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Forecasting Future Labour Demand in the Australian Rail Transport Industry ARTI

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Title: Forecasting Future Labour Demand in the Australian Rail Transport Industry ARTI


1
Forecasting Future Labour Demand in the
Australian Rail Transport Industry (ARTI)
  • Anusha MahendranDr Mike DockeryCentre for
    Labour Market Research
  • PATREC Research Forum
  • 4 September 2007

2
Study Background
  • Findings presented are derived from a study on
    the Australian rail industry workforce conducted
    by the Centre for Labour Market Research (CLMR)
    in conjunction with the Planning and Transport
    Research Centre (PATREC)
  • The study was principally sponsored by the
    Cooperative Research Centre for Railway
    Technologies (Rail CRC)
  • - although additional funding and assistance
    was also provided by the Australasian Railways
    Association (ARA) and various rail operators
    organisations across Australia
  • - the results of the study are presented in a
    report entitled Forecasting Rail Workforce
    Needs A Long-term perspective
  • 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

3
Objectives
  • So using the research we have completed as part
    of the study, 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
    participated in the study
  • - 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
  • - review rail operator sentiment about the
    workforce issues they face
  • - list some strategies which could assist the
    rail industry in addressing its workforce issues

4
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
  • 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)

5
Workforce Planning - Modelling
  • Workforce planning measures more specifically
    modelling are commonly used to address skills
    shortages
  • Employment occupational trends within specific
    industries can be influenced by numerous factors
    including
  • - overall economic structural changes
  • - changing qualification requirements
  • - developments in technology
  • - varying socio-economic conditions
  • - e.g. with regard to the organization of
    firms, product quality norms demand structures
  • Therefore although the skills labour needs for
    an specific industry or organization are dynamic
    and thus ever changing
  • - workforce planning models are still often
    used to predict skill needs

6
Workforce Planning - Modelling
  • Thus a singular or combination of various
    workforce planning models can be used to forecast
    the future workforce needs capabilities of a
    specific organisation or industry sector
  • In the case of most employment forecasting models
  • - historical trends are generally
    extrapolated into the future
  • - this usually involves factoring in several
    assumptions
  • regarding future development trends in the
    determinants
  • of labour demand and supply
  • The forecasts generated by the workforce planning
  • models are therefore often based on
    possible scenarios
  • - analysis of the characteristics of the
    existing workforce
  • within the specific industry or
    organisation being
  • examined

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 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

8
Australian Rail Transport Industry- Firm Types
  • Maintenance and Other Related Service Providers
  • These firms are involved in the manufacture,
    leasing and/or the maintenance repair of
    rolling stock
  • also includes firms involved in the provision of
    services related to the maintenance and
    inspection of rail track
  • as well as of communications signaling systems
  • - in addition/along with enterprises
    responsible for providing services related to the
    recruitment and training of skilled rail
    personnel are also classed under this group

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 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

10
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
  • - Contributed to reducing freight rates,
    improving service quality increasing
    productivity within the rail industry

11
Results of Rail Reforms
  • The reform process and resulting labour
    productivity
  • growth within the ARTI also resulted in a large
    scale
  • reduction in employment
  • With employment in the industry falling by 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/or
    multi-

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 training of their
    workers
  • There was also a distinct decline in the number
    of apprentices and trainees that were recruited
    trained during this period within the rail
    industry
  • 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 the training of 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 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
  • Another part of the study involved developing a
    model to enable forecasting of labour demand
    employment projections w/n the ARTI
  • - just to give a brief summary/overview of the
    model
  • The approach we took 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
    in a given base year- it is possible to determine
    labour productivity
  • The model also differentiated between freight
    passenger task for the rail industry
  • 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 in each time period

18
Modelling Projections- Results Labour
Demand/Employment
  • In the actual paper report projections are made
    and presented in 5 year intervals from 1996 to
    2020
  • Projections for freight task were taken form 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 the change in rail output, labour
    productivity and occupational distribution
  • Table 2 below shows the estimated 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 indicated on the
previous table (Table 2) - Demand by occupation
(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
  • 2001
  • which was 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

Table 5 Projected labour shor
tages (ve) and surpluses (
-
ve)
persons


2006

2011

2016

2020






Managerial

206

626

692

784

Professionals

630

174

-
115

-
339

Associate Professionals

19
9

325

259

267

Tradespersons

139

134

292

423

Adv Clerical Service

31

66

31

45

Int Clerical Service

-
93

-
49

-
316

-
443

Int ProductionTransport

144

1361

2629

3814

Elem Clerk,Sales Service

-
336

-
382

-
746

-
930

Labourers Related Workers

-
598

-
735

-
319

-
61






Total

322

1520

2405

3562


23
Modelling Projections - Results
  • As can be seen from the modelling results quite
    significant shortages are expected amongst
  • intermediate production transport workers
    (which includes drivers other operators)

    - managerial staff

    - tradespeople

    - associate professionals

24
Modelling Projections - Shortages
  • In the case of the occupational groups forecast
    to experience the most substantial shortages
    -
    namely the intermediate production transport
    workers and managers
  • this can be attributed to an increase in the
    forecasted occupation share of these professions
  • and also because of low 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
  • Given total employment demand is forecast to
    moderate slightly
  • - we believe the output employment demand
    projections are actually quite conservative
  • - this suggests that the factors that are most
    likely to lead to labour shortages in the rail
    industry lie on the supply side

25
Modelling Projections-Average Age by Occupation
  • The importance of the age profile of the
    workforce in determining these projected
    shortages can be clearly seen from the Table
    above
  • -the avg age of managers in the ARTI is projected
    to reach 55.9 by 2021 -while the avg
    age of intermediate production transport
    workers is forecast to be 52.2 by 2021

