Australia's Workforce 2005: Jobs for the Future
November 1995
Executive Summary
THE REPORT AND ITS MAIN FINDINGS
As this century draws to a close, much discussion has focused on the nature and
structure of the Australian economy and society in the 21st century. The Australian
economy and labour market have undergone marked changes over the past 20-30 years, with
some types of jobs declining in significance and others growing in importance - some with
completely new skill requirements. It is only natural that questions should be asked about
the effects of future changes and developments on the nature of work and the skill
requirements of jobs.
This report describes the implications for the pattern of employment and skill needs
over the next decade, of existing demographic, educational, social and domestic economic
trends as well as of future technological changes and international economic developments.
It should be emphasised that, while the report takes into account some of the major
factors and trends likely to affect the workforce in the future, other unspecified
factors, such as possible droughts and major mineral discoveries, will also bear on
employment growth and skill requirements.
This report updates projections of occupational employment skill requirements in the
year 2001 contained in the Department of Employment, Education and Training report, Australia's
Workforce in the Year 2001 (Workforce 2001), released in 1991. Where possible,
the findings of this report are compared with those of Workforce 2001.
Overall, the approach taken in this report is similar to that taken in Workforce
2001; that is, to assemble the factors about which it is possible to derive a
systematic view, to apply modelling and statistical techniques to ensure that the
projections are consistent, not only with the assumptions, but also with each other and to
identify the implications of these results. The projections contained in this report take
account of the economic, educational and other developments which have taken place since
the release of Workforce 2001. Details of the methodology are at Appendix 1.
The projections in this report should not be viewed as predictions or forecasts - as
physicist Niels Bohr said, "prediction is very difficult, especially about the
future"(1). Rather, they illustrate what may happen to the economy, industrial
structure and labour market over the longer term on the basis of particular assumptions.
While these assumptions are specified in the light of historical experience there is
always the possibility that they will not be realised.
The rationale for a report such as this lies in its systematic approach to the analysis
of future pressures for change and the likely directions and broad magnitudes of those
changes. While our knowledge of the pressures likely to affect future economic conditions
in Australia is necessarily partial and to some degree, uncertain, it is useful
nonetheless to have a considered view of the broad direction in which we are heading,
since new policies or programs are often required to modify emerging trends. A report such
as this can also be used as a sounding board against which other views or projections can
be compared.
Main Findings
The report analyses in turn the key changes which are likely to occur over the next ten
years in Australia's economy and industrial structure, the size and composition of the
labour force, the employment prospects for particular occupations and occupational groups,
the education and training system and supply of skills to the workforce and the balance
between the supply of, and demand for, skills. Key findings in each of these areas are
summarised below.
The Australian economy and industrial structure
The report presents three macroeconomic scenarios for the economy over the next ten
years. Scenario I is the base scenario and represents the set of projections which is
continued through the report. Under the base scenario the rate of employment growth is
sufficient to reduce the rate of unemployment to 5 per cent in 2001, consistent with the
objective set in the Government's policy statement, Working Nation.
The Discussion Paper, Restoring Full Employment (COEO 1993), indicated that a 5
per cent unemployment rate in 2001 could be achieved through an acceleration of
microeconomic reform and other measures to increase labour productivity and national
productive capacity. Active labour market policies were recommended as a means to reduce
skill bottlenecks that can lead to inflationary pressures. Scenario I incorporates the
continuation of microeconomic reform measures as well as the recent initiatives developed
in Working Nation. These initiatives will raise rates of participation in education
and training and assist the long-term unemployed into employment. They should also serve
to reduce labour market impediments to employment growth, such as the development of
generalised skill shortages.
Scenario II varies from the base scenario by incorporating assumptions which attempt to
cover some of the possible economic and labour market effects flowing from the convergence
of communications and computing technologies. Accordingly, Scenario II assumes a higher
economic growth rate than the base scenario. Scenario III differs little from the base
scenario but contains slightly lower assumed economic growth rates to test the sensitivity
of the industry growth projections to different macroeconomic conditions. Details of
scenarios II and III appear in Appendix 3.
Continued globalisation is expected to provide expanding export opportunities for
Australian industries as well as maintain pressure on them to become more internationally
competitive and meet greater import competition. A key stimulus to export performance will
be the ongoing integration of the Australian economy into the quickly growing Asian
region; this should also serve to reduce the impact on exports arising from future
economic slowdowns in Australia's trading partners in Europe and North America.
