This edition of the ACTU’s Economic Bulletin takes a
The participation rate has fallen from a high of 65.8%
close look at the ageing of Australia’s population and
in December 20101 to 65% in September this year.2
its
Some
Participation remains high in historical terms, as
commentators have suggested the decline in the
shown in Figure 1. To measure the effect of the
participation rate in recent years is due to the
ageing population on the overall participation rate,
softening labour market (which they attribute to
we need to look at the participation rates and
policies of the former government, including the Fair
population shares of individual age groups.3
effect
on
workforce
participation.
Work Act). The ACTU’s analysis challenges these claims, finding instead that almost all of the fall in
Different age groups have very different participation
participation since 2010 is due to the ageing of the
rates, as shown in Figure 2. Participation tends to
population rather than cyclical factors. The fall in
follow an inverted ‘U’ shape over the life course –
participation is largely demographic, not economic.
younger and older people are less likely to be in the workforce than those aged 25-54. Figure 2: Participation rate by age groups
World War II ended nearly 68 years ago, and the baby boom began soon thereafter. During the past three
Per cent 90
years, the first members of the baby boom
80
generation turned 65, an age at which many people
70
tend to retire from the workforce. The ageing of the
60
population has had an effect on the workforce
50
participation rate, dragging down the overall rate.
40
Figure 1: Participation rate since 1983
Dec 10 Aug 13
30
Per cent 67
20
66
10 0
65
15-19 20-24 25-34 35-44 45-54 55-59 60-64
65+
Source: ABS 6291.0.55.001, seasonally adjusted by the ACTU using X12ARIMA.4
64 63 62
1
61 60 Sep 83 Sep 88 Sep 93 Sep 98 Sep 03 Sep 08 Sep 13 Source: ABS 6202, trend.
December 2010 is used as the base period in this analysis as this is when the participation rate reached its peak. 2 ABS 6202, trend estimate. 3 In this Bulletin, ‘population’ refers to the civilian population aged 15 and over. 4 The participation rates for individual age groups given by the ABS are not seasonally adjusted. The ACTU has seasonally adjusted these data using a standard method
ACTU Economic Bulletin - September 2013 – Page 1
Figure 2 shows that participation has fallen among
The participation of older people has risen quite
younger people since 2010, while the participation
strongly in recent years. However, the participation
rates among older people have risen (off a lower
rate for older people is still lower than for workers
base). Figure 3 shows the change in participation
aged 25-54 (as shown in Figure 2). A shift in the
rates of each age group over this period.
composition of the population towards older age
Figure 3: Change in participation rate - Dec 10 to Aug 13 Percentage points 2.0 1.4 1.3 1.5 1.0
groups will therefore drag down the overall participation rate.
The overall participation rate is the average of the participation
0.5
0.2
0.1
particular
demographic
population. If the share of the population aged 65+
-0.3
rises, the overall participation rate will fall. Older
-0.6
-1.0
of
groups, weighted by those groups’ share of the
0.0 -0.5
rates
-0.9
-1.5
people have indeed come to represent a larger
-2.0
share of the population in recent years, as shown in
-2.5
-2.1
Figure 4 and Figure 5.
15-19 20-24 25-34 35-44 45-54 55-59 60-64
65+
Source: ABS 6291.0.55.001, seasonally adjusted by the ACTU using X12ARIMA.5
Figure 4: Population share Per cent 20
As an aside, we don’t believe that the entire decline
18
in the participation rate in younger people is due to a
16
weak jobs market, though some of it undoubtedly is.
14
Since
employment-to-
12
population ratio of people aged 15-24 has fallen by
10
December
2010,
the
1.5 percentage points. 1 point of that change has gone to a rise in the proportion of young people in full-time education and not in the labour force. ‘Earn or learn’ policies that seek to extend the period in which young people are engage in full-time study have likely contributed to the fall in participation rates among young people.
Dec 10 Aug 13
8 6 4 2 0 15-19 20-24 25-34 35-44 45-54 55-59 60-64
65+
Source: ABS 6291.0.55.001, original.