26
Future Occupational Shortages
  • The projections appear to be consistent with the
    views of many of the rail operators interviewed
  • - who anticipated they would experience
    future shortages amongst tradespeople,
    intermediate production transport workers and
    managerial professional staff in the future
  • Over 70 of the rail operators interviewed
    believed they were likely to experience skill
    shortages in at least 1 occupational group in the
    future
  • Half of the interviewees were expecting to
    experience shortages amongst engineers (who are
    classified as professional staff)
  • 38 expected future shortages amongst
    tradespeople
  • One quarter of rail operators interviewed
    believed they would experience shortages amongst
    train drivers in the future
  • 17 predicted future shortages amongst managerial
    staff

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
Operator Sentiment - Aging
  • Retirement rates of around 20 over the next 5
    years were
  • nominated by several operators for train
    drivers and for
  • controllers and signallers
  • 46 of respondents were concerned about aging
    amongst
  • locomotive drivers
  • One third of operators had aging concerns
    regarding their
  • engineering personnel
  • Roughly 29 of interviewees were worried about
    aging amongst their trade staff including
    electrical and mechanical tradespeople
  • One quarter of the respondents identified aging
    as a problem for
  • their managerial staff
  • 21 had aging concerns with regard to labourers
    and other
  • related workers

29

Table 5 Projected labour shor
tages (ve) and surpluses (
-
ve)
persons


2006

2011

2016

2020






Managerial

206

626

692

784

Professionals

630

174

-
115

-
339

Associate Professionals

19
9

325

259

267

Tradespersons

139

134

292

423

Adv Clerical Service

31

66

31

45

Int Clerical Service

-
93

-
49

-
316

-
443

Int ProductionTransport

144

1361

2629

3814

Elem Clerk,Sales Service

-
336

-
382

-
746

-
930

Labourers Related Workers

-
598

-
735

-
319

-
61






Total

322

1520

2405

3562


-
Table
7
Projected labour shor
tages (ve) and surpluses (
ve)
per
c
ent of
projected employment demand by occupation


2006

2011

2016

2020

Managerial

12.6

31.5

36.0

42.0

Professionals

21.4

6.5

-
4.5

-
13.6

Associate Professionals

7.3

11.4

9.4

10.0

Tradespersons

4.4

4.6

10.3

15.3

Adv Clerical Service

5.7

11.4


5.5

8.3

Int Clerical Service

-
2.9

-
1.4

-
9.5

-
13.8

Int ProductionTransport

1.7

15.0

28.7

41.3

Elem Clerk,Sales Service

-
8.7

-
9.3

-
18.8

-
24.1

Labourers Related Workers

-
30.4

-
56.8

-
25.1

-
4.8






Total

1.1

5.3

8.5

12.8

  • The modelling also indicated that relatively
    large surpluses of labourers related workers as
    well as elementary and intermediate clerical
    service workers are projected to emerge in the
    future

30
Training Implications
  • The modelling results indicate that a significant
    increase 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, trade,
    associate professional and managerial staff
    working within the rail industry
  • - In the immediate term, one potential way to
    minimise labour shortages amongst drivers
    operators would be to up-skill labourers and
    related workers to these positions
  • However the same could not be done with the
    surplus of elementary clerical, sales service
    workers that is expected to occur because of the
    mismatch in the gender profiles of the 2
    occupational groups
  • -this is because elementary clerical, sales
    service workers are predominantly females so it
    would be more difficult to effectively train them
    up to become intermediate production transport
    workers

    -since such professions have traditionally
    been dominated by male workers

31
Recruitment Implications
  • Recruitment wise- There is thus a need to
    increase the of intermediate production
    transport workers, managerial, associate
    professional and trade staff within the rail
    industry
  • 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
  • - For example, the model indicates that entry
    rates to the rail industry of recruits in the
    15-24 age groups would have to approximately
    double over 2001 levels to balance the demand
    supply projections
  • This is therefore likely to pose quite a
    challenge for rail employers given the largely
    unfavourable image of the rail industry its
    lack of career appeal for many potential recruits

32
Recruitment Implications
  • One effective strategy to address the aging
    workforce and labour shortages within the ARTI
    would be to achieve higher retention
  • - by increasing the rate at which new workers
    enter and/or
    - reducing
    the rate at which existing workers leave the
    industry
  • 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
Recruitment Implications
  • The option of attempting to increase recruitment
    levels 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

34
Study Findings
  • Most operators exhibited tangible concern in
    relation 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

35
Conclusions
  • The findings of the study indicate that over the
    next decade
    - the ARTI will
    face several different workforce challenges
  • -including problems relating to the aging of its
    workforce
  • -substantial skill shortages in several
    significant occupational groups
  • -And difficulties relating to the attraction
    retention of workers

36
Conclusions
  • In the case of the aging rail workforce

  • a high rate of labour turnover is expected due to
    the imminent retirement of many baby boomer
    workers who were predominantly recruited from the
    1960s-1980s
  • - who constitute a large portion of the
    industrys existing workforce
  • This is likely to result in a significant loss
    of experience skills
  • -And also means there will be a lack of mentors
    to effectively train younger workers

37
Conclusions
  • Given the general expectations that output in the
    rail industry will grow in the future
  • the current tight labour market conditions which
    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
    industry is not well placed to meet its future
    skills needs

38
Conclusions
  • Therefore some potential 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
  • - e.g. engineering, infrastructure development
    firms
  • - who require similar skilled personnel
  • - 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

39
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