by Lisa Denny
There is a perception that Tasmania needs large scale public infrastructure investments to stimulate and grow the economy and provide opportunities for young people to stay in the state. The reality is that Tasmania actually has a workforce supply issue, not a workforce demand issue.
Let me explain.
Tasmania’s population is ageing, much like most of the developed and developing world.
Government responses to the perceived challenges of population ageing is to grow the economy. It is thought that economic growth will ameliorate the fiscal challenges associated with an increasing number (and proportion) of people who are older and drawing publicly funded pensions as well as accessing health services and other age and care related services which need to be paid for by the revenue from a declining proportion of the population who are taxpayers.
However, what is not factored into the above approach to grow the economy is that alongside population ageing is workforce ageing.
Population ageing becomes a challenge when unemployment rates are low and declining and labour force participation rates are rising for each 5-year age group in the prime working ages of 15 to 64 years.
This is now the case in Tasmania.
Combined with Tasmania’s relatively strong economic performance, Tasmania’s ageing population is creating workforce supply challenges. It will also create workforce demand opportunities.
Labour Force data released by the ABS in May shows that Tasmania’s unemployment rate is the lowest it has been on record (3.8% in trend terms) and the labour force participation rate is the highest on record (63.0%) as is the employment to population ratio (60.5%). These are indicators of a well-performing economy.
However, a closer look at the composition of the workforce provides further explanation for these record-breaking figures.
Tasmania’s workforce is ageing. Almost a third (32.7%) are aged 50 years or older. Over the next 15 years, around 100,000 workers will exit the labour force. These workers will likely need to be replaced, creating workforce demand. The products and services these exiting workers will need and want, will also create further workforce demand.
While Tasmania’s overall labour force participation rate is lower than the national rate (partially explained by Tasmania’s older population), for seven out of the eleven 5-year age groups, Tasmania’s labour force participation rate is higher than the national rate. It is lower for those aged 20 to 24, 25 to 29 and 60 to 64 years of age.
The challenge for Tasmania going forward is ensuring that we have a supply of workforce entrants to meet the needs of this additional workforce demand.
The Labour Market Entrants to Exits ratio (LMEE) calculates the ratio of the number of potential workforce entrants aged 15 to 24 years (typical age of school leavers and higher education graduates) to the number of potential workforce exits aged 55 to 64 years (typical retirement age).
A ratio of more than 1 indicates more potential labour market entrants to exits.
A ratio of less than 1 indicates more potential labour market exits than entrants.
Since 2010, the LMEE ratio for Tasmania has been less than 1. That means, more Tasmanian workers have been exiting the labour market than young Tasmanians have been entering it for the past 12 to 13 years. The lack of new workforce entrants also contributes to placing downward pressure on the unemployment rate and workforce supply issues.
The below graph illustrates Tasmania’s LMEE ratio since 2006, using observed data and two sets of population projections. The first set, 2006 ABS population projections which I used to calculate the LMEE in 2014, and the second, 2022 population projections produced by Tom Wilson from Advanced Demographic Modelling using assumptions informed by the population change patterns identified from the 2021 ABS Census of Population and Housing.
As is evident, the LMEE has been steadily declining since 2006. While it is projected to improve slightly over the next decade or so, it is not projected to exceed 1, that is, there will not be more entrants than exits. This will continue to create workforce supply issues for Tasmania into the future.
What is also evident from this graph is that the LMEE actually deteriorated between population projections. The 2022 LMEE is projected to be lower than 2006 projections. This shows that while Tasmania’s population has been growing (a government objective) it has been growing in older age groups. Combined with a lower total fertility rate for the state, the population growth that Tasmania is experiencing is not going to produce more future workforce entrants.