Between December 2010 and August 2013, the share of the population aged 65 or over rose from 16.8% to 17.8%. This 1 percentage point rise represents a very large shift in the demographic composition of the Australian population.
called X12-ARIMA. Further information about this process is available on request. 5 The participation rates for individual age groups given by the ABS are not seasonally adjusted. The ACTU has seasonally adjusted these data using a standard method called X12-ARIMA. Further information about this process is available on request. ACTU Economic Bulletin - September 2013 – Page 2
Figure 5: Change in population share - Dec 10 to Aug 13 Percentage points 1.2 1.0 1.0
participation
rate
would
have
been
if
the
demographic structure of the population hadn’t changed over the past few years – in other words, if
0.8
there had been no ageing of the population.6 The
0.6
0.4
results of this analysis are shown in Figure 7, the key
0.4 0.2
chart in this Bulletin. If the demographic structure of
0.0
the population had stayed the same from December
0.0 -0.2
2010 to August 20137, we estimate that the overall
-0.1
-0.2
-0.4 -0.6
Fortunately, there is a way to estimate what the
-0.4
-0.4
participation rate would have looked like the orange -0.4
15-19 20-24 25-34 35-44 45-54 55-59 60-64
65+
line in Figure 7. Instead, the actual participation rate
Source: ABS 6291.0.55.001, original.
is shown as the blue line. The gap between these two
The share of the population that is aged 65 and over
lines is the contribution of the ageing population to
has been rising for decades, but the rate of increase
the decline in the participation rate.
picked up sharply around 2009, as shown in Figure 6. Figure 6: Share of the population aged 65+
Figure 7: Participation rate with no ageing population Per cent 65.8%
Per cent 18.0%
65.7% 65.6%
17.0%
65.5% 16.0%
65.4%
15.0%
65.3% 65.2%
14.0%
65.1% 13.0% 12.0% 1978
65.0% Jul 10 1983
1988
1993
1998
2003
2008
2013
Participation rate - actual Estimated participation rate if the demographic structure remained as at December 2010 Jul 11
Jul 12
Jul 13
Source: ACTU analysis. Original data from ABS 6291.0.55.001, seasonally adjusted by the ACTU using X12-ARIMA.8
Source: ABS 6291.0.55.001, original.
All the information above suggests that we have a lot 6
The participation rate for a given month is the weighted average of the participation rate for each age group, where participation rate of older people has risen, but older the weights are the population shares. By multiplying the participation rates of each group in August 2013 (or some people have come to represent a larger share of the other month) by the population shares from a base period (December 2010) and summing the results, you obtain an population. The first of these trends tends to push up estimate of what the participation rate would have been in the overall participation rate, while the latter drags it the absence of demographic change. The method is outlined in more detail here: down. The information above shows that ageing has http://www.frbatlanta.org/filelegacydocs/wp0906.pdf 7 The September edition of 6291.0.55.001 was not occurred, but it doesn’t show how much of an effect available when this Bulletin was written. 8 this has had on the overall participation rate. The participation rates for individual age groups given by the ABS are not seasonally adjusted. The ACTU has seasonally adjusted these data using a standard method called X12-ARIMA. The ‘actual’ series is also based on the ACTU Economic Bulletin - September 2013 – Page 3
of factors pushing in different directions. The
We estimate that 0.6 percentage points of the 0.7
estimate that 0.5 points of this decline was due to the
point fall in the participation rate between December
ageing of the population. Just over half (0.6 points) is
2010 and August 2013 was due to the ageing
therefore due to a decline in the employment-to-
population. The remaining 0.1 percentage point was
population ratios of particular demographic groups.
due to a decline in participation rates in particular age groups (which likely reflects cyclical softness in
Figure 8: Effect of the ageing population on the employment-topopulation ratio
the jobs market).
Per cent 62.6%
This means it is demonstrably untrue to assert that a
62.4%
softening in the labour market is the major cause of
62.2%
the fall in participation. Nearly all of the fall is due to
62.0%
the
ageing
of
Commonwealth
the
population.