While employment will grow across most industries, the pattern of employment growth is
projected to continue the trends of the last two decades, with growth occurring more
strongly in service sector industries. These industries include the finance, health,
personal services, retail and accommodation and restaurant industries. Employment is
projected to grow more slowly or fall in many of the manufacturing industries, in part
because of the need to become more internationally competitive. One way by which this
competitiveness can be achieved is to increase labour productivity which in turn would act
to reduce the rate of growth of employment opportunities. Other industries such as
electricity, gas and water and transport are also projected to increase labour
productivity substantially through the impact of microeconomic reforms. Improved
international competitiveness and increases in labour productivity in these industries
would be expected to have beneficial effects on the economy overall, allowing stronger
growth in national income and employment in other industries, particularly those in the
service sector.
The findings of this report, in this regard, are broadly in line with those contained
in Workforce 2001 which showed a shift in the industrial structure of employment
towards the service sector.
The labour force
The labour force growth rate is projected to slow to an average of 1.6 per cent per
year over the next ten years. This compares with 2.0 per cent per year growth over the
period since 1985. The reasons for this slowdown are the projected reductions in the rate
of natural increase and level of immigration as well as changes in the age structure of
the population. This means that there will be a reduction in the growth of the number of
people of working age. The labour force participation rate is projected to continue to
increase as quickly as over the past decade as a result of greater participation by
middle-aged women.
As a consequence of these trends, the composition of the workforce will change. The
long-term trends towards more part-time work, a middle-ageing of the workforce and an
increased proportion of females will continue.
The ageing of the population is unlikely to impose an increased burden on the working
population over the next ten years. Indeed, on the assumptions used in this analysis, the
ageing of the population will mean that a greater proportion of the population will be of
working age.
Occupational employment prospects
Employment prospects for particular occupations over the next ten years will depend on
two main factors: first, on the distribution of occupational employment by industry
sector, especially when it is concentrated in a rapidly growing service sector industry or
in industries facing international competition or further microeconomic reforms; and
second, significantly, on the skill level of the occupation.
The employment prospects of highly skilled occupations such as managers, professionals
and para-professionals will benefit in two ways. First, many who are engaged in meeting
domestic consumer needs, such as health professionals, will experience strong employment
growth. Second, certain other professional groups, such as engineers, who may be employed
in export or import competing industries, will also experience strong employment growth.
Their services will be required by these industries as they introduce new technologies,
increase the value of their products and services and better meet consumer needs.
In general, more highly skilled occupations will experience strongest growth in new
jobs, with the less skilled occupations, such as labourers and machine operators,
experiencing comparatively lower rates of growth. There are, however, many exceptions to
this general statement. Employment of sales workers, for example, most of whom would not
be classified as highly skilled, is projected to grow strongly owing to the increase in
consumer demand as a result of the growth of the national economy.
Production workers in manufacturing, who include many machine operators, labourers and
tradespersons, will face declining or weak employment growth because of the need for
industry to raise labour productivity to meet competition from overseas and capitalise on
expanding export opportunities. Notwithstanding the decline or slow growth in employment
for these groups, there will still be many job vacancies over the next decade for machine
operators and labourers arising from the replacement of existing workers as they leave
these occupations or retire.
While the findings contained in Workforce 2001 are generally consistent with
those in this report, (for example that the workforce was projected to become more
skilled), there are a number of differences. Workforce 2001, for example, had
projected relatively slower growth of management occupations and faster growth of trades
occupations than are implied by the projections of this report.
The education and training system and supply of skills to the workforce
The number of people participating in the education and training system will continue
to grow, though at a slower rate than over the last decade. The proportion of people who
complete secondary school or obtain a tertiary qualification is projected to rise from 57
per cent in 1994 to 68 per cent in 2005. This moderation of growth arises from a slow-down
both in the rate of population growth and in the growth of participation in
post-compulsory schooling and higher education. Current education and training policies
represent a consolidation of the large increase in access to higher education over the
past decade, with further Commonwealth Government growth funding likely to be concentrated
on regions with rapid population growth. The Government has signalled a shift in
priorities for growth towards the vocational education and training sector, providing
funding for an extra 40,000 places per year up to 1997. National industry vocational
education and training plans are being used by the Australian National Training Authority
to help ensure that the training provided meets industry needs.
The projected increases in enrolments in the vocational education and training and
higher education sectors are consistent with the education and training targets agreed to
by Commonwealth and State Ministers in 1991 (the Finn targets). As a consequence of both
past and projected levels of education participation, the proportion of people in the
workforce with higher education qualifications is projected to rise from 22 per cent in
1994 to 26 per cent in 2005. Much of the increase in the proportion of people holding
higher education qualifications arises from an ageing of an already qualified population.
