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Raising labour supply.

Australia faces the challenge of increasing labour supply to sustain growth in view of rising skill shortages and population ageing. Priority should be given to improving incentives to work for groups with the greatest scope to raise supply, such as women with families and lone parents, disability benefit recipients and older workers over 55. Immigration remains an important contributor to labour supply, helping to alleviate skill shortages. Given the high skill level of Australia's immigration intake, the adequate use made of immigrants' human capital is a matter of key importance. A significant challenge lying ahead is to remove potential barriers to increased immigration.

Meeting the supply potential

Australia is in a situation of historically low unemployment, with labour force participation at a record high and above the OECD average. Yet, Australian Bureau of Statistics (ABS) estimates suggest sizeable underutilisation of labour resources (Chapter 1). This chapter takes stock of policy initiatives since the 2006 Survey to improve incentives to work in the areas of the tax/benefit system, child-care services and retirement income arrangements, examining in each case the need for further policy change.

The interaction of the tax and welfare systems could be improved further

The comprehensive targeting of the social security system yields gains in terms of cost effectiveness and redistribution. (1) It can also create significant employment disincentives, however, by resulting in high marginal effective tax rates (METRs). Empirical evidence suggests a higher degree of labour supply responsiveness to financial disincentives at low income levels, for single parents and for second earners (Creedy and Kalb, 2005).

METRs have declined in recent years. They can still be a problem, however, particularly for families with children, largely due to the impact of the withdrawal of family assistance} Based on international comparisons, the 2006 Survey (OECD, 2006) attached priority to a reduction of"low wage traps" through, for example, a reduction in the lowest income tax rate or an increase in the threshold at which income tax is first paid (Buddelmeyer, Freebairn and Kalb, 2006). Attention was also drawn to "inactivity traps", the situation where employment, especially part-time employment, does not "pay" particularly in view of the high prevalence of jobless households with children} For lone parents and second earners, part-time jobs may provide a "stepping stone" to full-time labour market engagement. While METRs relevant to the transition from inactivity to part-time work are well below the OECD average for lone parents, they are above average in the case of one-earner, and especially two-earner, couples (Figure 2.1). Secondary earners are taxed more heavily in Australia compared to other countries, despite a system of separate personal income taxation. This is due to the withdrawal of family-related benefits. In most other countries means-testing is less common. That said, the Survey highlighted the unavoidable trade-off between "inactivity traps" and "low-wage traps" and the importance of clearly identifying the disincentive problems arising from different policy options.

The personal income tax cuts introduced since the 2006 Survey are expected to have strengthened work incentives. In particular, tax measures enacted in the May 2007 budget are officially expected to lead to a net increase in hours worked by existing workers and approximately 45 000 additional workers. Further tax cuts (AUD 46.7 billion over four years) provided by the 2008 budget under the Working Families Support Package, are estimated to encourage around 65 000 workers to enter the labour force (25 000 of whom will be married women and 10 000 single parents). Including additional supply of existing workers, this could imply around 2.5 million additional hours of work per week. The budget also introduced stricter means-testing for some family benefits. The net impact of the budget measures on participation, however, is expected to be positive as the new welfare tests affect only a small proportion of families.


The activity rates of lone parents and women should be boosted further by the recent tightening of eligibility criteria for Parenting Payments introduced by the 2005 "Welfare to Work" reform package (OECD, 2006). The new requirements, in effect since July 2006, appear to be reducing the number of people commencing Parenting Payment. Moreover, people who face compulsory activity test requirements under the welfare reform package appear to be exiting income support earlier than their counterparts in previous years, who did not face such requirements. An increased number of those remaining on benefit are earning some income from work. These trends are encouraging, even though it will take time for the recent initiatives to significantly affect the broader population of income support recipients because the stricter conditions for benefits receipt are predominantly applicable to new entrants. (4)

Enhancing access to affordable quality child-care facilities

Progress made since the 2006 Survey in reducing the cost and increasing the number of child-care places is welcome, as the use of formal child care is still limited (Chapter 3). For children who are using approved care, the Australian government funds the Child Care Benefit (CCB), which provides fee relief for both working and non-working parents. The CCB rate varies depending on family income, the number of children in care and the type of the care used. A Child Care Tax Rebate (CCTR) for "out-of-pocket" expenses, in effect since July 2004, complements CCB (OECD, 2007a).