Budget
came
The to
2013-14
the
61.8%
same
conclusion, finding that the ageing population was responsible for around 80% of the fall in participation
61.6% 61.4% Employment to population ratio - actual
between 2010 and April this year. The Minimum
61.2%
Wage Panel of the Fair Work Commission also
61.0% Jul 10
accepted our findings, saying that “we think that the proposition
that
the
recent
decline
in
the
Estimated ratio if the demographic structure remained as at December 2010 Jan 11
Jul 11
Jan 12
Jul 12
Jan 13
Jul 13
Source: ACTU analysis. Original data from ABS 6291.0.55.001, seasonally adjusted by the ACTU using X12-ARIMA.
participation rate, when measured by reference to those aged 15 or over, is largely explained by the
This is likely due to a softening in the jobs market.
ageing population is correct.”
This Bulletin doesn’t dispute the fact of the softening labour market – jobs growth hasn’t been strong
It is clear that most, nearly all, of the decline in the
enough to keep up with population growth. This is a
participation rate is due to the ageing population.
problem. But the point of this Bulletin is to show that
However, this doesn’t mean there hasn’t been a
some of the apparent softening is actually due to
weakening of the labour market. There has been, but
demographic change, and that the participation rate
this doesn’t show up in the participation rate as much
is particularly affected by the ageing population.
as it does in the employment-to-population ratio and, particularly, the unemployment rate.
The employment-to-population ratio has fallen by 1.1 percentage points since December 2010 – we
Please send any comments, corrections, criticisms or compliments
to
mcowgill@actu.org.au.
original ABS data, seasonally adjusted by the ACTU (so as not to introduced bias by comparing two series that have been seasonally adjusted using different methods). The ‘actual’ series is highly correlated with the ABS trend estimate. Further information is available on request. ACTU Economic Bulletin - September 2013 – Page 4
Matt
Cowgill
at
Employment and unemployment The tables and charts below summarise the latest available data about the Australian labour market. Table 1: Summary of labour force figures Monthly change
Level
Yearended change
Employed persons
11645800
9100
95500
- Full time employment
8133700
5000
-5200
Figure 10: Change in employment in the year to September Thousands 120 100.7
95.5
100 80 57.1
56.8
60
43.9
38.3
40 20 0.4 0
- Part time employment
3512100
4100
100700
-5.6 -5.2
-20 Working age population
Full time Males
19029500
26600
333500
Employment-topopulation ratio
61.2%
0.0
-0.6
Unemployment rate
5.6%
-0.2
0.1
Unemployed persons
697100
-14700
28300
6.0
7.80
0.4
0.7
5.5
64.9%
-0.1
-0.5
Participation rate
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
Figure 9: Change in employment between August and Sept. Thousands 14 11.1 12 10.7 9.1
10 8 5.0
Per cent 6.5
5.0 4.5
Source: ABS 6202, seasonally adjusted.
4.0 3.5 3.0 Sep 03
Seasonally adjusted Sep 05
Sep 07
4.1
4.5 4.6
2 0
Sep 09
Sep 13
5.6
SA
-4
6.6 6.1 6.0
Qld
-6 Full time Males
Sep 11
Figure 12: Unemployment rates by State/Territory 6.9 Tas 8.5
-2
-6.2
Trend
Source: ABS 6202.
4
-8
Total
Figure 11: Unemployment rate
Underemployment rate (quarterly)
6
Part time Females Persons
-6.6 Part time Females Persons
Total
Vic
5.5 5.7
NSW
5.1 5.7
Source: ACTU calculations based on ABS 6202, seasonally adjusted.
4.0
NT
5.5
WA
4.1 4.7
ACT
4.0 4.1 0
2
4 6 Per cent Sep 2012 Sep 2013
Source: ABS 6202, trend.
ACTU Economic Bulletin - September 2013 – Page 5
8
10
Figure 13: Employment to population ratio
Figure 16: Employment growth in the year to August 2013
Per cent 64
Public Administration and Safety
63 62 61 60 59
10.6%
Construction
5.0%
Other Services
4.3%
Transport, Postal and Warehousing
3.9%
Accommodation and Food Services
2.4%
Health Care and Social Assistance
2.0%
Wholesale Trade
1.7%
Retail Trade
1.7%
Electricity, Gas, Water and Waste…
0.6%
Financial and Insurance Services
0.4%
Professional, Scientific and…
58 Sep 03
Seasonally adjusted Sep 05
Sep 07
Trend
Sep 09
Sep 11
Sep 13
Source: ABS 6202.
