Despite widespread concerns about Artificial Intelligence (AI) displacing jobs, Australia is grappling with a workforce shortage. The retirement of the Baby Boomer generation and an ageing population are exacerbating this issue, making it increasingly challenging to find the necessary workers. This shortage is set to intensify as more labor is required to support the clean energy transition, expand housing, and meet the rising demand for human services, particularly in healthcare and aged care.
The announcement comes as Australia’s demographic shifts place unprecedented demands on its labor market. Australians enjoy one of the highest life expectancies globally, which, coupled with high living standards in old age, is reshaping the demand for labor and services. The population over 75 and 85 is growing to sizes previously unseen, necessitating more care and services for older citizens.
Australia’s Workforce Needs Are Growing
As the population ages, the demand for healthcare, aged care, and disability services is surging. Wealthier nations like Australia also witness increased expectations for government services, further driving the need for workers in these sectors. Additionally, older Australians tend to live in smaller households, creating a demand for more housing.
Concurrently, Australia is undergoing a transformative shift towards net-zero carbon emissions, requiring significant infrastructure development and a reallocation of labor and skills. This transition is akin to an industrial revolution with a clear deadline. However, the working-age population is shrinking as a proportion of the total population, complicating efforts to meet these demands.
While technology and AI are expected to enhance productivity, they are more likely to augment rather than replace human workers in the near future. The balance of evidence suggests that AI will support rather than supplant the workforce.
Making the Most of Our Talent Pool
The Australian labor market remains robust, with low unemployment rates. Yet, there is potential for greater workforce engagement to increase the number of workers, hours worked, and the effective use of skills. Many groups, particularly women, still face barriers to full employment or desire more work hours.
Australian women, among the most educated globally, are more likely to work part-time compared to their international counterparts and Australian men. This untapped potential represents a significant opportunity for growth. A recent study highlights that addressing long working hours predominantly undertaken by men could significantly reduce the gender earnings gap.
Migration plays a crucial role in addressing workforce needs, enhancing Australia’s working-age population and slowing the ageing demographic. The greatest benefits arise from attracting global talent and ensuring migrants can utilize their skills effectively in Australia.
Pulling the Policy Levers
Governments possess numerous policy tools to expand Australia’s talent pool. The federal government, in particular, controls migration intake and the skills mix. Australia should strive to be a model migration nation with a system that is flexible, focused on medium-term needs, and provides clear pathways from temporary visas to permanent residency.
Reducing barriers to work, especially for women with young children, is essential. Many face high “effective marginal tax rates,” which diminish the financial benefits of working. Although progress has been made in reducing these barriers, more efforts are needed. Ensuring affordable and high-quality childcare can significantly boost workforce participation among parents and older carers.
As the population ages, engaging older workers becomes increasingly important. Workforce participation declines significantly in the 50s and 60s. Embracing flexible work practices and promoting healthier ageing can enable longer working lives.
“Australia’s challenge is not job creation, but how to find the workers we need. Our governments will need to pull all the levers to ensure we do.”
The move represents a critical juncture for Australia as it seeks to balance demographic changes with economic demands. By optimizing migration policies, reducing employment barriers, and leveraging the potential of AI, Australia can navigate its workforce challenges effectively.