Following a rise by more than 13% in the CCB rates in 2007, the latest budget further improves the affordability of child-care facilities through an increase in the rate of the CCTR from 30% to 50% for out-of-pocket expenses for approved child-care costs, and by an increase in the cap on the rebate. On the other hand, the budget removed the minimum rate for higher-income families, effectively cutting their access to the benefit, though previous recipients maintain eligibility for the enhanced CCTR. Measures to reduce the burden of child-care costs for parents are complemented by initiatives to boost the supply of facilities through the establishment of 38 (out of 260 planned) child-care centres. There have also been some recent positive changes in the area of family friendly working arrangements. The inclusion in the National Employment Standards (to be implemented from January 2010 onwards) of a right for parents to request flexible working arrangements, if providing care for under school-age children, is commendable in this regard. (5)

Efforts to move disability pension recipients into work have progressed slowly

Disability Support Pension (DSP) recipients have increased considerably since the mid-1990s. Although the number of beneficiaries has levelled off, DSP recipients are currently accounting for around 6 1/2 per cent of the workforce (Figure 2.2). Past reforms (including the gradual increase in the female retirement age), demographic changes and structural adjustment, which resulted in the displacement of workers (especially older males), have all influenced the number of DSP beneficiaries. The previous Survey argued that the DSP programme may be increasingly used as a substitute for the unemployment scheme, given the greater generosity of the benefit and the absence of requirements for job search or participation in rehabilitation or re-training programmes (OECD, 2006). The "Welfare to Work" reform package, in effect since July 2006, was designed to address this issue through stricter eligibility requirements for new beneficiaries. (6) Recent budget estimates for DSP spending have, nevertheless, exceeded expectations, indicating a slower than anticipated exit of recipients from the DSP programme. This may reflect the fear of DSP recipients of losing their entitlement to a pension if, after finding work temporarily, they lose it again. This highlights the need for an effective employment transition framework to help people with disabilities find a job (AFR, 2008), particularly in view of the low international ranking of Australia with regards to employment rates of people with a disability (Figure 2.2).


The new retirement income arrangements may have positive participation incentives for some

The "Simplified Superannuation" reforms, in effect since July 2007, introduced significant changes to the superannuation system. (7) They included the abolition of the taxation of superannuation benefit paid from a taxed source (where tax has been paid on contributions and earnings) for those over 60, and the non-inclusion of superannuation benefits in assessable income from that age. These initiatives, by reducing the tax paid on their work and other income, are expected to encourage older workers to remain in the labour force longer or undertake work, while also drawing down their superannuation (Australian Government, 2007). However, some may retire earlier because of the increase in retirement income. The halving of the assets test taper rate for the Age Pension (the tax-funded public pension) from September 2007 is also providing greater incentives for older workers to work and save.

What more needs to be done?

Despite strong growth, approximately 16.5% of the workforce receives welfare benefits, with the DSP and Parenting Payment recipients accounting for the largest share. The introduction of stricter eligibility criteria for the existing recipients of parenting pensions, in line with those applicable to new claimants (since July 2006), would be a step in the right direction. The government should further consider extending the tighter eligibility and participation requirements that apply to new recipients (since July 2006) of DSP, to the stock of all recipients. The efforts of DSP recipients to find a job should not be impeded by the fear of losing their entitlement to a pension if, after finding work temporarily, they lose it again. The development of a national strategy is currently under way which will address the barriers faced by people with disabilities in gaining and keeping employment. According to a recent OECD study, mobilising the labour potential of all those on disability pensions wishing to work would have sizeable effects on long-term labour supply, resulting in a projected increase of some S percentage points (OECD, 2007b). Further investment in placement services will be required to this end. Public consultations on a new approach to employment services, with a strong emphasis on "work readiness" and tailored case-management for job seekers, are a commendable initiative. Enhanced financial incentives, through a further reduction in METRs, are of major importance for the labour market integration of welfare beneficiaries.

