Forecasting the Workforce Needs of the Australian Rail Transport Industry ARTI

1
Forecasting the Workforce Needs of the Australian
Rail Transport Industry (ARTI)

• Anusha MahendranDr Mike DockeryCentre for
  Labour Market Research
• PATREC Research Forum
• 2 October 2008

2
Study Background

• Findings presented are based on an update of
  modelling that was originally completed as part
  of a study on the Australian rail industry
  workforce
• which was conducted by the Centre for Labour
  Market Research (CLMR)
• in conjunction with the Planning and Transport
  Research Centre (PATREC)
• The original study (which was completed last
  year) was principally sponsored by the
  Cooperative Research Centre for Railway
  Technologies (Rail CRC)
• - With the results of the study being
  presented in a report that we authored entitled
  Forecasting Rail Workforce Needs A Long-term
  perspective

3
Study Background

• However funding for the updating of the modelling
  
• - and further analysis using the latest 2006
  Census data
• - was kindly provided for by PATREC
• Study data was acquired from a variety of sources
  including ABS statistics and existing literature
• - As well as primary research which was
  conducted with rail operators and industry
  representatives

4
Objectives
So using the research we collected as part of
the study and also in updating the modelling,
through this presentation Im hoping to cover the
following - Provide some background to the
current Skills Shortage issue - Outline the
major types of firms from the Australian Rail
Transport Industry (ARTI) that the study
focussed on - Summarise some of the major
changes which have occurred in the rail
industry over the last decade - Briefly
explain some of the modelling that was done as
part of the study - Profile some of the
modelling results - Outline some of the
consequent recruitment and training
implications for rail operators/employers -
List some strategies which could assist the rail
industry in addressing its workforce
issues as highlighted by our study
5
Skill Shortages- Current Context

• Firstly - some background about skills shortages
  and the current context in Australia
• - is quite a hot topic of discussion at the
  moment
• Skill shortages have been defined to occur
• - when the demand for a specific type of worker
  exceeds the supply of that type of labour under
  the current market conditions
• - i.e. at prevailing wages and other working
  conditions within a particular location

6
Skill Shortages- Current Context

• The current booming economic climate has placed
  increased strains on the supply of skilled labour
  in Australia
• Consequently many industries are finding it
  increasing difficult to find sufficient numbers
  of skilled personnel to meet their output needs
• - Thus due to the tight labour market many
  industry sectors are now facing the prospect of
  experiencing capacity constraints due to skill
  shortages
• - 1 example of 1 such industry which is the
  focus of my presentation today is the Australian
  Rail Transport Industry (ARTI)

7
Australian Rail Transport Industry- Firm Types

• The study principally focused on firms in the
  Australian rail transport industry who could be
  classified as belonging to 1 or more of the
  following categories
• Providers of Rail Infrastructure Access
• Firms that either lease or own the track they
  control and who administer track access to other
  parties
• - Also included in this group are firms that
  are involved in the provision of signaling
  communications
• Rail Train Operators
• These firms may be owned by either private or
  public sector entities
• - May also be categorized according to whether
  they are involved in the transportation of
  freight or passengers or a combination of both

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Australian Rail Transport Industry- Firm Types

• Maintenance and Other Related Service Providers
• These firms are involved in the manufacture,
  leasing, maintenance repair of
• rolling stock
• rail track
• and/or communications signaling systems
• In addition it also refers to enterprises
  responsible for providing services related to
• - the recruitment training of skilled rail
  personnel

9
Australian Rail Industry- Background Information

• The Australian rail industry has undergone major
  changes over the past decade with the
  implementation of initiatives by the Commonwealth
  and State/Territory Governments which were aimed
  at promoting more competition and efficiency
  within the rail industry
• Prior to deregulation, railways were
  predominately run by State government authorities
  that managed both below-track and above-track
  operations
• Many of the policies that were implemented were
  based on a fairly broad microeconomic reform
  framework
• - involved enforcing a more commercial focus on
  rail operators to improve cost recovery

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Results of Rail Reforms

• These policies induced significant changes within
  the industry including the following
• Caused an increase in private rail activity and a
  decline in government ownership management of
  railways
• Allowed for the vertical and horizontal
  separation of most rail networks
• Enabled the establishment of open access
  regimes which ensured third party access to
  essential rail infrastructure
• Led to an increase in the number of rail
  operators from 12 in 1991 to 27 in 1999
• Presently there are over 30 major rail operators
  in Australia compared to the 8 that existed a
  decade ago
• - Contributed to reducing freight rates,
  improving service quality increasing overall
  productivity within the rail industry

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Results of Rail Reforms

• The reform process resulting labour
  productivity growth within the
• ARTI however also resulted in a large scale
  reduction in employment
• With employment in the industry falling by
  around 50 between
• 1991 2001
• Other reasons for the decline in rail
  employment over the last
• decade include
• increased competition from alternative
  transport modes
• e.g. the trucking airline industries
• increased contracting outsourcing of rail
  operations
• redefining of labour arrangements with there
  being an increased
• emphasis on multitasking and multi-skilling