-0.4%
Education and Training
-0.4%
Administrative and Support Services
-1.8%
Mining
-2.0%
Manufacturing
-4.4%
Figure 14: Participation rate 15-64 (%) 77.0
15+ (%) 66.0
Participation rate (trend)
0.1%
Arts and Recreation Services
Rental, Hiring and Real Estate…
76.5
65.5
76.0
65.0
Agriculture, Forestry and Fishing Information Media and…
75.5
64.5
75.0
64.0
74.5
63.5
74.0 Sep 03
15-64 (LHS) Sep 05
Sep 07
15+ (RHS) Sep 09
Sep 11
Source: ACTU calculations based on ABS 6202, trend.
63.0 Sep 13
12 10 Underemployment 8 6 4 Unemployment
Aug 09
Aug 10
Aug 11
Aug 12
-12.2% 2%
7% 12%
Yearly change in employment (%)
Figure 15: Underemployment and unemployment rates Per cent 14
0 Aug 08
-7.6%
-18% -13% -8% -3%
Source: ABS 6202.
2
-5.3%
Aug 13
Source: ABS 6202, trend.
ACTU Economic Bulletin - September 2013 – Page 6
Output and productivity growth
Source: ABS 5206 and ACTU calculations. Non-farm.
Table 2: Summary of March quarter National Accounts
Level
Quarterly change
Yearended change
Real gross domestic product (GDP)
376799
0.6%
2.6%
Real GDP per capita
16118
Figure 19: Annual growth in labour productivity (GDP per hour) Year-ended growth 5% 4%
0.1%
Fair Work Act
Work Choices
0.9% 3%
Labour productivity (total economy)
-
Labour productivity in the market sector
-
Terms of trade
-
0.3%
1.8% 2%
0.3%
2.2% 1%
0.2%
-4.8% 0%
Wages share of income
53.9%
Profits share of income
27.0%
0.1
-0.1 -1%
-0.1
Seasonally adjusted
-0.2 -2% Jun 03
Source: ABS 5206.
Jun 05
Jun 07
Trend
Jun 09
Jun 11
Jun 13
Source: ABS 5206.
Figure 17: Growth in real GDP per year
Figure 20: Growth in output (gross value added) – year to June 2013
6%
Mining
5% 20-year average, 3.4%
4%
8.1%
Financial and insurance…
3% 2%
7.7%
Health care and social…
5.5%
Public administration and…
5.0%
Administrative and support…
4.5%
Arts and recreation services
3.1%
Education and training
2.4%
Retail trade
2.3%
Rental, hiring and real estate…
1% Seasonally adjusted 0% Jun 03
Jun 05
Jun 07
Jun 11
Jun 13
Source: ABS 5206 and ACTU calculations.
Figure 18: Annual growth in nominal unit labour costs 6%
4%
1.4%
Construction
0.6%
Manufacturing
0.6%
Trend
Jun 09
Information media and…
0.6%
Accommodation and food…
0.3%
Professional, scientific and…
0.1%
Agriculture, forestry and fishing
20-year average, 2.5%
-0.7%
Electricity, gas, water and…
-3.2%
0%
Seasonally adjusted Jun 01
-4.9%
-15% -10% -5% 0% 5% 10% Annual GVA growth Source: ABS 5206.