Increasing the supply of second earners also depends on improved access to affordable quality child care. Changes in the structure of Child Care Benefit to reflect the age-related cost profile of child-care provision are crucial for achieving better outcomes. The benefit should also be made more conditional on employment or job search, in contrast to the present situation where it is available for up to 24 hours for households where no family member works. Consideration by the government of the introduction of a paid parental leave scheme would bring Australia in line with international practice. A recent study by the Australian Human Resources Institute, contributing to the public consultation on the issue, concludes that a relatively large proportion of mothers return to work from organisations offering paid parental leave compared with their counterparts on unpaid leave. Moreover, most of the respondents believed that paid parental leave policy plays a role in attracting good candidates to the organisation (AHRI, 2008). The duration of leave is an issue of major importance. Very long parental leave could result in human capital depreciation, offsetting the potential benefits of the scheme in terms of a reduced length of breaks after child-birth and increased chances for women to return to their pre-birth job (OECD, 2007c). Finally, regarding older workers, incentives for early retirement would be reduced by aligning the eligibility age for superannuation (currently 55, but to be increased to 60 by 2025) with that of Age Pension (age 65) over time. Measures to reduce the penalties associated with combining Age Pension benefits with earned income, such as by excluding earned income from the Age Pension income test, or alternatively by further easing the income-testing, would clearly enhance work incentives at older ages (OECD, 2005).

Immigration: an additional potential source of skilled labour

Migration policy has put great emphasis on migration of skilled workers

Over the past decade Australia has sharpened its policy focus on skilled immigration by increasing the size of the Skill Stream within the annual permanent Migration Programme (Box 2.1). The change was accompanied by a refinement of the selection process. To ensure that primary applicants are job-ready upon arrival in the country, the threshold of the English language criterion was raised and the waiting period for access to the majority of Australian Government benefits and services increased from six months to two years. Two additional policy changes for skilled migrants include: an increase in points for applicants with skills in short supply, and the requirement that all applicants have their qualifications assessed before they are granted a visa. Australia has also pursued a deliberate policy of providing pathways for temporary skilled entrants to apply for permanent visas onshore, including the opportunity for overseas students graduating from Australian institutions.
Box 2.1. Migration arrangements: the main features

The current set of migration arrangements, in place with little
change since the early 1980s, distinguishes three basic types of
visas: i) between permanent settlement and temporary stay; ii)
between short-term and long-term temporary stays; and iii) whether
holders of (short or long-term) temporary visas have the right to
take up employment (see the special chapter on migration in OECD,
2003). The main visa classes that allow temporary immigrants to
work include the Working Holiday Makers visa, the Business Visitors
visa and the Business Long Stay visa. Only the permanent migrant
flow is subject to an overall ceiling on inflows.

Permanent visas are awarded under the Humanitarian and Migration
Programmes. The Migration Programme, accounting for the majority of
permanent arrivals (around 80% in 2006/07), consists of two main
streams: the Skill Stream and the Family Stream, with the former
comprising a number of categories for prospective immigrants that
relate to demand for particular occupational skills, outstanding
talents or business skills. A key mechanism for administrating
skill-based migration policy is the points test for migrant
selection. This assigns points according to a number of
characteristics, including the level of education and occupational
work experience, age and English language ability. Bonus points are
also awarded for meeting one or more of three attributes: skilled
work experience obtained in Australia, capital investment in
Australia, or fluency in one of Australia's major non-English
community languages. An applicant succeeds when the total points
reach a "pass mark" (Productivity Commission, 2006).