As most older people would have obtained their qualification soon after completing school
this raises the issue of the need to maintain the relevance of the knowledge and skills
represented by their qualifications. This requires a commitment to a process of life-long
learning.
The proportion with vocational education and training qualifications is projected to
rise slightly from 21 per cent in 1994 to 22 per cent in 2005. The projected increase in
the proportion of people with a vocational education and training qualification is likely
to be the minimum achieved as it does not include the effect of students studying for VET
qualifications in schools and the increases in entry level placements flowing from the Working
Nation statement.
Supply and demand for skills
While the new jobs created over the next decade will require a more skilled workforce
overall, the education and training system is well positioned to provide sufficient people
with the appropriate qualifications. As a consequence, broad occupational skill shortages
are not projected to occur over the next decade.
These findings are generally in line with those of Workforce 2001. This report
also found that the skills balance would not significantly change for most skilled
occupations. The conclusions differ, however, in that Workforce 2001 indicated
likely skill shortages in a greater number of areas. Since Workforce 2001 was
released, the growth in the number of tertiary education graduates has exceeded the
projected growth contained in that report. Accordingly, the increase in the supply of
people with professional and trades qualifications has been greater than originally
projected.
This report addresses the issue of likely skills balances only at the level of broad
occupational categories and for the nation as a whole. It is inevitable that, from time to
time, there will be some localised or short-term skill shortages, or shortages of people
with highly specialised skills.
The continued process of globalisation will present Australian industry with many
opportunities and challenges over the next decade. The opportunities will include the
expansion of current export markets for existing products and services and the export of
new products and services. Challenges will involve greater competition both from other
countries and in the domestic market.
It is clear that Australian industry has the potential to extend and build on emerging
competitive strategies to take advantage of these opportunities and meet these future
challenges. Such strategies will have many elements and include the use of improved
technologies, innovative marketing arrangements, better management and organisation
changes. The particular strategies employed will vary from industry to industry and firm
to firm. As noted above, the proportion of workers holding qualifications is projected to
reach a historically high level by 2005. A key element in most strategies, therefore,
should be to make the most of the opportunities which this will present for improvements
in quality, productivity and organisational effectiveness. A failure to take advantage of
the rising skill base of the workforce would represent a missed opportunity on the part of
management and employers and a waste of part of the education and training investments of
governments.
The employment destinations of many workers holding qualifications, particularly those
in some fields of study delivered by the higher education sector, are projected to widen
over the next decade. This is a consequence of the greater increase in the number of
workers with such qualifications compared with the growth of their traditional employment
destinations. The education and training content of such courses needs to be reassessed in
light of this development. Students in these disciplines also need to consider the
implications for their education, training and employment intentions.
Structure of the report
The report is divided into six chapters, as listed below. The first four address a
broad group of factors which will affect the size, structure and skill base of the
workforce. The fifth draws all of these factors together and assesses the possibility of
occupational skill shortages in 2005. The sixth chapter gives conclusions.
Chapter 1: Macro-economic conditions and industry structure
This chapter considers the broad forces, both domestic and international, likely to
affect the economy over the next ten years. Industries' growth prospects are identified
and the effects of continued tariff reductions and microeconomic reform incorporated. The
effects of converging telecommunications and computer technologies are also assessed.
Chapter 2: The labour force
The size and structure of the workforce and the factors which affect it are considered.
Particular issues investigated include the changing age and gender composition of the
workforce, the changing nature of work, such as the shift to part-time employment and
self-employment and the factors which will affect growth in productivity per worker.
Chapter 3: Occupational structures and prospects
Those factors which affect the relative prospects of individual occupations are
examined in this chapter. The effects of the projected occupational growth rates on the
level of skills of the workforce are explored.
Chapter 4: The supply of skills
This chapter considers the implications of projected educational and training
participation on the future supply and composition of skills. It also analyses likely
changes in the future levels of education and training attainment of the workforce and
population and in the level of national expenditure on education and training.
Chapter 5: Workers and skills
This chapter brings together the findings of the two previous chapters to provide an
assessment of occupational skill balances in the year 2005 and of the changing employment
destinations of holders of qualifications. The potential for skill deepening in the
workforce is analysed by comparing the level of skills of the workforce as a whole with
the increased requirements arising from changes in the occupational structure of
employment.
Chapter 6: Conclusion
The final chapter describes the major themes of the report and sums up its findings.
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