Jun 97
-0.5%
Transport, postal and…
Other services
2%
-2% Jun 93
2.3%
Wholesale trade
Trend
Jun 05
Jun 09
Jun 13
ACTU Economic Bulletin - September 2013 – Page 7
Prices and wages
Figure 22: Headline and underlying CPI inflation Per cent 5%
Table 3: Summary of prices and wages data Latest quarter
Level
Year-ended change
June
-
2.9%
Wage Price Index (WPI)
3%
Full-time average weekly ordinary time earnings (AWOTE)
May
$1,421
5.3%
Real full-time AWOTE
May
$1,421
2.9%
Total average weekly earnings (AWE)
May
$1,105
4.9%
2%
From 1 July
$622
2.6%
Average wage increase in collective agreements
March
-
4.5%
Headline CPI
June
-
2.4%
Trimmed mean (underlying CPI)
June
-
2.2%
Employees’ cost of living (LCI)
June
-
1.4%
Gender pay gap
May
17.5%
-0.1%
0% Jun 03
Underlying CPI Jun 05
Jun 07
Jun 09
Jun 11
Jun 13
Source: ABS 6401.
Figure 23: Wage Price Index growth 4.5%
4.0%
Source: ABS 6345, ABS 6302, FWC, DEEWR Trends in Federal Enterprise Bargaining, ABS 6401, ABS 6467, ACTU calculations.
Figure 21: Annual growth in the CPI and workers’ cost of living (Employee LCI)
6%
3.5%
Long-run average
3.0%
2.5%
2.0% Jun 98
5%
Trend
Seasonally adjusted
Jun 03
Jun 08
Jun 13
Source: ABS 6345.
4%
Figure 24: WPI growth in the public and private sectors
3%
5.0%
2%
4.5% Underlying CPI Employee LCI
4.0%
0% -1% Jun 03
RBA's target band
1%
Headline CPI
National Minimum Wage per 38 hour week
1%
4%
3.5% Jun 05
Jun 07
Source: ABS 6467, ABS 6401.
Jun 09
Jun 11
Jun 13 3.0% 2.5%
Private Public
2.0% Jun 03
Jun 05
Source: ABS 6345.
ACTU Economic Bulletin - September 2013 – Page 8
Jun 07
Jun 09
Jun 11
Jun 13
Figure 25: WPI growth in the year to June by industry 0% 1% 2% 3% 4% Electricity, gas, water and…
3.9%
Mining
3.5%
Health care and social…
Figure 27: WPI growth in the year to June by State 0% 1% 2% 3% 4% WA
3.4%
SA
3.3%
3.4%
Wholesale trade
NT
3.3%
Construction Rental, hiring and real…
3.2%
3.1%
Victoria
3.0%
3.1%
Tas
2.9%
ACT
2.9%
ACT
2.9%
Other services
3.0%
Australia
2.9%
Public administration and…
2.9%
Financial and insurance…
2.9%
NSW
2.8%
Information media and…
2.9%
Qld
2.8%
Arts and recreation services
2.9%
Source: ABS 6345.
Manufacturing
2.9%
Transport, postal and…
2.8%
Professional, scientific and…
2.8%
Retail trade
Figure 28: Average weekly ordinary time earnings for full-time adults $0 $1,000 $2,000
2.7%
Administrative and…
Mining
2.7%
Accommodation and food… Education and training
Professional, Scientific…
$1,706.60
2.6%
Information Media and…
$1,671.10
2.5%
Financial and Insurance…
$1,645.30
Source: ABS 6345.
Electricity, Gas, Water…
Figure 26: Range of WPI growth rates across industries 7%
Construction Transport, Postal and…
5% 4% 3% 2%
0% Jun 03
Education and Training Public Administration…
6%
1%
Health Care and Social…
$1,354.10
Arts and Recreation…
$1,315.50
Rental, Hiring and Real…
$1,303.80
Administrative and…
$1,276.50
Accommodation and… Jun 13
Source: ABS 6345 and ACTU calculations. Based on a 5-quarter centred moving average.
$1,425.10
$1,417.30
Other Services Jun 11
$1,436.00
Wholesale Trade
Australia Jun 09
$1,485.20
$1,420.90
Manufacturing
Jun 07
$1,622.90 $1,499.00
All Industries
Range of growth rates in all industries
Jun 05
$2,423.50
Retail Trade Source: ABS 6302.
ACTU Economic Bulletin - September 2013 – Page 9
$1,251.40 $1,104.70 $1,049.80 $1,022.00