Net overseas migration has risen steadily since the mid-1990s, reaching its highest level thus far in 2006/07, (8) and continues to be the main contributor to Australia's population growth (Figure 2.3). Skilled immigrants accounted for just under half of all permanent arrivals (ABS, 2008). Notably, employer-sponsored categories have provided the greatest proportionate increase in the Skill Stream in recent years. In addition, the number of skilled immigrants with temporary visas has been on the rise, thus complementing the permanent immigration programme, in particular by alleviating skill shortages in specific areas (Australian Government, 2008). The number of primary temporary Business Long Stay visas (allowing employers to sponsor skilled workers on a temporary basis) increased by 24% between 2006/07 and 2007/08.

Enhancing the effectiveness of the migration programme to meet the demand for skills

Empirical research has concluded that Australia's selection programme has been successful in improving the general skill level of immigrants and enhancing their labour market outcomes (Productivity Commission, 2006). This assessment is reinforced by a comparison of the labour market experience of successive cohorts of immigrants since the early 1990s, based on the three Longitudinal Surveys of Immigrants to Australia. The increased emphasis on skills in the migration selection process over the past decade led to a marked improvement in the human capital endowment of new arrivals (Figure 2.4), which has translated into higher labour market integration rates, though changes in labour market conditions and income support policy also appear to have been instrumental (Cobb-Clark, 2004). ABS statistics confirm the importance of good English language skills and recognised qualifications (bachelor degree or higher) to the labour market success of recent immigrants (Table 2.1). On many criteria, notably unemployment, immigrants fare similarly to the Australian-born after ten years and much earlier for those in skilled categories (OECD, 2003).



Overall, Australia compares favourably in international comparison with regards to employment outcomes for immigrants, even after adjusting for the better qualification structure of immigrants compared to the native-born (OECD, 2007d). Immigration makes an important contribution to labour supply, with newly arrived immigrants accounting for about 30% of employment growth between 2001 and 2006 (RBA, 2007). However challenges remain:

* Labour market outcomes among recent immigrants from the main English-speaking countries and those from non-English-speaking countries remain distinct. The latter, accounting for three-quarters of immigrants, is less likely to have had a job after arriving in Australia.

* Overqualification (i.e. working in jobs/occupations for which the skills are too high) tends to be greater for immigrants. Australia is close to the OECD average on this score, and surveys confirm that job satisfaction is good among immigrants. However, highly qualified immigrants from non-English-speaking countries are particularly affected by the overqualification problem. Around half of them with degree qualifications achieved a professional or managerial outcome, according to the 2006 Census data. The 20-29 age group underperforms in relation to that of 30-64 year-olds, despite the fact that most in the younger group have obtained the degree in Australia, with the shares in professional or managerial jobs standing at 22% and 36%, respectively (Birrell and Healy, 2008).

* Employers have argued that the temporary business long stay visas (particularly, the 457 visa scheme), which are a significant tool to overcome short-term skill shortages, involve unnecessary processing delays and high compliance costs, an issue about which the Productivity Commission has also expressed concerns (Productivity Commission, 2007). Moreover, problems have arisen, related mainly to lower skilled workers in the regional visa streams, because employers breached procedures (McDonald and Withers, 2008).

Recent reforms of the migration programme

Given the high skill component of the immigration intake, the adequate use made of immigrants' human capital is a matter of key importance, especially in light of chronic skill shortages. Recent reforms of the migration programme (in effect since September 2007) include a higher minimum standard of proficiency in English for professional occupations and the need for work experience in the case of former overseas students. These reforms go in the right direction. Efforts to increase employer-sponsored migration are also welcome. Evidence from the third Longitudinal Survey of Immigrants to Australia confirms the better occupational outcomes for highly qualified immigrants (principal applicants), where employers play a role in providing a predetermined job for the incoming immigrants (Birrell and Healy, 2008). Moreover, the skills assessment process for prospective immigrants from five main source countries was streamlined.

