The post-pandemic workforce shift – more caring but less productive
In previous columns I described the consequences of Australia running out of workers.
We lose a big cohort of Baby Boomers to retirement this decade, while a relatively smaller cohort of Gen Zs enters the workforce.
At the same time the biggest generation, Millennials, continues to make babies and goes on parental leave for at least some time.
Our workforce (see chart below) wants to continue its expansion, but demographics make the continued rise a more challenging story.
Aren’t we importing workers left, right, and centre?
Turns out, even a high migration regime won’t add sufficient workers. Half of migrants are international students who do not add to the workforce at scale.
Our skilled migration intake is surprisingly small (as discussed in a previous column) and not targeted enough to really fill the skills gap.
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Unless we drive the economy into a wall, Australia will not see high unemployment figures anytime soon – we just don’t have sufficient working age people to become unemployed at scale.
Australia continues to age (creating health and care jobs in the process) while Millennials go through the highest spending phase of the lifecycle (mid-40s consume like crazy and create retail, education, and leisure jobs) in the coming decade.
Our economy as a system wants to add more jobs in the coming decade. Let’s look at where job growth was strongest since the pandemic. I also provided benchmarks to compare the 20 quarters before the pandemic with the 20 quarters since.
Just under 2.3 million of the 14.6 million Australian jobs are in health care and social assistance – by far the biggest industry.
Since the pandemic, the sector grew even more important. Pre-pandemic, 21 per cent of net new jobs were in health. Post-pandemic the share increased to 29 per cent.
Overall, health sector employment grew by 26 per cent, or by 468,000 workers, since February 2020 – that’s 270 net new workers per day. This demand is going to increase dramatically once Baby Boomers demand aged care services and see their physical health decline (see previous column).
We also see the continuation of Australia’s transformation into a knowledge-based economy reflected in a growing education sector (plus 216,000 jobs).
The gigantic cohort of Millennials will, despite low birth rates, add many more kids to the education system.
The structural demand for workers looking after and educating kids is going up steeply. I wrote in the past about the almost comically high shortage of teachers that Australia is facing.
Our political leaders decided that no major structural housing reforms will be implemented in Australia (stamp duty, negative gearing, taxation, state owned housing developer) – all efforts are concentrated on adding more housing supply. Ok, but who is going to do all the work?
The construction sector grew only a bit faster than the national average (16 per cent vs 13 per cent). That is a far cry from a transformative effort. Talk to anyone in the broader housing sector and they will (among other things) bemoan the shortage of skilled tradies to do all the building works.
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If labour shortages in construction persist, Australia’s lofty housing supply goal of an additional 1.2 million homes will not be reached, and the housing affordability crisis continues to haunt the nation. Even with government incentives to boost supply, without enough skilled tradies, engineers, and planners projects will face delays and cost blowouts.
While solving the housing affordability crisis needs major policy reform on all fronts, getting enough workers into the construction industry remains a major priority.
No industry in Australia is as economically productive as mining. The sector now employs a record high of 310,000 people. Since mining can pay extremely high wages, it’s the only industry that will never suffer serious skills shortages – money talks.
This means that in the future we can assume that permanently over 300,000 of our workers will be earmarked for the mining sector. The other industries will compete for the limited resource of human capital.
Without wanting to belittle the benefits of any worker, we heavily grew economically relatively unproductive industries since the pandemic. I wrote a column about this last year.
We can divide the total economic output that an industry creates by the number of workers in that industry to get a sense of how productive each worker is. Mining creates the most wealth per worker by a long shot (over $1 million per worker).
If we can grow the mining sector, the economy grows. Yes, this analysis ignores the environmental costs and the social benefits. The labour demand in health and education is extremely high but adds relatively little to direct economic growth.
These low-productivity industries are essential for Australia to retain its standing as one of the world’s most liveable countries.
Without great healthcare and educational opportunities for our kids, many Australians and migrants might want to live elsewhere. We obviously need these industries from a moral perspective too – leaving your population less healthy and less educated than possible is in no way ethical.
Australia faces a decade where most industries want to add workers at scale. After all, the population base and the economy want to keep growing.
Unfortunately, we don’t have enough workers to make the most of these opportunities. This is where I must add a rallying cry for AI, automation, and robotics.
These tools can unlock productivity, meaning they can ensure that each worker adds a little bit more to the economic output – logically some of this newly created wealth should find its way into workers’ pockets.
AI, automation, and robotics aren’t just productivity boosters – they’re essential for maintaining economic growth in a future where Australia continues to run out of workers. While we can’t magically create more workers, we can equip the ones we have with better tools to more productive.
By now you got the main idea, it’s hard to ensure each industry gets the workers it needs. But how are individual jobs impacted? Next week we will take a closer look at the specific jobs that we added to the workforce since the pandemic. This paints an even clearer picture of bottlenecks and challenges our national economy faces.
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, or LinkedIn.
