Capital Metro. Job creation analysis. May 2014

Transcription

1 Job creation analysis May 2014

2 Table of contents 1. Executive summary Approach Communication of job figures Key findings Introduction The purpose of this paper The scope of the project Methodology Review of the current state of the ACT economy The ACT economy Employment job creation objectives Relevant Territory-wide policies, plans and initiatives and how they relate to job creation objectives for Plans and initiatives specific to Relationship to Australian Government plans Likely job creation from Methodology Economic contribution footprint analysis Achievable jobs Occupations and qualifications analysis Benchmarking Appendix 1 Summary tables for gross footprint and net achievable jobs Appendix 2 Relationship between gross footprint and net achievable jobs Job Creation Analysis EY i

3 1. Executive summary 1.1 Approach The scope of the project analysed in this paper is: The construction and operation of Stage 1 of the project a 12 kilometre light rail service linking the newly developed area of Gungahlin in the north, to Civic, Canberra s central business district. Land use development adjacent to the Stage 1 project corridor, including construction and operation (i.e. the utilisation of floor space area created). Job figures are analysed in two steps: The gross employment footprint is calculated. This footprint represents the gross employment demand that would arise in the ACT as a consequence of the construction and operation of the Stage 1 project. The net additional achievable employment is calculated using labour market modelling 1. This adjusts the gross footprint figure to better account for constraints in the economy, taking account of the displacement of jobs from elsewhere in the ACT economy. As a result, net achievable employment figures are more suitable for presenting what is most likely to occur on specifically (rather than indiscriminately across the economy). It is closer to what people would actually see on site, and would be a better guide when engaging with local industry. 1.2 Communication of job figures Major projects typically present job creation figures in gross footprint form; e.g. Project X will support 10,500 jobs over five years. Provided the correct language is used, presenting the gross footprint figures is technically acceptable as a description of the economic contribution of the project. Good practices when reporting these figures include: Always describing the period for which the jobs figure applies; e.g. for the construction period or for ten years, etc. Avoiding phrases that assume economic constraints have already been accounted for and that ; e.g. stating that the project supports 10,000 jobs is more accurate than creates 10,000 new jobs. Taking care when adding up jobs across years. This may be justifiable for discrete investments that are spread over a few years such as the jobs created through the construction phase of a project but jobs should not be added for jobs and expenditure that is ongoing. For instance, if the project delivers 100 ongoing (i.e. permanent ) jobs as part of the operation of the project, these should not be added to present 1,000 jobs over 10 years. Job figures should not be added to other projects the Territory may be undertaking. Economic footprint analysis does not take into account net effects, and the resulting jobs can therefore not be summed together. 1 See Appendix 2 for further detail about the labour modelling approach. Job Creation Analysis EY 1

4 1.3 Key findings The gross employment footprint For light rail construction: the total number of jobs that will be supported is estimated to be 3,560, spread over the construction period ( ). 1,450 of those are direct and around 2,100 indirect jobs. For corridor development construction: by 2027 the total number of jobs supported in that year is estimated to 1,830, of which 960 are direct and 870 indirect jobs. During the assumed peak year of light rail construction the project will support around 1,780 jobs (725 direct, 1050 indirect). This decreases to around 125 jobs during the operational period (refer to Table 1). Ongoing jobs remaining along the corridor. The corridor development element of Capital Metro will deliver additional floor space to accommodate around 26,000 jobs along the corridor. Taking into account the flow-on jobs from industry and consumption effects results in a total footprint of around 50,000 jobs that will remain long term along the corridor. Table 1 economic footprint Project component Indicator 2017 (assumed peak year of construction) 2022 (mainly operation) 2027 (mainly operation) 2032 (mainly operation) 2037 (mainly operation) 2042 (mainly operation) 2047 (mainly operation) Light Rail Corridor Development Direct effect Industry effect Consumption effect Total Direct effect Industry effect Consumption effect Total , , , , , , , , ,070 4, ,620 1,110 1,270 5,000 Achievable jobs Recognising that labour market constraints mean not all of the gross footprint jobs are achievable, the labour market modelling finds that around 960 net additional direct and indirect jobs will be supported during the assumed peak of construction in The equivalent figures for 2016 and 2018 are 720 and 240, respectively. Figure 1: Footprint (left column) and achievable jobs (right column) for light rail and corridor development 65% of these net achievable jobs (625 jobs) are required for on the ground construction work, with technical services accounting for 20% (100 jobs), financial and other specialist advisors accounting for 4%, management and admin also at 4%. The remainder of jobs are required for flow on employment in accommodation and food services. A more detailed breakdown of the top twenty occupations for the three years of light rail construction is provided in Figure 2 overleaf. Job Creation Analysis EY 2