Regarding temporary immigration, current reforms aim to improve the responsiveness of the temporary business (subclass 457) arrangement. The reform will reduce the visa processing time through the establishment of an accreditation system and the fast-tracking of applications for "low-risk" employers (with a good record of compliance with immigration and industrial relation laws} and the elimination of elements of duplication that exist in the visa processing system (ERG, 2008). The 2008 budget allocated AUD 20 million over the next four years to improve the integrity and responsiveness of temporary working visas, including developing a framework for longer-term reform to help meet future labour market needs.

What more needs to be done?

Further reforms of the assessment and recognition system seem necessary. A better over assessment and recognition of foreign qualifications and experience would limit exposure to overqualification. Australia has an elaborate assessment and recognition system that generally meets its objectives. But there is scope for improvement, especially with regard to the complexity of the current regime, which may lead to inconsistencies in the assessment criteria and processes underlying the regime. The need for a more uniform approach to occupational/professional licensing and registration across the states was highlighted by the Productivity Commission. Addressing, where feasible, the gap between migration and employment assessments, implying that immigrants are faced with additional assessment and accreditation obligations for practicing their occupation in Australia, is also on the reform agenda, as is the greater dissemination of information to prospective immigrants on the skill recognition process (Productivity Commission, 2006). The Australian Skills Recognition Information website, launched in 2006, is a welcome initiative, helping immigrants to understand the assessment process and integrate more swiftly in the Australian workforce. Options are also being developed to streamline skills recognition procedures that require assessment and licensing before immigrants can work in their occupation in a particular state (Jones, 2007). To this end, the Council of Australian Governments (COAG) agreed in July 2008 to develop a national trade licensing system that will remove inconsistencies across state borders, allowing for a much more mobile workforce. The new national system is expected to be signed off by COAG in December 2008.

A further study is warranted to assess the longer-term impact of the two-year waiting period before immigrants become eligible for income support on immigrants' occupational patterns. Research suggests that this policy change had a positive impact on the probability of immigrants to find a job, but a negative effect on their probability to hold a job that matches their qualification (Junankar and Mahuteau, 2005). The key question in this context is whether the initial occupational downgrading of immigrants has any long-lasting negative impact on their career prospects. (9) If there were strong long-lasting adverse consequences, it would make a case to reconsider the length of the waiting period.

Long-term challenges facing migration policy

Migration will remain an important tool to address skill shortages, although it is only one component of a broader skills strategy (Chapter 3). Against the backdrop of Australia's demographic trends, future labour requirements will increase demands for growing migration (ERG, 2008). Current government policy supports higher immigration levels. The 2008 budget increased the Skill Stream of the Migration Programme by 30% in 2008/09 to 133 500 places (compared to 34 600 places in 1997/98). This increase is expected to deliver fiscal benefits, in addition to addressing skill needs in the short run. A recent study by McDonald and Withers (2008) estimates that net migration would have to climb to 316 000 in 2051, from 160 000 in 2006, to keep labour force growth constant at 1% per annum.

Given the effectiveness of the current migration policy in terms of labour market integration and contribution to labour supply, and in view of empirical findings that most immigrants create net fiscal benefits (OECD, 2003), the government's approach is justifiable. Evidence further suggests that, to date, overseas migration has responded more quickly to job opportunities than interstate migration flows, implying that there is a merit in targeting skilled migration to particular geographical areas with acute skill shortages (Henry, 2008). However, further increases in migration need to be considered in the context of infrastructure and service delivery constraints, which tend to be more apparent in regions where there is rising demand for skilled labour linked to major infrastructure and mining projects. Housing availability and affordability, and education and health services are important examples in this regard. Moreover, given an increasingly internationally mobile labour force, Australia competes with other countries for skilled immigrants. At the same time higher immigration must not come at a cost of delaying the upskilling of the domestic population. Overall, further increasing the country's skilled migrant intake would require that migration policy should be pursued as part of a broad strategy for population growth, including issues such as the tax/benefit system, education, water, infrastructure and the environment (McDonald and Withers, 2008). An additional challenge is to attract immigrants to non-urban areas where they are most needed.

