It's reaching dramatic levels. And it is no exaggeration. Just watch the documentaries about hospital staff who are unable to cope and often collapse under the workload and the helplessness of caring for patients who endure long waiting lists. Or the thousands of tons of fruit in good condition rotting on the ground because there are not enough hands to pick it in rural areas. Or the "personnel wanted" signs in cities for all kinds of jobs. Or the schools that lack teachers.

The crisis, which experts say will affect this and the next generation, is a kind of perfect storm, caused by a multiplicity of factors that the authorities are unable to tackle, despite their efforts.

Labour or skills, it's hitting everyone hard

In December 2022, Australia recorded an unemployment rate of just 3.5%, a historic low. By December 2024, this had increased to 4.1%, with 328,900 unfilled job vacancies as of February. These figures are not translating into a fully functioning workforce. According to an OECD economic outlook report, Australia's labor shortage is the second most severe in the developed world. This issue has impacted businesses, with around 85% unable to operate at full capacity. Restaurants, cafes, shopping malls, and other businesses have been forced to limit their services.

Certain industries are particularly affected. The technology sector, for example, has seen a growing demand for skilled workers due to rapid digital transformation. Employers struggle to find qualified candidates, with 56% of hiring leaders reporting difficulty in filling positions. More than 87% of jobs now require digital skills, yet many workers feel unprepared for roles involving coding, AI, blockchain, and data visualization. By 2030, an estimated 340,000 new tech jobs will be created, exacerbating the skills gap.

Matthew Dickason, CEO Asia Pacific at Hays, underscores the severity of the skills shortage, noting that 88% of Australian organizations are experiencing it, with 40% reporting an intensification over the past year. He warns of an impending "skills recession" that could hinder organizational operations and growth.

The healthcare sector is also in crisis. The COVID-19 pandemic worsened the situation, with a projected need for 250,000 additional skilled healthcare workers between 2022 and 2027. A shortage of at least 70,000 nurses is expected by 2035. The Australian Medical Association sounded the alarm last year, saying that the number of patients seen on time is at its lowest in the last ten years. 

Other industries facing worker shortages include:

Food and accommodation services (+213% vacancies)

Arts and recreation (+211% vacancies)

Real estate (+191% vacancies)

What's going on here?

It's not an immigration problem any more. The migrant population shot back up after borders reopened post-Covid, but high-skilled labor shortages persist despite record levels of net overseas migration. Data from Jobs and Skills Australia shows a national shortage in at least 332 occupations, many of them essential. Many recent migrants are low-skilled workers, primarily international students and working holidaymakers, who often take lower-wage jobs. Furthermore, international graduates earn significantly less than their Australian-born counterparts and face poorer employment outcomes.

A significant factor is the rapid adoption of automation and AI, which has reshaped labor demands. While technology has driven economic activity, it has also created a mismatch in required skills. Additionally, the post-pandemic resumption of economic activities increased the demand for workers, overwhelming an already strained labor market.

Professor Peter Dawkins, author of the 2023 Jobs and Skills Report, highlights workforce deficits across key sectors, including healthcare, engineering, and skilled trades like electricians. Dawkins emphasizes that a robust national skills system—encompassing vocational education, higher education, and migration policies—is essential to ensuring a steady supply of qualified professionals. He further notes that skill shortages have been a persistent issue in Australia since the 1960s. As the country moves toward net-zero emissions, the demand for specialized labor is expected to grow further. Additionally, he argues that the rise of digitalization and artificial intelligence is reshaping industries, making reskilling and upskilling critical to maintaining workforce adaptability in the decades ahead.

The healthcare sector in particular faces unique challenges. Despite attempts to streamline and prioritise the immigration process for the sector, bringing in foreign healthcare workers remains complex and bureaucratic, discouraging skilled professionals from moving to Australia. Registering as a healthcare professional is time-consuming, further delaying workforce replenishment. Additionally, Australia’s aging workforce is a looming issue. Nearly 50% of the medical workforce is over 50, indicating an impending wave of retirements without enough young professionals to replace them. The pressure of understaffing has led to severe burnout, driving more healthcare workers to leave their jobs.

The Albanese government has been leaning into migration reforms ahead of the upcoming election, pledging to increase long-term migration of skilled workers while reducing reliance on short-term lower-skilled manpower, and tackling bureaucratic complexity such as the red tape that has plagued the healthcare sector.