5 A sizeable proportion of these net achievable jobs require relatively low qualifications, which present an opportunity to address unemployment amongst the low-skilled and in target groups, such as youth and indigenous groups. Currently unemployment in ACT at the high school or lower level reaches around 4,000 people, and the project will need around 500 additional workers at this skill level in 2017 (Figure 3). Development of the corridor could continue to employ low skilled workers once construction of the light rail is complete (e.g. in year 2022). Table 2 Total employment figures for light rail and corridor development Light rail Corridor development Period Gross footprint Net achievable Gross footprint Net achievable Construction peak year of light rail construction 1, (2017) Operations (2037) ,340 1,800 Figure 2: Increase in jobs by top twenty occupations during the light rail construction period Job Creation Analysis EY 3

6 Figure 3 Unemployment by group and education, and additional jobs by education, 2017 and 2022 Job Creation Analysis EY 4

7 Addressing job creation objectives EY derived the following job created objectives based on existing Territory policies and plans, as well as s Draft Local Industry Participation Plan. These objectives are compared to the results of the jobs analysis. Table 3 A comparison of job creation objectives and the jobs analysis Objective Description Potential to address 1. Reduce dependence on the public sector 2. Encourage local business involvement 3. Building local industry capability and capacity 4. Foster the employment of disadvantaged groups and support their participation in the ACT economy 5. Tackle youth unemployment Create opportunities within the private sector and reduce the reliance on the public sector (particularly federal) as the driver for growth Encourage the involvement of quality local businesses and maximise the opportunities to utilise local suppliers, services and labour. Support the development of or transfer of specific capability and capacity to increase the quality and competitiveness of ACT businesses. Provide opportunity to disadvantaged groups to participate in the project and its associated economic growth, including specifically targeted Indigenous employment and pursue opportunities with Indigenous businesses where feasible. Create opportunities for youths and workforce entrants and facilitate trainings leading to qualifications that are likely to be generated by the Project About 60% of public sector employees have qualifications at the level of Bachelor degree or higher 2. Job losses within the federal public sector are expected over the coming months, and a large proportion of these are likely to fall within the ACT. As noted above the majority of opportunities during light rail construction are likely to occur at lower levels of education, however about 20% are required at the Bachelor level degree or higher level. More detailed analysis is required to determine how the project could be managed to target these. Predictably the occupational requirement for light rail construction is largely related to construction and engineering occupations. Some of the top occupations required will be bricklayers, carpenters, joiners and labourers. As these types of jobs are likely to be supplied from the local market, the project will assist in encouraging local business involvement and in building local industry capability and capacity. Even for these occupations the additional need only amounts to between 2% and 5% of current supply, which does not suggest a significant shortage. It is likely that these jobs could ostensibly be filled by local workers. The occupational requirements for the activation of the corridor are broad, with some of the biggest categories of employment expected to be in sales, hospitality, construction, and the provision of cleaning services. Again, these kinds of employment are likely to be come from the local market, and hence assist in contributing to s job creation objectives. A large proportion (around 40% in 2017) of the necessary educational or skill level for the additional jobs will be at a year 12 qualification level or below. Young people (aged between 15 and 29) constitute a large proportion of unemployed at this skill level (Figure 3), meaning there may be immediate opportunities to target unemployment in that group. Continued corridor development construction would help support this demand longer term, after construction of light rail is complete. Those will mid-level skills should also find opportunities: about 25% of jobs will be suitable for those with Graduate Diploma/Certificate or Certificate level qualifications. High vacancy rates currently exist in some occupations that are likely to be in demand. Government supported training and development that is targeted at these occupations should help in matching labour market supply to demand, further addressing unemployment. 2 accessed 6 May Job Creation Analysis EY 5

8 Figure 4: Additional jobs by occupation and vacancy rates, 2017 and 2022 Job Creation Analysis EY 1

9 2. Introduction 2.1 The purpose of this paper EY was engaged by the Agency ( CMA ) to provide Professional Services for Business Case and Procurement Advisory Services for the project. CMA further engaged EY to undertake an additional analysis which focuses on the additional jobs delivered during the construction and operation of Stage 1 of the project and the associated land development activity. The purpose of this paper is to describe the benefits of the project by modelling the most likely type, number and timing of jobs, with a view to aligning these results with the Australian Capital Territory ( ACT ) Government s efforts, policies and plans to support local employment growth. 2.2 The scope of the project The scope of the project analysed in this paper is: The construction and operation of Stage 1 of the project a 12 kilometre light rail service linking the newly developed area of Gungahlin in the north, to Civic, Canberra s central business district. In November 2012 the ACT Government committed to deliver Stage 1 of with tracks in the ground by The project is currently in the Development phase, culminating in the delivery of a Full Business Case in late June early July 2014 in parallel with the Definition phase operations and construction technical work. The land use development (construction and increased operations) adjacent to the Stage 1 project corridor that is enabled due to the project. This includes revitalisation of the project corridor to stimulate urban redevelopment and higher densities, and to maximise the economic potential of the corridor through mixed land use. A high level timeline for the project is summarised in Table 4 below. Table 4 Project high level timeline Element of the project Light Rail Development phase Procurement phase Construction phase Operation phase January 2013 July 2014 September 2014 approximately September 2016 September 2016 end onwards Corridor development May 2014 September 2014 September 2014 and then ongoing under a staged approach which is yet to be determined. From 2015 onwards, under a staged approach which is yet to be determined. From approximately 2016 under a staged approach which is yet to be determined. Job Creation Analysis EY 2