Summing up

Australia is in an enviable position. Unemployment is at historically low levels, and labour force participation is at a record high. Yet, labour market outcomes still lag behind the leading OECD countries. There is much scope for improving incentives to work for women with families and lone parents, disability benefit recipients and older workers over 55 through further policy changes to the tax/benefit system, child-care services and retirement income arrangements. Immigration will remain an important contributor to labour supply, assisting to alleviate skill shortages. Further rises in migrant intake, however, should be considered in the context of infrastructure and service delivery constraints, and increasing international competition for immigrants. Importantly, migration policy is only one component of a broader skills strategy, with investment in education and training being the primary means. Given the high skill component of Australia's immigration intake, using immigrants' human capital better is a matter of key importance. Box 2.2 summarises the recommendations of the chapter.
Box 2.2. Recommendations to raise labour supply

Improving incentives to work

* As there is fiscal room, cut marginal effective tax rates further to
reduce the number of people caught in a "low wage trap" by reducing,
for example, the lower rates of income tax and/or raising the tax free
threshold. Reduce "inactivity traps" for one-earner, and especially,
two-earner couples.

* Consider extending the tighter eligibility criteria that apply to new
recipients (since July 2006) of Parenting Payments to all recipients,
monitoring closely the enforcement of eligibility and participation

* Extend the tighter eligibility criteria applying to new recipients
(since July 2006) of the Disability Support Pension (DSP) to all
recipients, monitoring closely the enforcement of eligibility and
participation criteria. Efforts of DSP recipients to find a job should
not be impeded by the fear of losing their entitlement to a pension if,
after finding work temporarily, they lose it again. The development of
a national strategy to address the barriers faced by people with
disability and/or mental illness in gaining and keeping employment is a
welcome step. Further investment in placement services will be required
to this end.

* Proceed with plans to reform the employment services, taking into
account the outcomes from public consultations.

* Continue efforts towards facilitating access to affordable child
care. Consider changing the structure of the Child Care Benefit (CCB)
to reflect the age-related cost profile of child-care provision. CCB
could be made more conditional on employment and the use of child-care
services by restricting its payment to the families where both parents
(or a single parent) work (or search for work) and use such facilities.
The introduction of a paid parental leave scheme would bring Australia
in line with international practice.

* Reduce incentives for early retirement by aligning the eligibility
age for superannuation (currently 55, but to be increased to 60 by
2025) with that of Age Pension (age 65) over time. Measures to reduce
the penalties associated with combining Age Pension benefits with
earned income, such as by excluding earned income from the Age Pension
income test, or alternatively by a further easing in the
income-testing, would clearly enhance work incentives at older ages,
though the attendant fiscal costs should be closely monitored.


* Pursue the current policy of favouring a high level of migrant intake
as part of a broad strategy to meet skill shortages. Implement swiftly
the announced reforms aiming at improving the integrity and
responsiveness of the temporary business (subclass 457) arrangement.

* Ensure that adequate use is made of immigrants' human capital. Reduce
the complexity of the current assessment and recognition of overseas
qualifications, by moving toward a more uniform approach to
occupational/professional licensing and registration across the states,
and address, where feasible, the gap between migration and employment


ABS (Australian Bureau of Statistics) (2008), Migration, Australia (cat. No. 3412.0), ABS, Canberra, March.

AFR (Australian Financial Review) (2008), "Failed Disability Reform to Cost $262 Million", AFR, 19 May.

AHRI (Australian Human Resources Institute) (2008), "The Parent Trap--The Parental Leave Debate", HRPulse Survey, Research Report, Vol. 2, No. 3, AHRI, September.

Australian Government (2007), Budget Paper No. 1: Budget Strategy and Outlook, 2007-08, Australian Government, Canberra, May.

