Time to upgrade mining skill shortages from 'transitory'...
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The time has now come to acknowledge that the historically high mining skills shortages - which, like inflation, began as a consequence of the policy response to the coronavirus pandemic but have since taken on a life of their own - have become persistent rather than transitory.
Data gathered by Mining Journal show that the ongoing skill shortages are a global trend.
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In Australia, mining job vacancies took off in late-2020 after the country shut its borders to foreign skilled labour and as the states and territories shut their borders to internal migration.
Vacancies hit an all-time high of 11,200 in May 2022 and averaged more than 10,400 in the 18-month period to February 2023 (when the Australian Bureau of Statistics last published data). This peak has been more pronounced and more persistent than the only other time in the past three decades when Australia's mining sector experienced significant labour shortages - at the height of the previous commodities boom in 2011-12 when vacancies peaked at 10,300 and averaged 9,840 for 15 months before going into a rapid descent as the commodities boom ended.
Canadian mining job vacancies surged from 4,795 to 7,120 in the June quarter of 2021 and have remained elevated ever since, averaging 7,800 in the 24 months between April 2021 and March 2023. In the United States, mining and logging job vacancies (which are reported together) averaged 34,600 in the 22 months from July 2021 to April 2023, compared to an average of 22,000 in the previous 96 months.
Job vacancies have pulled back slightly from the 2022 peaks in each of these countries, but not enough to indicate the problem will disappear. In the meantime, the smaller and medium-sized companies - who represent the growth end of the industry - may bear the brunt.
"If you take the 10,600 job vacancies [from the latest Australian data] and divide it by the more than 300,000 people currently in direct employment by the mining industry, you're looking at more than a 3 percent shortfall in the mining industry workforce," said Tom Reid, director, industry & advocacy at the Australian Resources & Energy Employer Association (AREEA).
"Companies are being affected across the board, but the big miners have got a lot more money to throw at the recruitment and the retention side of things. Some mid-tier mining companies are still facing labour turnover rates of 30 to 35 percent annually, [where] one in three employees of theirs are coming in and leaving before they reach the 12-month mark.
The mid-tier guys share the overall threat of the skill shortages but also have a specific problem in that they're bleeding talent to the top tiers."
AREEA published a report last year which calculated that 107 major Australian resources and energy projects were likely to enter production between the second half of 2022 and the end of 2027. It forecast that these would create demand for an additional 24,000 production-based roles within this five-year period. However, Reid, in his conversation with Mining Journal, said this was a conservative forecast "because the trend in Australian mining has shown that we tend to outstrip the forecasts fairly considerably."
Mining skill shortages
In a 2022 McKinsey survey of mining executives, 86% said it was harder to recruit and retain the talent they needed compared to two years earlier; and 71% said the talent shortage was holding them back from delivering on production targets and strategic objectives. According to PwC's annual global CEO survey published in July 2023, almost two-third of mining CEOs said skills shortages will have a large or very large impact on profitability over the next ten years.
Mining companies around the world have flagged the problem of labour shortages in financial reporting this year. Copper major Freeport McMoRan stated in its annual report in April that a tight labour market and increased competition from other employers in North America represented "strategic challenges" that impacted its ability to expand mining rates. Lithium producer Pilbara Minerals said in its half-year results in February 2023 that labour shortages in the Western Australian mining industry were one of the main factors in higher operating costs during this period.
Given these unusual challenges, some companies have looked for creative ways to recruit new workers and fill the gap in the short-term.
For example, Australia's Mineral Resources made headlines last year when it launched an ad campaign targeting New Zealanders (who can live and work in Australia without applying for a visa). Qualified Kiwis who made the move could earn up to A$300,000 (US$200,000) per year, more than triple the average New Zealand wage, Mineral Resources CEO Mike Grey told a New Zealand radio station at the time.
The New Zealand recruitment campaign had "an overwhelming response," Bronwyn Grieve, MinRes chief people and shared services officer, revealed to Mining Journal.
"Tens of thousands of Kiwis have visited our dedicated campaign website and our recruitment team are considering hundreds of potential hires. We have more than 800 jobs on offer across our operations, with roles available for suitably skilled workers in trades, mining, construction and utilities. Our most in-demand positions include mechanical fitters, drill fitters, electricians and engineers."
Root causes for mining skills shortages
There are several probable root causes for the ongoing skills shortages.
One obvious factor is general labour scarcity. Australia and the US currently have unemployment rates of 3.6% and 3.7% respectively, which is virtually full employment (although Canada has a much higher 5.2% unemployment rate). This means vacancy rates are high across all sectors; indeed, US total job vacancies peaked in March 2022, one month before mining job vacancies peaked, and Australia has seen a similar trend.
However factors unique to the mining industry have also exacerbated the problem.
In the past three years, mineral commodity prices have reached the highest levels since the end of the last commodities boom in 2012, spurring investment and increasing demand for workers.
Mining still typically pays more than other sectors, just as it did in the last commodities boom. In Australia, for example, mining sector employees earn an average annual wage of A$146,000 (US$97,000), compared to the national average of $94,000.
But, as Reid pointed out, "with previous generations, the industry may have taken it for granted that just paying higher wages would continue to attract people in and of itself. But people nowadays are looking for a greater mix [of incentives]. And when you've got near to full employment, people can be a lot more choosey about where and in which industries they want to work."
The industry's reputation for having a poor workplace culture, as underlined by an external review of Rio Tinto which identified instances of bullying, sexual harassment and racism, has only compounded the problem, in Reid's opinion.
"So how do we, as an industry, get to a point where the parents of a 16- or 17-year old girl leaving school and considering what she wants to study at university - how do we move to a situation where the advice they're getting is that our industry is a good place to work?" he said.
"Given the perception that the industry is a labour intensive, dirty industry that destroys the environment, that has a poor workplace culture, it's hard to imagine that parents would be encouraging their school age-leaving sons and daughters to study mining and petroleum-related degrees."