Study reveals the cost of luring staff to fill skills shortages – and how to slash your wage bill

A study has revealed businesses may need to increase wages by as much as $25,600 in order to lure a potential employee to a remote or regional location in order to fill a skills shortage.

The study was jointly conducted by researchers from Monash and Deakin Universities, led by professors Aaron Nicholas and Chandra Shah, and is based on a survey of 2,331 respondents aged between 18 and 64.

In the study, respondents were asked how much extra they would need to be paid each year in order to accept a job in their current industry in the regional cities of Karratha in Western Australia or Emerald in Queensland.

The two cities were chosen on the basis that both are currently experiencing large skills shortages across a range of industries.

The researchers found businesses would have to pay a wage premium of $19, 206 to attract married people over their single counterparts, $25,736 extra to attract people who are not currently studying, and $25,552 extra to attract people who currently own their house.

The biggest wage premiums, however, come when businesses attempt to lure away employees who already have a stable job.

A person who is employed but looking for work is likely to ask for $60,760 more than a person who is currently unemployed, while a happily employed person is likely to ask for $72,148 more than an unemployed person to relocate.

Meanwhile, people are likely to ask for $43,884 more a year if they don’t have friends of family in a particular location they’re looking to move to over those who do.

However, Nicholas told SmartCompany the study did identify some people who are more willing than average to relocate for work, despite the high cost of housing in Karratha and Emerald.

“Despite these factors, many people who are young, unemployed and single were willing to move without any further inducements, despite the costs involved,” he says. 

The research also revealed a number of ways businesses located in remote and regional areas can slash their wages bill.

The first is by offering training, which reduces the amount prospective employees ask to relocate by $6,902 each year.

Prospective employees will, on average, demand $10,504 less for a fly-in-fly-out contract over a contract that will force them to permanently relocate.

Employees are also likely to ask for the equivalent of $11,236 less per year in order to work on a permanent contract rather than a six-month contract. This suggests job security is a major factor in prospective staff looking to move for work.

In the report, the researchers note the findings should influence the policy approaches used by governments to fill skills shortages in the future.

“The impact of the most recent resources boom, notwithstanding the recent slowdown, has been a shortage of skilled labour in some regions… coexisting with pockets of high unemployment or underemployment in other parts of the country, such as Tasmania and a number of metropolitan areas in other states,” said the authors.

The results come as skills shortages in recent years have taken a toll on business profits, with businesses left to pay more than many of their counterparts elsewhere in the developed world.