Australian Government (2008), Budget Paper No. 1: Budget Strategy and Outlook, 2008-09, Australian Government, Canberra, May.

Birrell, B. and E. Healy (2008), "How are Skilled Migrants Doing?", People and Place Journal, Vol. 16, No. 1, supplement, Centre for Population and Urban Research, Monash University.

Buddelmeyer, H., J. Freebairn and G. Kalb (2006), "Evaluation of Policy Options to Encourage Welfare to Work", Melbourne Institute Working Paper Series, No. 9/06, Melbourne Institute of Applied Economic and Social Research, University of Melbourne, May.

Cobb-Clark, D.A. (2004), "Selection Policy and the Labour Market Outcomes of New Immigrants", Discussion Paper, No. 1380, Institute for the Study of Labour, Bonn, November.

Creedy, J. and G. Kalb (2005), "Behavioural Microsimulation Modelling for Tax Policy Analysis in Australia: Experience and Prospects", Melbourne Institute Working Paper Series, No. 2/05, Melbourne Institute of Applied Economic and Social Research, University of Melbourne, January.

ERG (External Reference Group) (2008), "Final Report to the Minister for Immigration and Citizenship Visa Subclass 457 External Reference Group", ERG, April.

Henry, K. (2008), "Revisiting the Policy Requirements of the Terms-of-Trade Boom", Address to the Australian Business Economists, Sydney, 20 May.

Jones, M.J. (2007), "Australia's 2008 SOPEMI Report to the OECD", SOPEMI, November, internal working document, OECD.

Junankar, P.N. and S. Mahuteau (2005), "Do Migrants Get Good Jobs? New Migrant Settlement in Australia", The Economic Record, Vol. 81, No. $1, Blackwell Publishing, August.

Kalb, G. (2007), "Interaction of the Tax and Social Security Systems in Australia: The Effect on Effective Marginal Tax Rates", The Australian Economic Review, Vol. 40, No. 2, Blackwell Publishing, June.

Mahuteau, S. and RN. Junankar (2007), "Do Migrants Succeed in the Australian Labour Market? Further Evidence on Job Quality", MPRA Paper, No. 8703, University Library of Munich, September.

McDonald, R and G. Withers (2008), "Population and Australia's Future Labour Force", Occasional Paper, No. 1/2008, Policy Paper, No. 7, The Academy of the Social Sciences in Australia, Canberra.

OECD (2003), OECD Economic Surveys: AustraZia, No. 4, OECD Publishing, Paris.

OECD (2005), Ageing and Employment Policies: Australia, OECD Publishing, Paris.

OECD (2006), OECD Economic Surveys: Australia, No. 12, OECD Publishing Paris.

OECD (2007a), Babies and Bosses: Reconciling Work and Family Life, OECD Publishing, Paris.

OECD (2007b), Sickness, Disability and Work: Breaking the Barriers, Vol. 2, OECD Publishing Paris.

OECD (2007c), OECD Employment Outlook, OECD Publishing, Paris.

OECD (2007d), Jobs for Immigrants, Labour Market Integration in Australia, Denmark, Germany and Sweden, OECD Publishing, Paris.

Productivity Commission (2006), Economic Impacts of Migration and Population Growth, Research Report, Productivity Commission, April.

Productivity Commission (2007), Annual Report 2006-07, Annual Report Series, Productivity Commission, Canberra.

RBA (Reserve Bank of Australia) (2007), "Immigration and Labour Supply", Reserve Bank Bulletin, RBA, Sydney, September.

Whiteford, P. (2006), "The Welfare Expenditure Debate: 'Economic Myths of the Left and the Right' Revisited", Economic and Labour Relations Review, Vol. 17, No. 1, September, Centre for Applied Economic Research and the Industrial Relations Research Centre, University of New South Wales.


(1.) For a discussion, see Whiteford (2006).

(2.) A study by Kalb (2007) has found that sole parents and couples with dependent children account for around 60% of those people that face METRs in excess of 50%.

