Despite widespread concerns about Artificial Intelligence (AI) potentially replacing human jobs, Australia is experiencing a significant shortage of workers. The retirement of the Baby Boomer generation and an aging workforce are contributing to this challenge, which is expected to intensify in the coming years. This shortage is particularly pressing as the country seeks to support a clean energy transition, expand housing, and meet increasing demands for healthcare and aged care services.
The announcement comes as Australia grapples with these demographic shifts and economic demands. The following analysis explores the driving factors behind the current workforce needs and the policy changes necessary to address them.
Australia’s Growing Workforce Needs
Australians enjoy one of the highest life expectancies globally, leading to a growing population of individuals over the ages of 75 and 85. This demographic shift is reshaping labor demand, particularly in sectors like healthcare and aged care, as older individuals require more services than their younger counterparts.
As nations become wealthier, citizens’ expectations for government services rise, further increasing the demand for workers in healthcare, aged care, and disability services. Additionally, Australia is undergoing a comprehensive economic transformation to achieve net-zero carbon emissions, necessitating substantial infrastructure development and a significant reallocation of labor and skills.
Meanwhile, the working-age population is shrinking as a proportion of the total population, complicating efforts to build necessary infrastructure and provide essential services. Although AI and technology promise productivity gains, they are expected to augment rather than replace workers in the near future.
Maximizing the Talent Pool
Australia boasts a robust labor market with a low unemployment rate. However, there is potential to further engage the workforce by increasing the number of workers and the hours worked, as well as fully utilizing workers’ skills and expertise. Despite positive aggregate statistics, certain groups, particularly women, face barriers to employment or seek more working hours.
Australian women are more likely to work part-time compared to their international peers and Australian men. Given that Australian women are among the most highly educated globally, this represents a significant untapped potential.
Migration plays a crucial role in addressing future workforce needs and is a key strength for Australia among advanced economies. By increasing the working-age population, migration helps slow population aging. The greatest benefits arise from attracting global talent and ensuring migrants can effectively utilize their skills and experience in Australia.
Policy Levers for Workforce Growth
Governments have several policy levers to expand Australia’s talent pool. The federal government, for instance, controls migration intake and the skills mix. To become a best-practice migration nation, Australia should aim for a migration system that is flexible, focused on medium-term needs, provides clear pathways from temporary visas to permanent residency, and ensures migrants can maximize their skills and qualifications.
Reducing barriers to work, especially for women with young children, is another critical policy area. Women with young children often face high “effective marginal tax rates,” which diminish the financial benefits of working. Lowering these rates could encourage more paid work hours among this group.
Recent government efforts have made progress in reducing work barriers for parents with young children. However, further steps are needed. Despite increased childcare subsidies, many working-age women using childcare still encounter high effective marginal tax rates.
Ensuring accessible and affordable high-quality childcare can reduce work barriers for parents and older carers, thus enhancing the talent pool.
As Australia’s population ages, engaging older workers becomes increasingly important. Workforce participation declines in the 50s and drops sharply in the 60s. Embracing flexible work practices and investing in healthier aging can enable longer working lives.
Looking Ahead
Australia’s challenge is not job creation but finding the necessary workers. Governments must leverage all available policy tools to address this issue. As the nation navigates demographic changes and economic transformations, strategic policy interventions will be crucial in ensuring a robust and responsive workforce for the future.