10 2.3 Methodology The report was prepared under a five step methodology which is outlined in Table 5 below. Table 5 Methodology Step Step 1, review the current state Step 2, establish job creation objectives for Step 3, determine likely job creation through modelling Step 4, draft key findings Inputs Latest labour market and jobs statistic for the ACT - High level analysis of current ACT employment/unemployment data and vacancies by major occupation groups. Territory-wide: ACT Government policies, recent media statements Recent and relevant ACT Government policies and plans directly or indirectly targeting employment issues. Australia-wide: Federal Government policies, recent media statements Recent and relevant Federal Government policies and plans directly or indirectly targeting employment issues. Corridor specific: CMA, EDD/ LDA initiates Corridor specific policies and plans targeting employment issues in relation to the Project. Establish job creation objectives for based on project expectations, objectives and in line with relevant Government policies. Use light rail construction expenditure to model the number of jobs associated with the building of the light rail project using input-output and labour market modelling. Use building construction expenditure and floor space that will come online through activation of the corridor to model the number of jobs associated with corridor activation using inputoutput and labour market modelling. Adjust dampen the input-output results to account for constraints in the economy, to produce net achievable employment results. Breakdown jobs by occupation, skill and field of expertise. Compare the outcomes of Step 2 and Step 3 to determine key findings. These are covered in the Executive Summary. Job Creation Analysis EY 3

11 3. Review of the current state of the ACT economy 3.1 The ACT economy The ACT economy is facing weak economic conditions in the short term, due to the following trends: An easing jobs growth rate. Slowly increasing unemployment. Decreasing levels of commercial and residential construction.3 These cyclical adjustments are expected to have been partially corrected by 2016, with improved economic conditions forecast in the longer term. However, rates of economic growth are likely to be softer than historically and it is expected that the ACT will become increasingly reliant on the private sector as growth of the Commonwealth public service plateaus. 4 Figure 5 Growth in gross State Product by States Source: Rapid Business Case 3 Access Economics: Business Outlook Rapid Business Case, Section Economic growth (26 March 2014) Job Creation Analysis EY 4

12 3.2 Employment Unemployment in ACT remains low compared to other states. Although we can observe some recent positive trends around the unemployment rate, the number of job vacancies indicates a decreasing trend in all major occupation groups in the ACT. Unemployment in the ACT decreased in March 2014 by 0.3 per cent, due to an increase in full-time employment by 700 persons. On a year to year basis, ACT employment grew by 0.8%, as the unemployment rate has decreased from a revised 4.2 per cent in March 2013 to be 3.4 per cent.5 Figure 6 shows the evolution of the annual average number of unemployed persons in the ACT between 2008 and Figures for the years between 2008 and 2013 are actual data based on the ACT Labour Market Data provided by the Education and Training Directorate of the ACT Government. A trend was extrapolated for the period , based on that actual data. Figure 6: Annual average number of unemployed in the ACT Number of unemployed 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Source: ACT Labour Market Data.xlsx (Last Modified 23/04/2014, 3:54 PM) In trend terms, labour force participation remains unchanged at 71.4 per cent. 6 Due to the predicted ongoing reduction in public sector recruitment, employment growth is forecast to ease to zero over The most recent measure of ACT based job vacancies was 4363, down on the 4703 vacancies recorded in March As shown in Figure 7, the number of vacancies indicates a decreasing trend in all major occupation groups. The most significant decrease can be observed in the case of Professionals, where the average number of vacancies decreased by 527 between 2012 and March A similar drop is shown in the number of vacancies for Clerical and administrative workers, where the number of open positions dropped by 444. Figures for the years between 2008 and 2014 are actual data based on the ACT Labour Market Data spreadsheet provided by the ACT Education and Training Directorate. A trend was extrapolated for the period , based on that data. 5 Labour Force March 2014, Chief Minister and Treasury Directorate, Economic and Financial Analysis Branch 6 Labour Force March 2014, Chief Minister and Treasury Directorate, Economic and Financial Analysis Branch 7 ACT Labour Market Data.xlsx (Last Modified 23/04/2014, 3:54 PM) Job Creation Analysis EY 5

