Australian Businesses Outsourcing Jobs Overseas to Avoid Higher Wages Amid Tight Labor Market
A recent survey conducted by Money Transfer Comparison has revealed that Australian businesses are increasingly turning to offshore labor in order to circumvent the challenges posed by higher wages and a tight labor market. The poll, which included 200 company directors, found that 68% of small and medium-sized enterprises (SMEs) would opt to employ staff based overseas.
One of the main driving forces behind this trend is the difficulty businesses face in finding qualified domestic workers. With wages in Australia experiencing the fastest growth in over a decade, many companies are finding it challenging to attract and retain talent. As a result, they are seeking cost-cutting measures by sending jobs offshore.
While the survey demonstrated that 21% of respondents found it arduous to find staff locally, an additional 25% indicated that reducing costs and tax liabilities motivated their decision to outsource jobs. Another contributing factor is the scarcity of specific technical skills, particularly in the field of IT. Consequently, 21% of the firms surveyed expressed a need for overseas outsourcing in this area.
The survey also highlighted the types of jobs most likely to be outsourced. Consultants topped the list, with 18% of businesses considering this option. Administrative assistants followed closely behind at 14%, while bookkeeping, marketing, and human resources or payroll were also mentioned as potential roles to be outsourced.
It is worth noting that Australia currently has an unemployment rate of 3.5%, the lowest in 48 years. Coupled with the wage growth rate of 3.7%, the fastest seen since 2012, the pressure on businesses to find skilled workers is intensifying. The Reserve Bank predicts that wages will continue to rise, with a projected growth rate of 4% next year, marking the first time since 2009.
Meanwhile, Russell Gous, spokesman for Money Transfer Comparison, suggested that the high wages in Australia, combined with the economic uncertainty caused by 12 interest rate hikes since May 2022, have made it challenging for small businesses to sustainably afford local labor costs. He emphasized the importance of exploring offshore alternatives to maintain business longevity during these uncertain times.
However, it is important to note that the survey sample size of 200 is smaller than the recommended 1,000, which is typically regarded as the minimum required for accurately reflecting the viewpoints of Australians. More extensive research would be necessary to confirm the extent of this trend.
On a different note, a survey conducted by Finofin, the parent company of Money Transfer Comparison, found that 50% of Australians aged 18 to 34 supported higher immigration rates. This sentiment reflects a broader perspective on the need for a diverse labor pool to meet the increasing demand for skilled workers.
Despite wages rising by 3.7%, the cost of living for employees is soaring by 9.6%, surpassing the 6% inflation rate. Consequently, individuals who remain employed are experiencing a 5.9% reduction in real wages when adjusted for inflation.
In summary, the survey indicates that Australian businesses are diverting jobs offshore as a means of avoiding high wages in a labor market characterized by scarcity. The challenges of attracting qualified staff locally, along with rising wages, have pushed more companies to explore cost-cutting measures. It remains to be seen whether this trend will continue, as further research is needed to provide a more comprehensive understanding of the situation.
