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Aged care workforce shortages require action from the Jobs Summit & resourcing for high quality care

While reforms to improve the quality of aged care are welcome and necessary, the government must also consider how to properly resource providers to meet higher standards.

Against the backdrop of stagnant wage growth and record low unemployment, expectations were high for the Labor Government’s Jobs and Skills Summit. Discussion at the Summit traversed a wide range of workforce issues, including sustainable wage growth, skills and training, and migration. The primary objective of the Summit, however, was clear – to address widespread workforce and skill shortages. Although criticisms of the Summit include concerns about the event being a “union power grab” and lacking representation from the “Big Four” banks, the event has the potential to catalyse a re-shaping of the economy to address workforce shortages.

In no part of the Australian economy are workforce shortages more economically and socially significant than in aged care. Within the sector, staff are key to delivering safe and high-quality services to older Australians both in their homes and in residential aged care settings. Staffing costs make up a vast majority (around 70 per cent) of the operational costs for aged care providers. Yet, widespread understaffing was highlighted by the Royal Commission into Aged Care Quality and Safety as a key driver of neglect and quality failures. The Royal Commission made several key recommendations for increasing the skilled workforce in order to improve care in residential aged care homes. However, COVID-19 lockdowns, border closures and high sector turnover of staff have subsequently exacerbated workforce shortages and made it difficult for providers to recruit and retain sufficient permanent and qualified staff to deliver an appropriate level of care. Recent reports indicate that there is a current shortfall of 35,000 direct care staff in the sector.

Workforce shortages in aged care are likely to further intensify in the short term, as the passing of the Aged Care Amendment (Implementing Care Reform) Bill 2022 through both houses of the federal parliament is expected to substantially increase demand for qualified registered nurses within aged care homes. This package of reforms includes the requirement that aged care homes have one registered nurse on site and on duty for 24 hours a day, seven days a week. Additionally, residential homes will be required to provide a minimum staffing level of 200 minutes of total direct care and 40 minutes of registered nurse time per resident per day, from October 2022. With as few as 5 per cent of aged care homes currently meeting these staffing levels, this renews concerns about workforce shortages given reports that a further 110,000 direct care staff will be needed in the next decade.

Intensified workforce shortages are occurring as providers increasingly struggle to remain financially viable, prompting major concerns about the financial sustainability of the sector. A recent report by the UTS Ageing Research Collaborative (UARC) finds that 60 per cent of aged care homes are currently operating at a financial loss. In committing to increasing the capacity of the aged care workforce, the Australian Government recently proposed a 25 per cent wage increase to the Fair Work Commission for aged care sector workers. Although the government have committed to funding part of these wage increases, it is not yet known how much of the additional labour costs will be borne by providers. Further, it is not yet clear whether changes to the funding model for residential aged care with the introduction of the Australian National Aged Care Classification (AN-ACC) will lead to sufficient government support to fund the required increases in staffing.

Our new study at UARC highlights the critical social and financial trade-offs that providers experience in managing their workforce. Our study finds that investment by providers in the quality of their workforce comes at a steep cost to their capacity to generate financial returns. Consistent with the recommendations of the Royal Commission into Aged Care Quality and Safety, we used workforce skills (more registered and enrolled nurses) and stability (full time employees) as measures of a quality workforce. These workforce attributes are expected to improve quality of care services provided to residents. However, persistent workforce shortages and high staff turnover have made it difficult for providers to maintain a skilled and stable workforce.

With workforce shortages forcing providers to hire less skilled and more temporary staff, a costly investment in full-time staff who can provide continuity of care and quality of service should be rewarded. However, our research finds that this investment does not pay off for providers in terms of their financial performance. Instead, it is providers with a comparatively less skilled and less stable workforce, and who provide a poorer quality of care to residents, that have stronger financial returns. Providers with a more skilled and stable workforce provide higher quality care to residents but suffer from worse financial returns.

It is problematic that that a workforce must be both skilled and stable in order to provide higher quality of care because providers experiencing workforce shortages will often employ temporary workers (i.e., a less stable workforce) in order to increase their proportion of skilled staff. Our research shows that this strategy does not improve quality of care. Yet, this is a likely scenario that will be faced by many providers who will struggle to meet the Albanese Government’s requirement of minimum levels of registered nurses in aged care homes.

Discussion around skilled migration at the Jobs and Skills summit may well offer a short term solution to workforce shortage issues, but will be unlikely to address the significant scale of shortages in the sector. The Victorian Government’s announcement of free nursing degrees may also alleviate some of the medium term pressure, though it could also have adverse effects for other states. The bigger challenge, however, is for providers to maintain a quality workforce while remaining financially viable. This is a dilemma for the sector which is likely to persist for as long as it experiences ongoing staffing shortages.

Medium and long term action on workforce shortages in aged care needs to be formulated at the national level and, importantly, this conversation must involve aged care providers of all sizes and include rural and remote providers. For providers to meaningfully commit to higher staffing levels that improve quality of care, the financial disincentives to meet these requirements must be addressed. Measures to address this challenge demand a combination of direct financial incentives for providers and reforming the pricing of care services.