13 Figure 7: Average number of vacancies by major occupation groups 3,000 2,500 2,000 1,500 1, Managers Technicians and Trades workers Clercical and administrative workers Machinery operatores and drivers Professionals Community and personal service workers Sales workers Labourers Source: ACT Labour Market Data spreadsheet (last modified 23/04/2014, 3:54 PM) The number of employees has remained fairly stagnate in recent years. This is expected to continue in the next couple of years. Figure 8 shows the estimated number of employees for and forecasts of employee numbers to It also details the major occupation groups within total employment, indicating the dominance of professionals, managers and clerical and administrative workers. Figures up to 2013 are actual data, while figures for the years are forecast data based on the ACT Labour Market Data spreadsheet. A trend was extrapolated for the period , based on that data. Figure 8: Number of employees by major occupation groups Number of employees Forecast Managers Technicians and trades workers Clerical and administrative workers Machinery operators and drivers Professionals Community and personal service workers Sales workers Labourers Source: ACT Labour Market Data.xlsx (Last Modified 23/ 04/2014, 3:54 PM) Please note, that Figures for are forecast data provided by the Education and Training Directorate. Job Creation Analysis EY 6

14 4. job creation objectives 4.1 Relevant Territory-wide policies, plans and initiatives and how they relate to job creation objectives for As noted in Section 3.1, it is expected the ACT will become increasingly reliant on the private sector as growth of the Commonwealth public service plateaus. is not only delivering a high quality, fast public transport service, but can act as a catalyst for the corridor development and assist in the economic growth and development of the area. It has the opportunity to promote the local economy and strengthen workplace availability in both the public and private sectors. Proposed job creation objectives for are listed in the table below. Table 6 Job creation objectives for Objective Reduce dependence on the public sector Encourage local business involvement Building local industry capability and capacity Foster the employment of disadvantaged groups and support their participation in the ACT economy Tackle youth unemployment Description Create opportunities within the private sector and reduce the reliance on the public sector (particularly federal) as the driver for growth Encourage the involvement of quality local businesses and maximise the opportunities to utilise local suppliers, services and labour. Support the development of or transfer of specific capability and capacity to increase the quality and competitiveness of ACT businesses. Provide opportunity to disadvantaged groups to participate in the project and its associated economic growth, including specifically targeted Indigenous employment and pursue opportunities with Indigenous businesses where feasible. Create opportunities for youths and workforce entrants and facilitate trainings leading to qualifications that are likely to be generated by the Project These job creation objectives seek to align with ACT plans and policies outlined in detail in this chapter. The table below lists the ACT policies that are the most relevant to the ACT labour market and their influence on the job creation objectives. Table 7 Relevant ACT policies, plans and initiatives Title Date Description Influence on job creation objectives Canberra Plan 2008 Responsibility: Chief Minister and Treasury Directorate The plan sets out a strategy that reflects the views and values of Canberrans and responds to the challenges facing the city. It provides guidance towards growth and development of Canberra and prepares for the city s future. The plan articulates seven strategic themes, including those directly or indirectly relevant to the labour market: a fair and safe community. excellent education, quality teaching and skills development. a strong and dynamic economy. High quality services. The plan highlights the need to address both the skills shortage and the needs of people excluded from the labour market, and states that the ACT Government will work both locally and with the Federal Government to implement coordinated strategic responses. This policy has been captured within the job creation objectives within: Encourage local business involvement. Build local industry capability and capacity. Tackle youth unemployment. Foster the employment of disadvantaged groups. Job Creation Analysis EY 7

