One Year Later, Apprentice Wage Hike Has Delivered Jobs Decline

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17 September 2014

Last year’s massive hike in apprentice wages has led to a national collapse in work commencements, setting the scene for skills shortages in critical industries in future years, Master Electricians Australia (MEA) warned today.

MEA’s General Manager – Workplace Policy Jason O’Dwyer said new figures supported earlier predictions that the pay increases of up to $100 per week, awarded by the Fair Work Commission last August, would send the job market into a nose dive.

The National Council for Vocational Education Research shows a 12.4 per cent decline in the number of apprentices and trainees in training at the end of March 2014, compared with the previous year.  Trend estimates for the June quarter point to a further decline.

Mr O’Dwyer said the 30 per cent pay hike for apprentices announced in August last year had put an abrupt end to a slight upturn in employment numbers, with the number of people commencing apprenticeships and traineeships falling in every quarter since the decision was handed down.

“It’s no coincidence that this downward trend began at the same time that the trade unions’ claim for increased wages was successful,” Mr O’Dwyer said.  

“Historically apprenticeship commencements are linked to the broader economy however what we are seeing for the first time from this data is a divergence from the trend we would expect. This points to micro influences that are at the heart of the apprenticeship model.

“MEA and other employer associations raised concerns with the Fair Work Commission during hearings that their decision would have a severe adverse impact on employers offering apprenticeships if they were to approve the Unions claim.     

“We raised concerns that the evidence relied upon by the unions regarding the affordability of their claim did not take into account the very specific nature of apprenticeships, and the limited number of businesses that create these opportunities for young people.  

“We said at the time that the rationale was flawed, and that apprenticeship commencements would suffer as a result of the pay claim.  It gives us no joy that our prediction has come true.”

Mr O’Dwyer warned that the decline in apprenticeship commencements would create skills shortages across a range of industries, including electrotechnology. And this compounding skills shortage would ultimately lead to higher costs for consumers.

“We had hoped that the Federal Government’s Trade Support Loans scheme would lessen the impact of the wage hike on the industry, but these NCVER figures show that this simply is not having a big enough effect on maintaining the required level of apprentices that will be needed in the future.

“It is time for the Federal and State Governments to combine their efforts to urgently step up their promotion of apprenticeships for young Australians, strip out the red-tape and excessive paper-work, and better match the incentives schemes to support a sharp uptake in recruitment and retention of apprentices.”   

“We need the Government to set a clear vision for skilling our young Australians and work closely with industry and vocational education stakeholders to drive these urgent reforms to stop

“This wage increase was a dreadful decision 12 months ago.  With the benefit of hindsight it’s even worse than it initially appeared.  And the impact will continue to increase over time.

“Governments need to address this issue urgently before the system simply collapses.”