In addition to the workforce supply issues outlined above. Tasmania has the poorest educational attainment rates of all states. Only around 3 in 5 young Tasmanians successfully complete year 12. Around 2 in 5 students in year 9 meet the expected level for writing proficiency, which is an indicator of successful school completion. This writing proficiency has been declining since NAPLAN was first introduced. This means that many young Tasmanian students do not have sufficient literacy levels to successfully complete school and either pursue higher education and/or training or enter the workforce.
The graph below shows that the number of secondary school students (blue line) and the number of higher education/workforce entrants (orange) is projected to decline from around 2023 and 2029 respectively.
If only 3 in 5 Tasmanian students successfully complete school throughout the projection period (grey line), the number of literate, numerate and workforce ready young Tasmanians will continue to decline. If the Tasmanian Government is able to improve retention and attainment rates through its literacy and education policies by 0.1 percentage point each year over the projection period so that 4 in 5 students successfully complete school by 2050, the number of literate, numerate and workforce ready young Tasmanians will increase. But, the LMEE will still be less than 1.
As I explain above, Tasmania’s ageing population and ageing workforce creates ongoing workforce supply issues for the state. As does the state’s poor educational outcomes.
The ageing population and ageing workforce also creates workforce demand opportunities.
As the Tasmanian Government contends with the challenges to continue to grow the economy as well as provide for the needs of its people in an environment of sustained skill shortages, it will need to think very strategically about its long term plan in terms of industry development, infrastructure investment and service provision as well as education and training policy and investment.
Further reading available at www.lisadenny.com.au:
1) Denny, L, “Economic restructuring and the polarisation of the workforce: a regional perspective”, Australasian Journal of Regional Studies, 25 (1) pp. 4-25. ISSN 1324-0935 (2019) This paper won the John Dickinson Memorial Award for best paper in the journal in 2019
2) Denny, L, “Heigh-ho, heigh-ho, it’s off to work we go – the Fourth Industrial Revolution and thoughts on the future of work in Australia”, Australian Journal of Labour Economics, 22 (2) pp. 95-120. ISSN 1328-1143 (2019)
3) Denny, L, “Choosing a career? These jobs won’t go out of style”, The Conversation, The Conversation Media Group Ltd, Australia, 20 February 2019 (2019)
4) Denny, LJ, “Workforce polarisation in Tasmania: Implications for the future of work and training”, Institute Insights, Institute for the Study of Social Change, Hobart, Insight 7, pp. 1-13. (2019)
5) Banks S, Denny L, ‘Insight Four: Planning for the future of aged care’, Institute Insights, Institute for the Study of Social Change, 4, 2018
6) Denny, L, “Insight One: The Changing Nature of Work in Tasmania”, Institute Insights, Institute for the Study of Social Change, Hobart, Tasmania, 1 (2017)
7) Denny, L, “Insight Two: Tasmania’s workforce by industry sector”, Institute Insights, Institute for the Study of Social Change, Hobart, Tasmania, 2 (2017)
8) Denny, L and Churchill, B, “Youth employment in Australia: A comparative analysis of labour force participation by age group”, Journal of Applied Youth Studies, 1 (2) pp. 5-22. ISSN 2204-9193 (2016)
9) Churchill, B and Denny, L and Jackson, N, “Thank God you’re here: the coming generation and their role in future‑proofing Australia from the challenges of population ageing”, Australian Journal of Social Issues, 49 (3) pp. 373-392. (2016)
10) Denny, L and Churchill, B, “Young people missing out on jobs to older workers and migrants: study”, The Conversation, The Conversation Media Group Ltd, Australia, 12 April 2016 (2016)
11) Churchill, B and Denny, L, “The IGR focuses on the old, when the future belongs to the young”, The Conversation, The Conversation Media Group Ltd, Australia, 6 March 2015 (2015)
12) Churchill, B and Denny, L, “Baby Boomers, be nice to your grandkids: they may save Australia”, The Conversation, The Conversation Media Group Ltd, Australia, 24 October 2014 (2014)
Republished with kind permission of Lisa Denny, who retains copyright © 2023. Read more of Lisa’s thoughts at her Substack.