15 Title Date Description Influence on job creation objectives It also notes that the ACT is providing additional resources to the vocational education and training system to give students a wider range of career and education options and to assist in dealing with the skills shortage. The plan confirms that the ACT Government will continue to focus on providing an environment in which individuals and businesses are able to prosper. Actions include but are not limited to: Encouraging innovation. Increasing export focus. Develop infrastructure. Commercial and industrial development. Growth, Diversification and Jobs - A Business Development Strategy for the ACT April 2012 Responsibility: ACT Economic Development Directorate ACT Indicative Land Release Programs to Responsibility: Economic Development Directorate The strategy outlines a vision for a growing Canberra economy building on a commitment to private sector growth and jobs. The overall goal of the Business Development Strategy is to achieve growth, diversification and jobs by: accelerating business innovation. supporting business investment, and fostering the right business environment. The aim of the Strategy is to harness knowledge to drive innovation and business growth, to ensure business community is highly collaborative, connected and sustainable, and to make Canberra a preferred location for business to operate. The Land Release Programs are setting out the Government s intended program of residential, commercial, industrial and community land releases. The Programs are indicative and are subject to change as market conditions alter or as Government priorities are adjusted. Key objectives relevant to the labour market include: promoting the economic and social development of the Territory, including contributing to the vision set out in the Canberra Plan of a city representing the best in Australian creativity, community living and sustainable development. assisting in the operation of a competitive private sector land development market. Seeks to broaden the contribution of the private sector by facilitating growth, economic diversification and new job opportunities achieved by. This policy has been captured within the job creation objectives: Reduce dependence on the public sector. Encourage local business involvement. Building local industry capability and capacity. This policy has been captured within the job creation objectives within: Building local industry capability and capacity. The Forecasting of Industry Needs and Entitlement (FINE) ACT Skills Needs List June 2013 Responsibility: Education and Training Directorate The Forecasting of Industry Needs and Entitlement project is the modelling and data analysis project which is informing the ACT Skills Needs List. The ACT Skills Needs List will provide an adaptive and dynamic approach to identify ACT skills needs at a qualification level. It will also inform the ACT Government s allocation of funding to training in the future. This policy has been captured within the job creation objectives within: Building local industry capability and capacity. Tackle youth employment. Job Creation Analysis EY 8

16 Title Date Description Influence on job creation objectives Vocational Education and Training Funded Programs, New Training Initiative planned implementation in 2015 Responsibility: Education and Training Directorate The program will enable the ACT government to subsidise training in areas of skill needs, and thus direct students into the most in demand areas for skill needs, so that their chances of employment are increased. Beginning in early 2015, the program will increase the level of contestable funding available for government-subsidised training, including qualifications that are likely to be needed by Project. This policy has been captured within the job creation objectives within: Tackle youth employment. Building local industry capability and capacity. There are a number of ACT policies in place that provide insight into the ACT s objectives for the regional labour market. However, specific job creation targets do not exist, meaning that direct comparison with the modelling results in Chapter 5 cannot be undertaken. 4.2 Plans and initiatives specific to Stage 1 of will be a 12 kilometre light rail service linking the newly developed area of Gungahlin in the north, to Civic. The project is seen as an enabler of development along that corridor, with the light rail system at the heart of urban densification within defined precincts between Gungahlin and Civic. The CMA has been established to deliver the project and will work closely with the Land Development Agency (LDA) to develop comprehensive property and land release strategies for the corridor to realise the opportunities created by the project. 8 In coordination with the wider ACT Government, the CMA will work with the industry and all relevant sectors to 9 : Support sustainable economic development in the ACT and surrounding region. Encourage and promote the whole-of-life and long-term advantages of using locally based supplies and labour. Provide equitable opportunity for disadvantaged groups to participate in economic growth, including adopting specifically targeted Indigenous employment and training strategies and pursuing joint venture opportunities with Indigenous businesses and organisations where feasible. Facilitate education and training opportunities that maximise local employability and workplace capability. Structure specifications, tenders and other project documentation to provide industry, business and labour the opportunity for maximum participation in the supply of goods and services. Support and promote the services provided by Industry Capability Network ACT to identify suitable local providers s Draft Local Industry Participation Policy, March Job Creation Analysis EY 9

17 4.2.1 Light rail construction and operations Vocational Education and Training Funded Programs - New Training Initiative The Vocational Education and Training Funded Programs New Training Initiative, prepared by the ACT Education and Training Directorate (ETD), was developed as part of the ACT Vocational Education and Training Skills Reform agenda. The objective of the New Training Initiative is to complement the National Skills Reform Agenda. It also aims to subsidise training in areas of skills needed, and thus direct students into the most in demand vocational areas so that their chances of employment are increased. The New Training Initiative is supported by the Canberra Plan as a tool to address skill shortages. It increases the level of contestable funding available for government-subsidised training. Within the framework of the New Training Initative, a number of qualifications have been identified that ETD believe to be needed for light rail construction and the operations. These are listed in Table 8 below. Table 8 Qualifications that are likely to be needed by the Light Rail Project Qualification Name Certificate II in Rail Customer Service Certificate II in Tram or Light Rail Infrastructure Certificate III in ESI - Power Systems - Rail Traction Certificate III in Rail Customer Service Certificate III in Rail Driving Certificate III in Rail Infrastructure Certificate III in Tram or Light Rail Infrastructure Certificate IV in Rail Infrastructure Certificate IV in Tram/Light Rail Control Certificate IV in Rail Safety Management Diploma of Rail Operations Management Diploma of Government (Rail Safety Regulation) Source: Education and Training ( Information).docx The New Training Initiative considers that there will be a number of other qualifications that could be relevant to both the construction and operation/ maintenance of the project, however ETD have acknowledged there may be disparity between the qualification identified in Table 8 and the actual opportunities created by the project s Draft Local Industry Participation Policy The s Draft Local Industry Participation Policy was prepared by the CMA in March The policy attempts to maximise opportunities for the local industry to participate in major investment projects. The key purpose of the policy is to provide local industry with full, fair and reasonable opportunity to participate in major projects in both the public and private sectors. It drives initiatives that aim to encourage industry to build capability and enhance participation. In the context of, the Local Industry Participation Plan aims to: Identify opportunities for local industry participation and ongoing development. Assist project proponents and developers to maximise opportunities to utilise local suppliers, services and labour. Drive the development of a local skills base that can better meet the needs of future developments of a similar nature. Improve the capacity of local businesses to compete globally. Job Creation Analysis EY 10

