The view from England: Miners suffering from unintended consequences

As mining booms, the industry is suffering from the employment consequences of earlier bear-market bites.  

Most of us are aware from an early age that every action has consequences. Adults learn that these outcomes might be complicated, and that not all are foreseeable. This is especially true when multiple independent corporate decisions are taken that come to have an impact at the global level. So it is with cutting mining jobs in times of depressed metals prices, and expecting employees to come running back when prices recover.  

We should have known better. Unintended consequences were first aired publicly in England almost 330 years ago by John Locke in a letter to Sir John Somers. Locke (1632-1704) was a philosopher and physician, widely regarded as one of England’s most enlightened thinkers and commonly considered as the ‘Father of Liberalism.’  

In his communication of 1695, Locke discussed the unintended consequences of interest rate regulation with Sir John (1651-1716), who was Lord High Chancellor of England under King William III (and chief architect of the union between England and Scotland in 1707). Actually, Locke’s ‘letter’ was rather more a report as it ran to over 27,000 words (although Locke did end the missive by writing that he had explained the issue with “as much brevity and clearness as I could.”)  

Locke was an early advocate of social contract theory (in particular the legitimacy of the state over the individual), and five years earlier, in his ‘Second Treatise of Civil Government,’ Locke had likened inappropriate government regulations and taxes to theft by an armed burglar.  

Locke wouldn’t have needed EY to report (as it just did) that workforce challenges are on the minds of global mining executives, and that employment issues are among the top 10 mining industry risks for 2022.  

The issue has been looming for years. In 2019, Ryan Montpellier, executive director of Canada’s Mining Industry Human Resources Council (MiHR), wrote “To have a sufficient talent pipeline for the Canadian mining sector, the industry will need to recruit approximately 100,000 new workers.” He warned, “Companies competing for this talent will cause a shortage for the entire sector. To ensure a sufficient talent pipeline, mining companies will have to grow the pie together, instead of approaching this shortage by trying to grab the biggest share of recruits.”  

More recently, Montpellier signalled that “demand for talent has outpaced supply,” and “Canadian companies have hundreds of positions they just can’t fill.” Worryingly, MiHR calculates that 60,000 mining workers will retire by 2030, forcing companies to deal with replacement demand even as they need to fill net new positions.  

There are similar problems in most jurisdictions. In Western Australia, for example, the mining and resources sector might need up to 40,000 more workers by mid-2023, according to modelling commissioned in mid-2021 by the Chamber of Minerals and Energy. CME called on industry and government to collaborate on ways to combat the shortages.  

In a late 2021 survey, KPMG compiled the views of more than 400 mining executives, and nearly two-thirds of the respondents nominated “finding and retaining talent” as their overwhelming concern, with fears that the problems may persist for up to another five years.  

BHP recently warned of “ongoing labour mobility restrictions,” and the company’s head of Australian mining, Edgar Basto, told reporters “We expect labour market tightness and competition for skills to increase in 2022.” 

Despite Australia’s hard borders being lifted as Covid restrictions are eased, the Australian Financial Review warned on Apr. 14 that Western Australia’s mining industry is currently “short more than 10,000 workers,” based on new analysis that “shines a light on the lingering side effects of the WA government’s cautious management of the pandemic.” 

In its December 2021 Workforce Report, LinkedIn noted “workers in the energy and mining industry have, on average, been applying for work in other industries more frequently than applicants in other sectors.” The LinkedIn report said transitioning energy and mining workers have primarily moved into manufacturing, construction, software and IT services, corporate services and finance occupations since 2019.  

Mining-employment issues include an aging workforce, the length of time it takes to develop the necessary technical expertise and knowledge, and a lack of new talent coming into the industry.  

Mining is a cyclical business and, unfortunately, the historical cost-saving method of laying off employees during bear markets has come home to roost. Coupled with its poor reputation and remote locations, mining cannot afford its awful record as a stable employer. Over 300 years ago, Locke would have been able to explain the merit of long-term employment relations in a volatile industry.