Can Australia win in the global battle for skilled workers?

Peter McDonaldDirector

Australian Demographic and Social Research Institute

Reference

Peter McDonald and Glenn Withers

Population and Australia’s Future Labour Force

www.assa.edu.au

Predictable futures for Australia

1. Major investment in new physical infrastructure.

2. The continuation of the mining boom.

3. Substantial new investment in education and training.

4. Substantial new investment in health and welfare.

5. The growth of the aged population.

6. Doubling of standards of living by 2040.

7. Radical changes in the way we live our lives.

Future labour demand (1)

1. New infrastructure for water, transport, ports, energy supply, housing and office space, and state-of-the-art communications will be demanding of engineers and construction workers.

2. Mining expansion will require managers and mining engineers through to truck drivers, port and railway workers.

3. Most new workers will be supplied from domestic sources but they will need to have leading-edge training. More teachers and educators required.

Future labour demand (2)

4. The demand for health workers is strong and will continue to be so.

5. The growth of the aged population will generate increased demand in all types of service industries and in the health sector.

6. Rising living standards will create new demand for labour, especially in consumption and service industries.

7. And new ways of living our lives will create jobs that do not exist today.

Future labour demand (3)

Much of the future labour demand will be met by migration and Australia’s population will grow at a much faster rate than the ABS has previously projected.

Massive planning implications – but not the subject of today’s address.

Population growth has a multiplier effect upon the demand for labour. The additional population must be fed, clothed, housed and generally entertained.

Labour supply

Australia’s labour force grew at close to two per cent per annum between 1980 and 2000.

This was due to full entry to the labour force of the baby boom generation, increased participation of women and overseas migration. The first two of these sources of growth will largely disappear from now on.

The labour force is growing today at about 1.2% per annum and falling. Current growth would be close to zero without migration (next slide).

Labour Force Annual Growth Rate Projection

-0.8

-0.3

0.2

0.7

1.2

2006 2021 2036 2051

Year

Rat

e (%

)Australia

Note: Assumes fertility constant at 1.8 births per woman and labour force participation constant at July 2007 levels

Annual Net Migration = 0

Annual Net Migration = 160,000

Table 1: Population and annual net migration if labour force growth is assumed to be constant at 1% per annum, Australia, 2006-2051.

Year Population (millions) Annual net migration (thousands)

2006 20.6 160

2021 25.3 227

2031 28.9 227

2041 32.3 266

2051 36.2 316

Note: Assumes fertility constant at 1.8 births per woman and labour force participation constant at July 2007 levels

Response by Government(all in the past week!)

An additional 31,000 skilled migrants in the 2008-09 Migration Program.

Temporary skilled migration expected to exceed 100,000 in 2008-09.

Foreign students gain automatic work rights in Australia.

Cabinet is expected to approve a pilot program for a guest worker scheme from the South Pacific.

A longer term reform package will be considered as part of the 2009-10 Budget.

And work gangs: large projects

The Government will also promote and encourage the wider use of Labour Agreements for larger projects that are in the national interest and have significant economic benefit for Australia (Minister for Immigration and Citizenship, press release, 5 May).

Other views

‘Federal Opposition Leader Brendan Nelson says the Government's plan to plug the labor shortage with an increase in migration will put Australian's out of work’ (ABC On-line News 18 May 2008).

UNIONS believe the Rudd Government is using a huge increase in skilled migration over the next 12 months to dampen wage pressures across the economy as they pursue catch-up pay claims to offset rising inflation (The Australian, 16 May).

Global competition for labour

In the next 50 years, because of past and future low birth rates, skilled labour will be the quintessential scarce resource.

This is not to say that the world as a whole should be aiming to increase its population. But it does mean there will be redistribution of population across the globe on a numerical scale greater than we have ever seen.

UN projections of labour market entry ages (15-24 years)

Region Change in population aged

15-24 years

15-25 year olds in 2050 as a percent of 15-24 year olds in 2005

2005 to 2025(millions)

2025 to 2050(millions)

Africa 88.5 75.9 187

Asia -11.1 -54.3 91

Europe -25.0 -10.0 66

Latin America 4.0 -11.2 93

USA/Canada 3.4 2.3 112

Oceania 0.7 0.4 122

WORLD 60.5 3.1 105

Labour market entry ages, 2005-2025

Region Change in population aged 15-24,

2005-2025(millions)

Region Change in population aged 15-24,

2005-2025(millions)

East Asia -55.5 East Europe -19.9

South/Central Asia

36.0 North Europe -0.8

Southeast Asia

0.7 South Europe -2.0

West Asia 7.7 West Europe -2.3

Net Annual Migration, Years to 2050UN Projections

Region Net annual migration assumed for UN projections

Africa -400,000

Asia -1,200,000

Europe +850,000

Latin America & Caribbean -750,000

USA & Canada +1,300,000

Australia +100,000

Strategies

1. Expos in targetted cities overseas.

2. Expos in Australian cities to encourage employers to participate.

3. Application on shore from 457 and student temporary migrants.

4. Working Holiday Makers.

5. Regional migration schemes. Competition between States and between towns and cities.

6. Pacific Compact.

7. Facilitate labour agreements for large projects.

Comparative advantages?

Linking workers and employers. Nothing beats a guaranteed job upon arrival.

High Australian dollar.

High minimum wage.

English as the language of business.

Universal health system and good quality education. Equality of opportunity for children.

Lifestyle. Cosmopolitan image.

Comparative disadvantages?

Slow access to citizenship.

Immigration of parents more difficult than in USA and Canada.

Housing costs and housing shortage.

Impressions of racism, social disharmony.

Inadequate settlement supports.

High taxation.

Distance.