(3.) Jobless families accounted for 13.5% of families with children under 14 years old in mid-2007, raising major welfare concerns about the half million children living in such households.

(4.) For people who were in receipt of Parenting Payment prior to 1 July 2006, activity test requirements commenced from 1 July 2007 or when their youngest child turns seven (whichever is the later). This group of beneficiaries, however, can continue to receive the Parenting Payment until their youngest child turns 16, unlike new applicants (after July 2006) who will move to unemployment benefit when the last child turns eight (lone parents) or six (for couples).

(5.) Other initiatives comprise the inclusion in the Australian Fair Pay and Condition Standard of a right to take up to 10 days of paid sick leave each year as carer's leave (i.e. to care for a family member who is sick) and changes to unpaid parental leave provisions.

(6.) New applicants for DSP, in particular, who are assessed as being capable of working 15 hours or more per week at wages at or above the relevant minimum are no longer eligible for support after 1 July 2006, but they receive the Newstart Allowance instead, which implies increased (at least 15 hours per week) job search requirements.

(7.) Australia has a three-pillar pension system. The tax-funded public pension (Age Pension) is the first pillar and is means tested. The pension is payable at age 65 for men and 6211/2 for women, gradually increasing to 65 by 2014. The second pillar involves the Superannuation Guarantee, introduced in 1992, requiring employers to make a superannuation contribution on behalf of their employees. The earliest age for access to superannuation benefits is SS years. The third pillar mainly comprises private savings, voluntary superannuation contributions for the most part, which are tax deductible.

(8.) Although net migration data for 2007/08 are not available, the planning levels for the 2008/09 Migration Program (which represent the highest level ever administered by an Australian government) confirm that migration arrangements will continue to contribute to Australian population growth.

(9.) Using data from the first two Longitudinal Surveys of Immigrants to Australia (LSIA) Mahuteau and Junankar (2007) conclude that immigrants arriving in Australia in the late 1990s outperform the earlier cohort (arriving between 1993 and 1995) by a year and a half after the settlement. After this period, more recent immigrants who have not found a good job see the prospect of improving their situation decrease sharply below that of the past cohort.
Table 2.1. Labour market outcomes for recent migrants (1)


                                     Unemployment   Participation
                                         rate           rate

Australian born                          4.1            68.7
  Recent migrants (arrived               5.0            71.9
    after 1997)
  All overseas born (regardless          4.1            60.0
    of period of residence)

Country of birth: recent migrants
  Main English speaking countries        2.5            81.3
  Other                                  6.0            69.1

Pre-arrival qualification level
  Bachelor degree or higher              3.9            79.6
  No post-school qualification (2)       7.2            59.9

Migration programme (3)
  Skill stream                           4.7            82.6
  Family stream                          7.5            62.4



Australian born                         65.9
  Recent migrants (arrived              68.4
    after 1997)
  All overseas born (regardless         57.6
    of period of residence)

Country of birth: recent migrants
  Main English speaking countries       79.4
  Other                                 64.9

Pre-arrival qualification level
  Bachelor degree or higher             76.5
  No post-school qualification (2)      55.6

Migration programme (3)
  Skill stream                          79.0
  Family stream                         68.0

(1.) The term "recent migrant" relates to the migrant cohort which
was born overseas, arrived in Australia after 1997, was aged 15
years or over on arrival and had obtained permanent Australian or
temporary residence (if intending to stay for 12 months) status
(excluding New Zealand citizens).

(2.) Estimate has a relative standard error of 2S% to 50% and
should be treated with caution.

(3.) Data for the Humanitarian steam are not available.

Source: ABS (2007), Labour Force Status and Other Characteristics
of Migrants (cat. No. 6250.0), Australian Bureau of Statistics.
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Title Annotation:Chapter 2
Publication:OECD Economic Surveys - Australia
Geographic Code:8AUST
Date:Oct 1, 2008
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