61] Unfortunately, at present, the opposite trend is evident in the food sector as industry employs people with lower level qualifications to complete higher level work because of the skills shortage. [62]  

Committee view

2.30      The committee is of the opinion that there is a significant skills shortage in both agricultural production and agribusiness in Australia, and that this skills shortage is not going to resolve itself through market forces. This will be exacerbated by the ageing of the workforce in the medium-term, and competition for labour from the mining sector for the foreseeable future. The skills shortage also poses a threat to the productivity increases that are necessary for the continued viability of the food sector. Therefore, the committee considers that steps must be taken to alleviate the skills shortage, and protect productivity growth. Industry and education bodies, working with government, will need to undertake concerted efforts to address the skills shortage to ensure that there are sufficient human resources to meet the needs of a growing sector. It is to this subject that the report now turns.

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