18 Promote employment and business growth by expanding market opportunities for local industry. Provide local contractors with increased access to, and raised awareness of, local industry capability. Expose local industry to world's best practice in workplace innovation, e-commerce and use of new technologies and materials. Develop local industry's international competitiveness and flexibility in responding to changing global markets by giving local industry a fair opportunity to compete against foreign suppliers. Assist decision making in relation to Government purchasing and investment. The policy aligns with Territory policies including: The Business Development Strategy for the ACT and its goal of creating the right business environment. The Canberra Plan s objective to drive export and commercial and industrial development. The policy puts further emphasis on the involvement and utilisation of local businesses and expanding their market opportunities. It also shares a common objective with the Vocational Education and Training Funded Programs to drive the development of a local skill base Corridor development initiatives The long term objectives of the project are unlikely to be achieved without focused government actions and development initiatives for the land along the corridor. A corridor specific development unit is being created within the Land Development Agency with this mandate, as a result of recommendations made in the Rapid Business Case for (March 2014). Future corridor development initiatives must all be supported by the LDA in order to continue. This includes the indicative land release program, aligning the commercial and residential land releases to the development strategy and land use mix along the corridor. LDA policies are set by the Government, whose practice is to make an annual statement of land policy and development objectives to guide the LDA over the coming financial year. In the Statement of Government Policy for , key objectives include: Ensuring that an adequate supply of land is maintained to meet market demand and to stimulate economic activity in the residential, commercial, industrial and community land development sectors. Contributing to the provision of advice to Government on the ACT property market to support the development of its land release targets. Contributing to the delivery of the Government s policies and priorities as they relate to land development, urban renewal and urban sustainability.10 The Statement of Government Policy also defines the key deliverables of the LDA, specifically mentioning the corridor. The most relevant deliverables include: Supporting the delivery of urban intensification along the corridor. Pursuing development opportunities where such opportunities would be consistent with the Government s policy framework for land acquisitions. 10 Statement of Government Policy for the Land Development Agency (LDA) for (February 2014) Job Creation Analysis EY 11

19 4.3 Relationship to Australian Government plans The Federal Government election held on 7 September 2013 resulted in a change of government. The new Government communicated an intention to reduce the size of the Commonwealth public service by 12,000, and this has recently been updated to 16,000 in the Federal Budget. These reforms are likely to place significant pressure on the labour market and lead to a heavy reliance on the private sector for employment prospects. There are a number of Federal Government policies that directly or indirectly support employment either through education and training or economic development. The table below lists some of the relevant Federal Government policies in place targeting employment: Table 9 Relevant Federal Government policies, plans and initiatives Title Date Description Desired impact on the current state labour market Generation Success, 16 April 2014 Responsibility: Department of Employment An industry led initiative supported by the Australian Government aimed at drawing employer s attention to youth unemployment in Australia. The federal government is supporting the initiative through the introduction of incentives, including: The introduction of the Job Commitment Bonus, under which young, long-term employed people can receive bonuses of up to $6,500. Delivering the Relocation Assistance to Take Up a Job scheme from 1 July, which gives long-term job seekers up to $6,000 if they move to a regional area for work or $3,000 if they move to a metropolitan area. Cutting red tape out of the Job Services Australia system so that local providers can spend more time helping people find work. This initiative aims to assist young Australians in gaining employment. The various incentives provide tangible benefits to young Australians and should make the process of moving into meaningful employment easier. The desired impact is to decrease the level of youth unemployment, and provide more workers for low level entry jobs in industry. This policy has been captured within the job creation objectives within: Tackle youth unemployment. Building local industry capability and capacity. Reformed Indigenous Employment Program, last updated 31 May 2013 Responsibility: Department of the Prime Minister and Cabinet Experience+, April 2012 Responsibility: Department of Employment The Indigenous Employment Program (IEP) commenced on 1 July 2009, and aims to increase employment for Indigenous Australians, supporting the Government s commitment to halve the gap between Indigenous and non-indigenous employment outcomes within a decade. The IEP provides support for activities that increase employment opportunities and participation for Indigenous Australians. The desired impact of the IEP is to bridge the gap between Indigenous and non-indigenous Australians. This should allow more Indigenous Australians to develop their capacity and skills, and find ongoing employment, increasing the size of the Australian labour market and decreasing Indigenous unemployment. The Experience+ initiative aims to attract employers who make a public commitment to move toward better practice in employing mature age people (45 and over). Financial benefits are available to employers who employ an eligible mature age job seeker. The desired impact of the Experience+ initiative is to assist mature age Australians in obtaining employment. As Australia has an aging population, keeping mature-age people in employment broadens the employment base of the country, offers employers access to unique skills and experiences, and decreases the burden on the Federal government from people moving towards the end of their working lives. This policy has been captured within the job creation objectives within: Foster the employment of disadvantaged groups and support their participation in the ACT economy. Tackle youth unemployment. This policy has been captured within the job creation objectives within: Foster the employment of disadvantaged groups and support their participation in the ACT economy. Job Creation Analysis EY 12

