Submission 167 Australian Council of Trade Unions Workplace Relations Framework Public inquiry

Employment

The story of labour supply in Australia is a familiar one: a long-term trend for increased female labour force participation and a steady decline in male labour force participation (Figure ). Male labour force participation has declined by 11 per cent since 1978 while female labour force participation has increased by 35 per cent (although, as explained in Chapter 11 there is potential to improve the quality and extent of female participation in particular circumstances) . As Wilkins and Wooden observed, the age structure of the population contributes to some of this decline in participation rates.⁹⁵

Figure : Labour force participation, Australia 1978 to 2015

Seasonally adjusted data, indexed to 100 in 1978. Source: ABS Labour Force

Survey, Cat. No. 6202.

The earlier discussion on hours and employment growth since the GFC emphasised the stagnant full-time employment situation since 2011 for both men and women. It is apparent that labour force participation since 2011 has also entered a stagnant phase.

The story among different age groups over the period from 1978 to 2015 is particularly illuminating (Figure ). For males in the prime of their working lives (25 years to 54 years) the declines in participation rates were modest, but among younger men (15 to 24 years), there were substantial falls. Among older men (55 to 64 years) there was something of a turnaround from the situation which had prevailed in the 1990s and 1980s, when participation rates fell substantially. After 2000, participation rates for men in this age band grew substantially, with a steeper rise among the older group. Among women, all age groups except those in the 15 to 19 year age group experienced increases in their participation rates, with particularly notable increases from the 1990s onwards in participation by women aged 45 to 64 years. Borland has noted that some of this increase has been due to cohort effects, particularly those associated with higher levels of education among mature-age women.⁹⁶

The changes for teenagers reflect much higher school retention from the 1980s onwards, as governments sought to keep students in school longer and employment opportunities, particularly for point-of-entry jobs, disappeared. The teenage labour market, as a viable destination for full-time employment, virtually disappeared during the 1980s, particularly for young women (with young men still able to access a wider range of apprenticeships). Indeed, were it not for the proliferation of casual, part-time student employment and the decline in participation rates for teenagers shown in Figure would be much greater.⁹⁷
Figure : Labour force participation by age and sex, Australia 1978 to 2015

Trend applied to original data. Source: ABS Labour Force Survey detailed tables, Cat. No. 6291.0.55.001, Table 01.

How likely is it that these trends in labour force participation will continue? Wilkins and Wooden suggest that the increased participation among the older age cohorts will be insufficient to offset the effects of population ageing, leading them to conclude: ‘while rates of participation within the working-age population will increase, the overall rate of labour force participation can be expected to decline further’.⁹⁸ Concerns about participation rates have been a central focus for policymakers in government, particularly in areas such as social security.⁹⁹ The scope for the industrial relations system to influence these outcomes is limited. While new initiatives may influence the relative positions of various groups—such as mature age workers or workers with family responsibilities—the major constraints on the overall level of labour force participation remain tied closely to labour demand. Where there are labour supply issues these are either related to skills issues or problems of geographical mobility, and only the former is amenable to industrial relations innovations.

Unemployment in the 2000s

For much of the 2000s the unemployment rate dropped among both men and women, and by 2008 had reached historically low levels (Figure ). The male unemployment rate fell faster than the female rate, but after the GFC it also rose faster and further. As discussed earlier, a combination of factors—and particularly the Labor government’s stimulus measures—arrested the rise in unemployment, but this was a relatively short-lived phenomenon. From 2011 onward unemployment began to climb steadily. The growth in GDP which had been sustained by the construction phase of the mining boom began to falter after 2013, and the rapid collapse in commodity prices suggested that the export phase of the mining boom would not be able to compensate. The rapid rise in unemployment rates in both Queensland and Western Australia confirmed this prognosis.
Figure : Unemployment rates (%), Australia 2000 to 2015 (seasonal & trend)

Figure : Unemployment rates for selected states, 1981 to 2015

Trended from seasonally adjusted data. Source: ABS ABS 6202004, 6202005, 6202006, 6202008.
Whereas historically both Western Australia and Queensland had generally experienced higher unemployment than NSW and Victoria, by the early 2000s this pattern had reversed (Figure ). By 2008 unemployment rates in Western Australia had reached an all-time low of just 2.3 per cent, while Queensland dropped to 3.2 per cent. With the GFC, and the subsequent employment falls in the mining sector, unemployment rates in both these states were back to comparable levels with NSW and Victoria by 2015. The prospects for any turn-around in their fortunes are dim. Commodity prices have crashed in recent years, with iron ore dropping from over $180 per tonne in 2011 to under $60 per tonne in 2015. Both mine closures and job cuts for the surviving mines have taken place over the last 12 months. At the same time, the drop in world oil prices has dimmed the prospects for the large-scale expansion in Australian natural gas production. As Treasury, the Reserve Bank and numerous economic commentators keep noting, there has been no expanded investment in the non-mining sectors of the economy to compensate for the slow-down in that sector. Only property investment and construction has keep unemployment in check, and this has largely been an area of economic activity restricted to Sydney and Melbourne.

While the watershed of the GFC needs to be kept in mind, it does seem to be the case that in the 2000s a lower level of GDP growth was sufficient to keep unemployment in check. This was a cautious finding by Borland in his discussion of Okun’s law.¹⁰⁰ In his graph (Figure ), which showed the four-quarter change in the rate of unemployment graphed against the annual rate of growth in GDP, Borland discerned a change during the 2000s. Whereas the overall linear regression implied that unemployment was stabilised at a rate of 3.2 per cent GDP growth, the regression results for the 2000s suggested that unemployment was now stabilised at a GDP growth rate of 2.7 per cent. Borland concluded that:

This shift is consistent with there being higher rates of employment growth in the 2000s due to favourable labour cost conditions; however, the effect represented by the Okun relation will also reflect the relatively high rate of growth in labour force participation in the 2000s.¹⁰¹
Figure : Borland's analysis of Okun's law