Australia must optimise its workforce, for everyone’s sake
With relatively fewer workers around, we must find ways to drive productivity, argues our resident Stats Guy.
I made the argument in previous columns that Australia is running out of workers; that the current skills shortage will persist (even under a continued high migration regime), and that we must urgently find solutions.
In the coming decade, we’ll see heaps of Baby Boomers retire, while a relatively smaller cohort enters the workforce, and Millennials will exit the workforce temporarily as they go on parental leave.
With relatively fewer workers around, we must find ways to drive productivity. The first point of call is to praise all the cool buzzwords (AI, automation, robotics).
Less uni graduates, more TAFE workers
We must also rethink our educational system as we send too many of our Year 12 graduates into the university system and too few into the TAFE system. Our national business model relies on mining, agriculture, international education, and tourism – we don’t need half of our Year 12 students to go to university to advance these industries. We will certainly continue to import migrants to fill skill gaps too.
Even if we do all of the above, we will still likely have countless jobs that we can’t fill. We must therefore also explore ways to optimise our existing workforce.
The two charts below show the labour force status of the Australian population by age. Data for men and women are shown separately because they differ quite significantly.
As a quick aside, the term workforce refers to all people who are employed full-time, work part-time (this includes casual working arrangements), and those who are away from work (usually due to illness, compassionate leave, or parental leave). The labour force also includes the unemployed population.
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Under the age of 15 nobody is officially employed in Australia. There are, of course, young kids who help in the family business without being technically employed. These kids and everyone under 15 are classified as not in the labour force. From age 15 up to age 37 for men and age 25 for women this cohort keeps shrinking.
From the age of 50 the share of the population not in the labour force goes up year after year as we see a few early retirements and a few people who have accrued enough wealth to live off their savings.
If we want to expand our worker pool from within the people who aren’t in the labour force at all, then they are numerically our best option.
Delaying retirement
It’s not just ethics that make introducing young kids into the workforce wrong. Our economy is sufficiently complex that we need our workers to have completed at least high school education to be productive members of the workforce. The growth opportunity instead lies in pushing back retirement.
We want to encourage our experienced workers to transition into part-time roles and remain in the workforce for a little longer. To a degree, this will happen organically as a growing number of low-income earners find themselves in their mid-60s with insufficient super balances. The tail of the full-time employed blob that reaches upwards into the late 60s and early 70s will only grow over time.
What about the cohort aged 20 to 50 who are not in the labour force? Can we transition some of them into the workforce?
In a recent column, I discussed the problem of the growing NEET (Not in employment, education, or training) cohort. These are economically unproductive people, report poor mental health, are potentially politically destabilising, but are an untapped source of workers.
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Anecdotally, one of the reasons for our low unemployment rate is that people who would have collected unemployment benefits in the past are transitioning to mental health related disability payments because the payouts are higher. This puts them technically in the not in the labour force category.
You can easily see how even raising this topic is politically very challenging. Nobody wants to take healthcare funding away from people who genuinely need it, but a few easy political points can be scored that way.
Childcare barriers
Primary carers are also not in the labour force. Since women are more likely to be the primary caregiver, in the 18-64 cohort there are about 50 per cent more women than men.
This brings us to the next cohort, away from work. As mentioned above, this cohort is still employed but they don’t work because they are on some sort of leave. A sabbatical, illness, compassionate or parental leave.
Providing workplaces that don’t result in injury or mental health issues is a moral duty as well as a nice way of ensuring our workforce remains sizeable.
What can we do to encourage women back into the workforce quicker after the initial period of maternity leave? There is only one option that has been proven to be effective. That’s offering universal free childcare.
Childcare costs are insultingly high for most Australians right now. With falling childcare costs, we will see that the primary caregiver in a household will work longer hours.
Encouraging people out of unemployment is the most obvious way of increasing the workforce. Employment services are more popular than ever as understaffed employers are willing to give candidates a go who they would’ve ignored a few years ago.
Training and upskilling unemployed workers is especially important if they used to work in declining industries. We must also find smarter and more efficient ways of placing unemployed workers into new jobs. The good news is that employers are more willing than ever to take on people with a long gap in their CVs.
Increasing workers’ hours
The same is true for ageing workers. In the past, organisations were reluctant to hire older workers for anything but top leadership jobs.
Now organisations view a 55-year-old hire as a reliable resource who likely sticks around for longer – the only problem is that these older workers demand high wages. If a business is severely financially constrained, they will still hire a younger worker over an older worker.
Pushing workers from part-time to full-time employment is a great way of increasing the total hours worked in Australia (a popular measure of productivity). The problem is that many people want to work part-time. That’s either because they have care responsibilities of sorts or simply because they prefer more spare time.
Optimising our workforce from within won’t be easy, but we have no other choice than pursuing this if we want to ensure a successful economic future for Australia.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, LinkedIn for daily data insights in short format.