20 Title Date Description Desired impact on the current state labour market Australian Jobs Act 2013 and Australian Industry Participation (AIP) Responsibility: Department of Industry The Australian Jobs Act 2013 ( the Act ) requires all major projects with capital expenditure of $500 million or more to meet new mandatory requirements. Further, AIP plans are required as part of the Act. AIP plans required companies to outline how they will provide full, fair and reasonable opportunity to Australian industry. Australian firms face challenges in gaining access to global supply markets and major investment projects. The Act and the associated AIP plans aim to encourage Australian industry to innovate, develop competitive capability and take advantage of investment opportunities. This should strengthen the position of Australian industry, and increase the demand on the Australian labour market. This policy has been captured within the job creation objectives within: Reduce dependence on the public sector. Building local industry capability and capacity. Job Creation Analysis EY 13

21 5. Likely job creation from 5.1 Methodology The project This job creation analysis assesses the economic and employment impacts of the Stage 1 Capital Metro project and the associated corridor development, as defined in Section The scope of the project analysed The assessment of the likely job creation from considers the implications of on the ACT economy from: Expenditure on the construction of the light rail line. Expenditure on the operation of the light rail line. Expenditure on additional retail and commercial property development. Ongoing retail and commercial activities in the additional developments. Data on construction and operational expenditure for the light rail alignment has been sourced from the existing cost estimates for. Expenditure and ongoing economic activity related to the activation have been estimated based on the activation scenario in the Rapid Business Case. The expenditure and additional economic activity will generate both a direct and flow-on employment footprint on the ACT economy, where: Direct jobs are the changes in employment in the specific sector which has experienced the increase in spending (the direct economic impact), such as the construction sector, retail, and/or commercial sectors. Flow-on jobs are the changes in employment in other industry sectors as a result of the direct spending. This is often called the multiplier effect or indirect economic impact. The two components of flow-on jobs are: the industrial effect: demand for goods and services from businesses providing inputs for the direct spending; and the consumption effect: demand for goods and services by people employed by the direct expenditure. The flow-on jobs of an activity are jobs that are dependent on the activity through the supply chain. They express how important the activity is for the economy. However, these direct and flow-on jobs are not necessary additional jobs for the ACT economy because: Development and construction activity along the corridor is likely to occur at the expense of activity elsewhere in the ACT. The additional employment located along the corridor will largely be relocated from other parts of the ACT. Estimating the share of the additional corridor jobs that are additional to ACT is not a straightforward task. For the purpose of this analysis we assume that 10% of the additional jobs to the corridor are additional to ACT. For the new activity to generate new jobs, rather than simply displace existing jobs, there also needs to be an increase in the number of available workers to fill those jobs. In practice, this can only happen through a reduction in unemployment, an increase in participation and/or an increase in inward migration. Job Creation Analysis EY 14

