without it, we're just pouring water into a leaking bucket

Written by John Buchanan, Professor, Discipline of Business Information Systems, University of Sydney Business School, University of Sydney

This article is part of The Conversation’s series looking at Labor’s jobs summit. Read the other articles in the series here ^[1].

Australia has more qualified teachers and nurses than at any point in its history. There is no “shortage” of these skills.

The problem is that within five years of gaining their qualification, as many as one in four nurses ^[2] and a similar proportion of teachers ^[3] have decided to do something else.

The dropout rate is intensifying. Between 2016 and 2021 the proportion of nurses registered but not working in the profession rose by 63% nationally ^[4]. In Victoria it was 85%.

Employers desperate for skilled staff in particular want immediate fixes. Many see the problem as lack of supply, because they cannot find the workers they want at the prices they want to pay.

But what if the problem is the nature of what employers are demanding? What if their preoccupations with maximising short-term commercial gains is the root cause of the problem?

Developing “mental wealth” is just as important as material and commercial growth. Without this, solutions such as importing more workers or increasing course numbers are like pouring water into a leaking bucket.

What is mental wealth?

Mental wealth is a relatively new term to express the social and economic value of mental health. It has two dimensions: mental capital and mental wellbeing ^[5].

Mental capital is the stock of cognitive and emotional capabilities – things like the ability to reason clearly and successful social functioning. Unlike physical capital (buildings and machinery) that depletes with use, mental capital grows if treated well.

Mental wellbeing derives from life satisfaction, having sufficient physical resources, connection with others and a sense of purpose. High wellbeing deepens mental capital. Low wellbeing depletes it.

From a mental wealth perspective, action is required on three fronts.

1. Skills transferability (creating quality occupations)

Just as mental health affects our ability to cope with life’s ups and down, mental wealth affects a workforce’s ability to adapt to changing circumstances – something crucial for economic development. Such capability is nurtured by empowering workers to master quality, transferable vocational skills.

Apart from the professions and a few skilled trades, Australia offers little in terms of strong, ongoing development of quality transferable skills.

Consider our approach to intermediate-level service work.

Our labour market and vocational education arrangements treat customer service, carers and administrative support roles as entirely separate domains of work.

In reality, however, many people flow between jobs of this nature. It is not uncommon for child-care workers, for example, to move into retail and administrative roles ^[7].

We need to build on the reality of these flows to create occupational structures that deepen transferable skills and enable people to move more easily between related areas, as opportunities rise and fall in different parts of the labour market ^[8].

Deepening this transferability will require greater cooperation between employers and unions across different sectors – as well as educators.

Renewed interest in multi-employer or sectoral bargaining is a welcome development in this context. Such arrangements could help develop greater communication and trust between all stakeholders.

2. Vocational education

Occupational reform also requires supportive changes in education. We especially need to make non-university education options more attractive.

Since the late 1980s, Australia’s TAFE sector has been run down by failed experiments in outsourcing. Public funds have been wasted on promoting “competition”. It has increasingly become a realm where businesses, manipulating government funding models, can make profits by delivering poor-quality courses.

It is time to rebuild the sector ^[9].

3. Employer investment in learning

But arguably the weakest element of our workforce development system is the lack of investment in workplace learning.

Skills development is what economists call a “public good” – the benefits do not accrue just to those who pay for it. In business this contributes to employers’ reticence to invest in skilling up workers lest they be “poached” by rivals who haven’t made the same investment.

To avoid freeloaders, many countries have schemes that pool employer funds for skills development. France, for example, imposes a Contribution to Professional Training ^[11] on all employers based on their payroll costs (0.55% for small businesses, 1% for large ones and 2% for labour hire firms).

This money goes into sector-based funds, which businesses can then claim back for workplace training. This arrangement ensures all businesses contribute to paying for skills development, and have an incentive to provide it.

No resources to waste

These proposals would not only help Australia address skills shortages but move us onto a trajectory that deepens and does not deplete our mental wealth.

We can’t afford to pour resources into a leaking job bucket.

We need initiatives that address the causes and not just react to the symptoms of our current labour market challenges. The proposal outlined above provide evidence based solutions that must not be ignored.