12
Results of Rail Reforms

• The reforms also led to a substantial reduction
  in training investment across the industry by
  rail employers
• This was due to the increased emphasis on cost
  minimisation heightened fear prevalence of
  poaching
• - which acted as major disincentives for rail
  operators to invest in the staff training
• There was also a distinct decline in the number
  of apprentices and trainees that were recruited
  trained during this period
• As rail employers increasingly looked to recruit
  workers with pre-existing rail qualifications and
  experience
• With most operators preferring to recruit or
  poach already experienced and skilled workers
  rather than invest in training more fresh
  recruits
• During this time there was also a substantial
  rationalisation downsizing of many of the large
  scale training programs that were previously
  sustained by government owned rail organizations

13
Methodology - ABS Census Data Analysis

• The 1st stage of the study involved
• - ABS data from the 1991, 1996, 2001 2006
  Censuses being analysed to develop a historical
  and current profile of the demographic, skill
  occupational characteristics of the Australian
  rail workforce
• - And also to ascertain employment trends
  within the industry
• This involved accessing 2 data tables from each
  Census year profiling Australian rail employees
  by age, gender, State and occupation
• - as well as by age, gender, State and
  qualification level
• - Identical data tables profiling all employees
  in all Australian industries were also sourced to
  enable comparisons to be made

14
Methodology - Questionnaires

• As part of the study, 22 rail operators across
  Australia completed a questionnaire which
  collected information about the rail workforce
  within their organisations
• We got a very high response rate which we were
  quite pleased with because it meant we ended up
  getting about 90 of rail operators in the
  industry to participate in the study
• Specifically data on employment by occupation,
  age and gender
• -current vacancies, recruitment sources
• -occupations in which they were having
  trouble attracting workers
• -wastage rates and retirement expectations
  was collected and analysed from each participant

15
Methodology - Interviews

• The questionnaires were then followed up with
  face to face interviews with human resource
  representatives from 24 rail operators around
  Australia
• In addition to being asked to elaborate on the
  data they had provided in the questionnaires
• - interviewees were also asked about any
  technological changes they were anticipating
  within the industry
• - and the impact of these upon employment by
  occupation and skills demand
• In these in-depth interviews
• - data was also collected on how rail
  operators believed changes in scale of output
  would impact on employment within each
  occupational group

16
Modelling Projections

• The forecasting part of the study involved the
  development of a model to enable future
  projections of labour demand employment within
  the ARTI to be made
• - just to give a brief overview of the model
  we used
• Our approach to forecasting labour demand
  involved assuming initially that there was just 1
  homogenous output from the rail industry Y
• - Produced by homogenous units of labour X
• - So that in any 1 time period (t), the output
  per worker (or labour productivity l) could be
  defined as

17
Modelling Projections Labour Demand/Employment

• Therefore with data on both output employment
  for a given base year- labour productivity could
  be determined
• As can be seen in Table 1 below- Forecasts for
  future output from existing published sources,
  combined with assumptions regarding changes in
  labour productivity were thus used to forecast
  total employment for each time period
• - Have listed the projections made in 5 year
  intervals from 2011 to 2020

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Modelling Projections- Results Labour
Demand/Employment

• The model also differentiated between freight
  passenger task for the rail industry
• Projections for freight task were taken from a
  2006 BRTE report which indicated that freight
  task is predicted to grow by around 2.2 p.a from
  2003 - 2020
• Passenger task projections were taken from data
  presented by the Apelbaum Consulting Group which
  anticipated a growth rate of 1.4 p.a for freight
  task from 2005 - 2020

19
Employment by Occupation

• Forecasts for employment demand by occupation
  were then derived from forecasts of aggregate
  employment based on assumptions relating to
  changes in rail output, labour productivity and
  occupational distribution
• -therefore effectively used a tops down
  approach for the forecasting
• Table 2 below shows the estimated projected
  percentage share of each of the occupational
  groups for different time periods

Rail Workforce Projections - Occupational Share
20
Demand by Occupation
So using the occupational shares listed on the
previous table (Table 2) - Demand by occupation
(in persons) was then calculated for each of the
time periods (as shown here in Table 3 below)
21
Supply by Occupation

• Projections of labour supply by occupation were
  then calculated
• separately by occupation age starting from
  the base year of
• 2006
• which is the most recent year that such
  detailed information
• was available through the ABS Census data

22
Modelling Projections Results

• The differences in the projections for labour
  demand supply for each occupation were then
  interpreted to be projections of labour shortages
  surpluses
• with shortages being indicated by -ve figures
  -surpluses being
  represented by ve figures

23
Modelling Projections - Results

• As can be seen from the modelling results quite
  significant shortages are expected amongst
• - Managerial staff
• - Advanced Elementary clerical, sales and
  service workers
• - as well as Labourers related workers

24
Modelling Projections - Results

• In the short to medium term future
• shortages are also anticipated to occur amongst
  Professionals
  
  
• While in the long term (by 2020), shortages are
  predicted for
• Intermediate production transport workers
  (which includes train drivers) - Associate
  professionals
  
  - and Intermediate clerical, sales service
  workers

25
Modelling Projections - Shortages

• In the case of the occupational groups forecast
  to experience the most substantial shortages in
  the long term
  