22 An increase in the demand for labour in the ACT will put upward pressure on wages, which will encourage more people to work in ACT. However, higher wages will also dampen the initial increase in demand for new labour, as businesses become less competitive. The second stage of the analysis therefore involved labour market modelling to understand what share of the employment footprint represents additional, or achievable, jobs, rather than displaces existing. The analysis draws upon evidence from literature on labour elasticities in order to model the labour supply and demand responses based on the initial employment footprint impacts. The output of the analysis is an estimate of the net additional achievable ACT jobs generated by the project. Based on this assessment of achievable ACT jobs, the final stage of the analysis uses ABS Census data to break down the jobs impacts by detailed occupations and vocations. This enables us to consider how well the additional needs match the availability of workers with particular skills and capacity within ACT, and where the needs may conflict with skills shortages as evidenced by vacancy statistics and government identified skills shortages. The figure below summarises the approach the three main components of our analysis in yellow, inputs in light grey and outputs in dark grey. Figure 9: Approach for assessing job creation impacts The rest of this chapter covers the main components above in turn Key assumptions The analysis relies on cost, scope and timing inputs provided by the Agency related to both the light rail project and associated corridor development. Inputs are current as at 20 May Economic contribution footprint analysis The economic footprint of will include both those driven by the construction and operation of light rail and of the corridor development. The corridor development element of Capital Metro will deliver additional floor space to accommodate around 26,000 jobs along the corridor. Taking into account the flow-on jobs from industry and consumption effects means a total footprint on 50,000 jobs, as seen in the table below. Job Creation Analysis EY 15

23 Table 10 economic footprint Indicator Direct effect Industry effect Consumption effect Total Light rail ongoing operational employment (2049) Corridor ongoing employment (2049) 26,000 11,000 13,000 50,000 However, the majority of the jobs accommodated along the corridor will not be new to ACT. Rather, they will locate in the corridor instead of somewhere else within the territory. As noted above, the following analysis assumes that only 10% of the additional corridor employment is new to ACT. The results of the economic footprint analysis are summarised below for the years 2017 to The employment footprint is split into that created by the construction and operation of light rail and by the corridor development and associated economic activity in those developments. Table 11 economic footprint Project component Indicator 2017 (assumed peak year of constructio n) 2022 (mainly operatio n) 2027 (mainly operatio n) 2032 (mainly operatio n) 2037 (mainly operatio n) 2042 (mainly operatio n) 2047 (mainly operatio n) Light Rail Corridor Development Direct effect Industry effect Consumption effect Total Direct effect Industry effect Consumption effect Total , , , , , , , , ,070 4, ,620 1,110 1,270 5,000 By far the most significant employment footprint impact of light rail is during the construction phase, where, in the peak year 2017, 725 direct jobs lead to a total footprint of 1,780 jobs in ACT. During the operation phase, a total of 125 footprint jobs are generated. Comparatively, the employment footprint for the corridor development is modest in 2017 with 240 jobs, but it then increases to 1,030 in 2022 and 1,830 in The following figures show the profile of jobs from the direct, industrial and consumption effects over time for ACT, from the light rail and the corridor activation, respectively. Figure 10 shows that the footprint employment demand for corridor development net of the redistribution of jobs is around 200 in 2017, of which about half are direct. In 2022 and 2027 they reach around 1,000 and 1,800, respectively. Job Creation Analysis EY 16

24 Figure 10: Light rail employment footprint Figure 11: Corridor development employment footprint 5.3 Achievable jobs The above estimates show the gross potential additional employment demand that arises from the direct expenditure and economic activity. This additional employment demand will put upward pressure on wages, which encourages additional labour supply from reduced unemployment, increased participation and increased inwards migration. Higher labour costs will, however, in turn dampen the initial increase in labour demand until, over time, wages adjust so that labour markets clear. This labour market analysis is undertaken for 5-year intervals starting from 2017 and shown in the figures below. The net achievable jobs are naturally lower than the gross increase in labour demand, as they better account for the labour market constraints described that exist in the economy. Job Creation Analysis EY 17

25 The peak achievable jobs created during the light rail construction phase reaches 960 in 2017 with around than 725 of these directly engaged in the construction activities. The corridor development generates 130 jobs in 2017, rising to nearly 600 in 2022 and reaches 1,800 in Figure 12: Light rail achievable jobs Figure 13: Corridor development achievable jobs The table below shows the net achievable jobs in ACT in 2017 and 2022, by industry sector and as a result of light rail and corridor development. Table 12 Additional achievable jobs to ACT by sector Professional, Scientific and technical Services Financial and Insurance Services Information Media and Telecommunications Accommodation and food services Administrative and support services Light Rail Corridor development Total Light Rail Corridor development Total < < < < Retail Trade Rail Operations Rail Construction Building Construction Other Construction < Other Sectors < Total net achievable jobs , Most of the additional jobs in 2017 are related to construction activities, although 230 jobs are displaced from construction activities not related to the light rail and corridor development. Other sectors that see a significant increase in jobs in 2017 include professional, scientific and technical services, accommodation and food services and retail trade. In 2022 the number of achievable jobs resulting from light rail is only 75, of which the majority are directly related to rail operations. In addition there will be an additional 560 jobs generated from corridor development, mostly in professional services and accommodation and food services. For both light rail and corridor development, the table above shows that the additional direct employment is displacing existing jobs most notably in the construction sector. This reflects both a Job Creation Analysis EY 18