Research Note no. 35 2004–05
Australia’s ageing workforce
Tony
Kryger
Statistics Section
7 March 2005
The
ageing of Australia’s population
is a well known phenomenon. It has been particularly apparent since the
1960s and is attributed to falling mortality and fertility rates combined
with the effect of a baby boom generation as it moves into the older age
brackets. For similar reasons the workforce has also been ageing, but
over the past two decades the workforce (and especially the full-time
workforce) has been ageing at a rate faster than the general population.
The reasons for this, how rates of ageing differ between industries and
how ageing might affect the economy, are discussed below.
It should be noted that this Research Note refers
only to persons of working age (i.e. 15–64 years). Therefore, the average
age of a group of persons (whether in the general population or the employed
workforce) is to be understood as the average age of the same group in
the 15–64 year age range.(1)
The workforce is ageing faster than the
general population
The average age of the civilian population is 2.2 years
greater than it was two decades ago (up from 36.6 to 38.8 years). This
compares with an increase in the average age of all employed persons of
2.8 years (35.8 to 38.6 years) and an increase in the average age of all
full-time workers of 3.5 years (35.9 to 39.4 years). The average age of
all part-time workers has risen only 1.2 years over the past two decades,
slowed down by the influx of teenagers into the part-time labour force.
Chart 1 shows that the average age of the full-time
workforce has been increasing faster than the general population. It highlights
the fact that whereas full-time workers were on average younger than the
general population before 1991, the situation has since reversed and in
recent years the gap in ages has widened.
Females in the full-time labour force have been ageing
at a much faster rate than their male counterparts. Over the past two
decades as more older women have entered the job market, the average age
of female full-time workers has increased by 5.6 to 38.5 years. This is
twice the corresponding increase for male workers of 2.8 to 39.9 years.
Workers in education and health are amongst
the oldest workers
Workers in the vital areas of education and health
are amongst the oldest workers in Australia.
In 2004 when the average age of all Australian workers was 38.6 years,
the average age of workers in the education sector was 43.4 years (the
oldest of any industry sector) while the average age of workers in the
health and community services sector was 41.7 years.(2)
Significantly, both these sectors are also amongst the most rapidly ageing
sectors in the economy. Hence, while the average age of all Australian
workers has increased by 2.8 years over the last two decades, the average
age of workers in the education sector has risen by 5.2 years and in health
and community services it has risen by 5.5 years. (See Table 1.)
An older and ageing workforce in education and health
and community services could cause supply problems in the future as increasing
numbers of workers reach retirement age. It could be argued that unless
something is done to augment labour supply in these sectors, there could
be a serious diminution in the quantity and quality of services that these
sectors provide.
Fewer younger people and more older women
in the workforce
There are two influences which explain why the workforce
(and especially the full-time workforce) has been ageing faster than the
general population. The first of these is the rise in education participation
with the consequent fall in the number and proportion of young people
participating in the full-time labour force. In 1984 for example, persons
aged 15–24 years comprised 23.1 per cent of the full-time labour force;
by 2004 that figure had fallen to 13.6 per cent.
The second factor that explains why the workforce has
been ageing faster than the general population is the increased number
of older women participating in the labour market. These are women who
previously may have remained outside the labour market but who have either
been compelled (e.g. financial pressures) or enticed (e.g. higher wages
or social reasons) to enter the workforce in response to the increased
availability of jobs for women. The shift in the labour market toward
more part-time and more service sector jobs has been particularly advantageous
to women. Women aged 40 and above appear to have been the main beneficiaries,
their representation in the female workforce increasing from 31.6 to 46.6
per cent between 1984 and 2004.
Some consequences of an ageing workforce
The economic consequences of an ageing workforce are difficult
to predict because older workers in the future may not have the same characteristics
as older workers today. However, areas in which ageing could have an impact
include:(3)
- Labour supply
Labour force participation rates fall sharply
after age 54 years and therefore it might be expected that an older
workforce will have a lower average rate of participation. It follows
therefore that unless older workers can be persuaded to stay on in
the labour force, and assuming that labour force participation rates
do not rise for the other age groups, labour shortages could occur
resulting in increased pressure on wages.
- Economic growth
By constraining labour supply growth, the ageing
of the workforce could also slow down Australia’s
economic growth performance.
- Productivity
The Productivity Commission has noted that productivity
levels initially increase and then decrease with age. At any point
in time therefore, the effect of ageing on Australia’s
average productivity level will depend on the particular age mix of
the labour force. It will also depend on the extent to which improved
health and higher education levels have lifted productivity levels
for older workers. Most research supports the view that there will
not be a decline in worker productivity with age.(4)
- The Australian Bureau of Statistics Labour Force Survey publishes
data by single year of age from 15 to 24 years and by 5 year age spans
thereafter. The average age of a group of persons was calculated by
weighting these ages using the number of persons in each age category,
assuming that the midpoint of each 5 year age span is the representative
age.
- For a detailed description of industries see ABS, Australian and
New Zealand Standard Industrial Classification (Cat. No. 1292.0).
- For more information see Productivity Commission 2004, Economic
Implications for an Ageing Australia, Draft Research Report, Productivity
Commission, Canberra.
- See Department of Employment and Workplace Relations 2003, Submission
to the Senate Select Committee on Superannuation: Inquiry into Planning
for Retirement.
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