  - namely Intermediate
  production transport workers
  -
  along with Managers
• this can be attributed to an increase in the
  forecasted occupation share of these professions
• and also because of lower expected retention
  rates for these occupations as they are dominated
  by older males
• And consequently are more likely to have
  comparatively higher rates of turnover
  retirement

26
Modelling Projections-Average Age by Occupation

• The importance of the age profile of the rail
  workforce in determining the projected shortages
  can be clearly seen from the Table above
  
  
• -the avg age of Managers in the ARTI is projected
  to reach 52.5 by 2021 -while the avg age of
  Intermediate production transport workers is
  forecast to be 51.3 by 2021

27
Operator Sentiment - Aging

• With regard to the aging of rail workers
• 22 of the 24 rail operators
• 92 of those interviewed identified aging as a
  concern in at least one occupational
• group
• The occupational groups for which the
  respondents most commonly identified aging
• concerns
• corresponded with those groups that were
  forecast to have a relatively high average age
• amongst their workers
• - namely Managerial staff and Intermediate
  transport production workers

28
Training Implications

• The modelling results thus indicate that
  significant increases in training must be made by
  rail operators across the industry to ensure
  there is an adequate supply of workers
• -In particular there is a need to develop
  training programs courses for driving,
  clerical, associate professional and managerial
  staff working within the rail industry
• -This is especially poignant considering that
  total employment demand is forecast to moderate
  slightly
• given that we believe the output employment
  demand projections weve made here are actually
  quite conservative
• it also reinforces that the factors that are most
  likely to lead to labour shortages in the rail
  industry lie on the supply side
• So that to effectively address labour shortages
  within the sector -these
  supply side factors need to be improved

29
Recruitment Implications

• Recruitment wise- There is thus a need to
  consistently increase the of Managers
  - as well as Advanced Elementary clerical,
  sales and service workers employed within the
  rail industry
  - also
  increased recruitment of Associate professionals
  and Intermediate production transport workers
  is required in the long term

30
Recruitment Implications

• In the case of Managers and Intermediate
  production transport workers
• - it also seems imperative that rail operators
  should place a greater emphasis on attracting
  younger recruits
• - due to the higher forecasted average age of
  workers in these occupational groups as predicted
  by the modelling results

31
Recruitment Implications

• The option of attempting to increase recruitment
  levels in the ARTI by substantially improving the
  wages conditions offered at entry level however
  seems unrealistic
• - due to the degree of price competition the rail
  industry faces from other transport modes
• - and also because wage increases at entry level
  are likely to inevitably eventually flow on to
  some degree to incumbent workers
• In addition many rail operators also expressed
  that they are already unable to compete with the
  generous financial incentives offered by larger
  firms in other industries that are competing for
  the same type of workers skills
• Such as the mining, building construction
  sectors
  

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Recruitment Implications

• One effective strategy to address the aging
  workforce and labour shortages within the ARTI
  would be to achieve higher retention
• This can be achieved by
  -
  increasing the rate at which new workers enter
  and/or
  - by reducing
  the rate at which existing workers leave the
  industry
• However to achieve either or both of these
  outcomes it is likely that the attractiveness of
  rail careers must be improved
• - especially for currently underrepresented
  groups of workers such as women and younger
  employees

33
Conclusions

• The findings of the study thus indicate that over
  the next decade
• - the ARTI is likely to face several different
  workforce challenges including
• -Problems relating to the aging of its workforce
• -Substantial skill shortages in several
  significant key occupational groups
• -And difficulties in relation to the attraction
  retention of workers

34
Conclusions

• Therefore given the general expectations that
  output in the rail industry will grow in the
  future
• that current tight labour market conditions look
  set to continue
• And because the number of younger workers
  entering the industry is already not sufficient
  to replace ongoing wastage and retirement rates
• There are reasons to be concerned that the
  Australian Rail Transport Industry is not well
  placed to meet its future skills needs

35
Conclusions

• However most operators did express that they had
  evident concerns relating to the
• issues of skills shortages aging amongst
  their rail workers
• Many were developing and looking to implement
  several medium to long term
• strategies to address these workforce issues
  including
• - providing older workers with financial
  incentives and flexible working conditions in
• an attempt to get more of them to delay
  retiring
• - developing and instigating mentoring
  programs and initiatives to promote the
• transfer of knowledge from more experienced
  workers to their younger
• contemporaries
• - increasing their intake of apprentices and
  trainees
• - developing more graduate recruitment and
  cadetship programs
• - increasing their investment in training and
  capability development
• of existing workers and new recruits

36
Conclusions

• Some additional measures the rail industry could
  look at implementing to address the labour issues
  it faces include the following
• Up-skilling existing workers
• Increasing investment in pre-industry training
  for new recruits
• Developing more collaborative training and
  recruitment programs
• with organisations in other industries
• - who require similar skilled personnel
• - e.g. engineering, infrastructure
  development firms
• Improving the public image of rail careers so
  that they become
• more appealing to potential recruits and
  currently
• underrepresented groups of workers
• - such as younger people and women

37
References

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38
References

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