In the short to medium term, this could include a financial incentive scheme that rewards providers that commit to upskilling employees, maintaining a higher mix of skilled and permanent staff, and reducing turnover of permanent staff. In the longer term, broader sector reform is needed in allowing providers greater scope to price their care services to reflect their investment in the quality of their workforce, as well as increasing price transparency allowing consumers to compare prices across providers.

Overall, if progress is to be made on improving the quality care that is provided to older Australians, the government must take action to address workforce shortages in the long-term as well as incentivise, rather than compel, aged care providers to maintain a higher quality workforce.

Nelson Ma is a senior lecturer and researcher in financial accounting at the University of Technology Sydney (UTS). His research focuses on understanding how the drivers of financial performance impact the quality of financial statements prepared by publicly listed companies. Nelson has recently published a series of projects in aged care, analysing quality of care and the financial outcomes of different business and workforce models.

David Brown is Professor of Management Accounting at the University of Technology Sydney (UTS). His expertise is in the design and use of management and accounting systems to address behavioural, decision making and coordination problems in organisations. He is best known for his work on management control system packages (multi-system design). David has a detailed understanding of key issues within the aged care sector, particularly as these relate to the management practices of service provider organisations.

Image credit: StockSnap

2022-09-02T23:19:26+10:005 September 2022|

Conscious decoupling: creating a more sustainable model of material use in a growing economy

Australia’s material footprint per capita is rising. But with the right policies, we can break the nexus between depleting our ecological resources and improving economic growth.

Nature by itself is a circular economy – its wastes are reabsorbed back into the environment for productive reuse. However, the disproportionate global growth in waste, and the rapid proliferation of inorganic waste that is difficult to break down, is entirely an anthropogenic problem. Left unaddressed, this is creating cumulative impacts on our biodiversity, food security and way of living.

Depleting natural resources at current rates is unsustainable

We are seeing an unprecedented rise in the consumption of primary materials – farmed, mined, harvested or extracted from the natural environment in other ways – which are not being replenished fast enough to sustain this level of human consumption.

Each year, Earth Overshoot Days are getting progressively earlier, indicating intensified consumption activity. By Global Footprint Network estimates, it would take the biocapacity of 4.5 earths if the world’s population lived like Australia. Only six other countries in the world currently have bigger demand for ecological resources per capita than Australia.

Our consumption and production patterns based on the linear economy approach of “take, make and dispose” are creating more and new types of wastes. At the same time, insufficient prior investment in better solutions means that resource recovery rates are not growing sufficiently quickly to keep up.

Australia is a world-leading consumer of raw materials (at over 40 tonnes per capita in 2019) and has a material footprint of 47 tonnes per capita to service final demand. Both metrics are around double the OECD benchmark. At the same time, Australia’s resources productivity is low, generating economic output of USD 1.18 for every kilogram of material consumed: less than half the OECD benchmark in 2019.

In 2020, the European Union’s second Circular Economy Action Plan highlighted the need for the EU to keep its “resource consumption within planetary boundaries”, given that global consumption of materials is expected to double in the next 40 years, and waste generation increase by 70 per cent by 2050. Resource extraction and processing alone will account for half of total greenhouse gas emissions, and over 90 per cent of biodiversity loss and water stress.

Which countries are leading the world in resource productivity?

A circular economy is one where economic growth is successfully decoupled from material use.

An analysis of OECD nations’ material footprints demonstrates the slow rate of progress towards decoupling, even in many high-income economies. The “material footprint” represents the total volume of raw materials needed to satisfy the final demand of an economy. This includes not just the raw materials used domestically, but also upstream raw materials used overseas in producing the finished or semi-finished goods that are used by an economy.

NSW Circular’s analysis reveals four groups of countries at different stages of progress towards a circular economy (Figure 1 shows a selection of these countries).

Leaders: This group comprises Japan and advanced European economies including Austria, Germany, Greece, Italy, Luxembourg, Netherlands, Norway, Portugal, Slovenia, Spain and Switzerland. They have managed to steadily reduce their material footprint per capita while increasing economic growth (absolute decoupling) and continue to progress in this direction.

Progressing: These economies are generally tracking in the right direction in terms of decoupling, although momentum in reducing their material footprint per capita has decelerated in recent years. Within the OECD, this group comprises Costa Rica, Czech Republic, Finland, France, Slovak Republic and Sweden.

Losing momentum: This mix of large and small economies have seen some progress in decoupling in the early 2000s to 2010s, but this momentum has stalled or even reversed in recent years. Within the OECD, this group comprises Belgium, Canada, Denmark, Hungary, Iceland, Ireland, Israel, Mexico, the United Kingdom and the United States.

Laggards: These countries have seen their material footprints per capita steadily rising (albeit at a slower rate than economic growth, i.e., relative decoupling), and have shown no real progress in reducing their material footprints per capita since 2000. In the OECD, this group comprises Australia, Chile, Colombia, Estonia, Korea, Latvia, Lithuania, New Zealand, Poland and Turkey.

