Sydney’s unemployment rate is low, but worker drought continues to plague the city

Sheaves says the labor shortage is affecting businesses of all sizes and in all sectors in his district.

Kerrie Sheaves, President of the Sydney Hills Business Chamber.Credit:Deep Edge Studios

“That’s the No. 1 problem we have,” she says. “It could be large corporations that have lost hundreds of employees or a micropreneur desperate for a director. They pretty much all have a hard time finding staff. It is a real crisis in this region.

Businesses in many parts of New South Wales are also calling for staff.

The labor shortage will be in the spotlight when the Albanian Government’s Jobs and Skills Summit is held later this week. One of the goals of the meeting is to build a “larger, better trained and more productive workforce”.

After jumping more than 7% at the start of the pandemic in 2020, Greater Sydney’s unemployment rate has been well below 4% since April this year.

The very low unemployment rate in much of the city is something to celebrate. The share of women in employment in New South Wales has reached an all-time high this year. There has also been a sustained decline in long-term unemployment.

But as unemployment goes down, the supply of labor also goes down and businesses are feeling the pinch.

One of the main reasons for the labor shortage is the collapse in the number of migrants caused by the prolonged closure of borders in the event of a pandemic.

Callam Pickering, an economist at job search firm Indeed, estimates the working-age population in New South Wales would be 159,000 larger than it is today without border closures.

“The population deficit is concentrated among those under 35,” he says. “The reason is simply that immigration tends to be heavily concentrated in this age group. This has made recruitment particularly difficult for industries that rely primarily on young talent, such as accommodation and food services and retail.

Industries that rely on young staff have been particularly hard hit.

Industries that rely on young staff have been particularly hard hit.Credit:Peter Rae

There are now more job vacancies in NSW than unemployed to fill these vacancies for the first time in 40 years since the Bureau of Statistics began counting vacancies.

A survey released in June by Peak Body Business NSW shows that 93% of businesses in the state were experiencing skills shortages, up from 55% in 2019.

“Positions at all skill levels were reported as being difficult or impossible to fill – from laborers to medical specialists,” the report said.

Shortages were particularly acute for chefs and cooks, cleaners, housekeepers, waiters, boilermakers, fitters and turners, electricians and carpenters.

Business NSW chief executive Daniel Hunter said the NSW business community is grappling with the biggest workforce challenge in over 50 years: “Almost half of businesses said that it was just as difficult to fill entry-level positions as experienced ones.”

Difficulties recruiting and retaining staff, as well as rising inflation and higher interest rates, are weighing on the business climate. A measure shows that business confidence in New South Wales had fallen last month to lows reached during the pandemic shutdowns.

The shortage of labor affects many aspects of urban life.

The queues of passengers streaming out of Sydney Airport terminals earlier this month were a highly publicized example. Airport chief executive Geoff Culbert warned last week that the recovery in air passenger numbers “continues to follow the recovery in the workforce”.

He says the industry is working hard to rebuild staffing levels “but with ongoing labor shortages, it’s going to take time.”

A host of less visible disruptions caused by labor shortages have become commonplace, including stores slashing opening hours, restaurants slashing their menus and deliveries being delayed. This situation has been exacerbated by the high rates of absenteeism caused by COVID-19 and the winter flu season.

Vacancies are particularly high in the accommodation and food service sector, which includes many tourism businesses.

Yesh Mudaliar, general manager of Holiday Inn Parramatta, says rooms sometimes cannot be cleaned to meet demand due to a lack of housekeeping staff. On some occasions, members of the hotel management helped clean the rooms and serve food and drink.

“I sometimes wonder where all the people have gone? We are a country of 25 million people. The hospitality industry is one of many labor shortages, which underscores the need for greater flexibility in our immigration system,” he says.

James Scott wants to expand his small plumbing business but says it has been difficult to find the right people.

James Scott wants to expand his small plumbing business but says it has been difficult to find the right people.Credit:Kate Geraghty

James Scott, the owner of Crucial Plumbing Services, said a recent renovation project had been put on hold for a month pending the delivery of a toilet seat. He attributes the delay to staffing difficulties at the supplier.

“I could have walked there and had it,” Scott says. “Luckily the client had another toilet he could use, but that was really annoying.”

Scott wants to expand his small plumbing business, but says it’s been hard to find the right people: “Trying to get materials is a joke and trying to get staff is a nightmare.”

A recent report by the Organization for Economic Co-operation and Development found that Australia was second only to Canada in having the most severe labor shortages in the developed world.

Hunter says there are instances where companies have offered signing bonuses of up to $5,000 in a bid to fill entry-level positions.

“It’s an extremely competitive environment between employers for staff now,” he says. “It feels like a lot of companies are in the desperation zone.”

Some businesses in Sydney have decided that greater use of automation is the only option.

“To stay on top of things, there’s no doubt that some businesses in NSW are exploring how they can increase the degree of automation in their operations to overcome staffing and skills shortages,” says Hunter.

New South Wales Treasurer Matt Kean said the state was entering a “labour drought” that would see a shortage of 304,000 employees by 2025-26. He called on Anthony Albanese’s federal government to speed up the pace of migration.

NSW Treasurer Matt Kean is calling on the Federal Government to increase immigration.

NSW Treasurer Matt Kean is calling on the Federal Government to increase immigration.Credit:Brook Mitchell

“I have been advised that there are 65,000 workers ready and waiting to enter New South Wales,” Kean told the Herald.

“Small businesses are in desperate need of workers, especially in the hospitality industry which depends on international students and working holidaymakers.

“Now is the time to open borders and get passports stamped so that industries like hospitality, care and construction can start closing the crucial gaps that are holding them back.”

A return to more normal levels of migration will help alleviate labor shortages, but deeper structural issues also need to be addressed.

A Business NSW study published in June found that 36% of businesses identified housing affordability as a key long-term challenge to their staffing needs.

Many respondents identified the need for more affordable housing and limits on the number of properties used as temporary vacation rentals as a way to help address labor shortages, particularly in regional areas. The aging of the workforce emerges as another long-term challenge for labor supply.


Chronic skills shortages plagued many sectors of the economy long before the disruptions of COVID-19.

A Federal Treasury document released ahead of the Jobs and Skills Summit said that “in recent years Australia’s skills and training system has failed to adapt to meet the needs of the economy”.

The government says one of the aims of the summit is to “address skills shortages and get the right mix of skills”.

But businesses in Sydney are likely to struggle with labor shortages for some time to come.

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