Policy options for a more sustainable model of material use

How do we break this nexus between depleting our ecological resources, while improving economic growth and standards of living? Here are some policy solutions:

  1. Set goals for sustainable material use, with an action plan that includes measuring and setting targets for reducing our material footprint. Australia presently has a range of policy strategies that target different aspects of our material consumption and disposal. These range from the National Waste Action Plan (and similar strategies by the states and territories), to various infrastructure, manufacturing, and innovation programs that include the circular economy and new materials as priority sectors for development.A holistic national circular economy action plan is needed: one that goes beyond waste and recycling targets to consider all parts of the materials supply chain contributing to our consumption activity, with a view to reducing our material footprint. For example, the European Parliament has called on the European Commission to propose science-based binding EU targets for 2030 to significantly reduce the EU’s material and consumption footprints, and bring them within planetary boundaries by 2050. Independent researchers have even suggested, for example, a target cap on household resource use based on their material footprint, such as in this study from Finland. For Australia, a first step towards such a national action plan could be for governments to embed metrics to track our consumption and material footprints, and resource productivity and sufficiency, into policy frameworks to monitor progress and inform implementation. State and territory governments could also consider planning guidelines to maximise industrial symbiosis, such as those incorporated into EU law in 2018 with member states required to promote replicable practices.
  1. Incentives to maximise material reuse. Waste levies and product stewardship schemes, including container deposit schemes, are currently the main policy tools with financial levers for reducing waste across Australian states and territories. These are effective to a point, but by themselves are not going to be enough to reach government waste reduction targets.Further incentives should be considered for households and businesses to reuse, repair or repurpose goods. These may take the form of business incentives for repair shops, concessions for customers using these services, incentives to transition from disposable to reusable materials, and requiring design standards and labelling to facilitate repair and recycling. As a start, the government should implement the Productivity Commission’s Right to Repair report recommendations from 2021 as soon as practicable. Other policy options could include banning unnecessary waste, such as the destruction or disposal of unsold durable goods. Clothing and household goods, for example, typically have a high environmental footprint in their manufacture, are often not easily recycled, and can be donated for reuse, resold, repurposed or recycled. Similar bans have already been introduced in France and are being considered in the EU and Scotland.
  1. Set targets for low-carbon materials or material reuse in publicly funded infrastructure projects where feasible to slow material supply risks. Australia is projected to spend AUD 1.5 trillion in infrastructure development up to 2040. Infrastructure Australia estimates that investment in major public infrastructure over the next five years alone will exceed AUD 218 billion. This presents a significant opportunity to deploy more sustainable low-carbon materials – including recovered materials – into constructing buildings, roads, landscaping, and fit-out materials, among others. This need to slow the depletion of natural resources and shore up materials supply chain resilience is urgent. Demand for materials is expected to rise by 120 per cent over the next three years. Significant supply risks are expected from increased demand for quarried materials such as rock and bluestone (240 per cent), steel (160 per cent) and concrete (110 per cent). Beyond ramping up efforts to recover all reusable demolition waste generated through development projects, governments at all levels will also need to work with industry and groups such as the Materials and Embodied Carbon Leaders’ Alliance to find new solutions to drive reductions in embodied carbon in the built environment.
  1. Industry development policy to accelerate the supply and take-up of sustainable and low-carbon products. We need more sustainable products to reduce our material footprint. At the same time, we need to develop market depth and innovation to create commercially self-sustaining markets for these emerging products.Currently, Australia’s federal manufacturing policy is based on six sector-specific roadmaps. Of these, two focus on improving our use of natural resources and materials: resources technology and critical minerals processing, and recycling and clean energy. A more holistic version of this approach is needed in a sustainable product policy framework that connects research and industry policy with the material productivity targets. This framework must cover all stages of product development, including product design as it can determine more than 80 per cent of a product’s environmental impact over its lifecycle. The European Commission’s recent proposal to introduce Ecodesign for Sustainable Products regulation (repealing their 2009 Ecodesign Directive) is an example of such policy action.

Another critical policy lever is through government procurement frameworks, which can be strengthened to prioritise sustainable and low-carbon products and service models to support the proposed material and carbon reduction targets. This can be supplemented by public reporting of progress towards targets. Japan’s Ministry of the Environment, for example, discloses estimates of greenhouse gas reductions brought about by its green public procurement actions.

Economic growth and positive environmental outcomes are often viewed as a hard trade-off. However, in the case of the circular economy there are some clear solutions to overcome this dilemma: by maximising the productivity of the materials we use and, by doing so, reducing waste. This generates both economic and environmental benefits.

As Australia continues to rebuild from the pandemic and local natural disasters, there has never been a better time to focus on turning our waste and resource supply challenges into an opportunity for a stronger and more resilient economy.

Dr Kar Mei Tang is Chief Circular Economist with NSW Circular. Her work focuses on how environmental and economic policy can intersect to bring about better local and global outcomes. Her experience spans many years of senior executive and governance roles in these fields in the public and private sectors, in Australia and internationally.

Caption: A circular economy generates both environmental and economic benefits. Materials recovery facility in Australia. (Photo by Peter Virag/iStock)

2022-06-06T09:30:56+10:009 May 2022|
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