Young Aussie workers crushed by migrants, oldies

Record low interest rates are having a direct impact on the Australian labour market, by forcing older people to delay retirement and remain in full-time work for longer than they had intended. This is in turn reducing the employment opportunities for younger Australians, forcing many of them to take up casual roles or jobs in the ‘gig’ economy.

Economist Callam Pickering notes that the proportion of younger workers who are underemployed has increased from about 11% in 2008 to nearly 18%. The trend for older people to continue working full-time is also dampening wages growth, as their priority is continuity of income rather than pay rises. From The Australian:

A deep-seated fear spreading through the older generation of Australians is forcing them to stay in the full-time work force much longer than they ever intended.

In turn, that is keeping a lid on wages and contributing to the casualisation of major parts of the younger work force…

In the work force older people are seeking continuity of income and wage rises are not high on their agenda, and so their increased participation is contributing to keeping a lid on wages.

The statistics indicate that so far the older people are not rushing into casualisation, but are hanging on to their full employment for as long as they can.

That may change but at the moment it is young people who are leading the big increase in part-time work…

Indeed, economist Callam Pickering clearly sets out what is happening in the workforce: “Over the past decade, thousands of younger Australians have been forced into part-time employment, often casual or even ‘gig’ roles…

There is a kernel of truth in Gotti’s analysis. As shown in the next chart, the labour force participation rate of over-65s has more than doubled since 2000, and there is obviously much further scope for participation to lift given the legislated increase the Aged Pension eligibility age to 67 from 2023, as well as people living heathier for longer.

But Gotti has conveniently chosen to ignore the biggest driver of Australia’s rising labour supply: mass immigration.

As we already know, net overseas migration (NOM) into Australia has surged over recent years, as illustrated by the next chart:

NOM is also directly responsible for more than 60% of Australia’s population growth.

The lion’s share of recent migrants are of prime working age and, therefore, have high labour force participation.

Indeed, a recent paper by Melbourne University Professor, Peter McDonald, found that around three quarters of employment growth in Australia between 2011 and 2016 was attributed to immigration:

The permanent and temporary skilled migration policies established by the Australian Government from 1995 played an important role in meeting that labour demand, especially in the boom years of the first decade of the 21st century…

From July 2011 to July 2016, employment in Australia increased by 738,800. Immigrants accounted for 613,400 of the total increase…

Migration has had a very large effect on the age structure of employment with most new immigrant workers (595,300) being under 55 years.

Clearly then, the ongoing supply shock from immigration is unambiguously the primary reason why labour supply continues to outrun demand and why wage growth remains anaemic, especially among younger Australians.

Gotti has also conveniently ignored the systemic wage theft from temporary migrants, which has become entrenched across the entire Australian economy:

Entire industries have become heavily reliant on migrant workers to perform low-skilled work in the labour market for below award rates, which is unambiguously undercutting local workers and lowering overall wage growth.

The impact is most pernicious on younger Australians, as explained recently by the Grattan Institute:

As the Productivity Commission noted, where migration does displace existing populations, it tends to affect people with low skills and youth most. That seems to be happening in Australia. And because international students and backpackers are primarily looking for part-time work, they may affect under-employment more than unemployment…

Low-skill migrants might also put downward pressure on wages (if accurately measured). The measured wages of those aged 20 to 34 have not risen as fast as the wages of older workers for some time (Figure 7)…

Australia is now running a predominantly low-skill migration system. People from this system form a material proportion of the younger workforce. Because of visa conditions, many of these migrants have incentives to work for less than minimum wages, and there is anecdotal evidence that many do. It is impossible for data sources on the Australian labour force to pick up all of this phenomenon. It is possible that the scale of this influx to the labour market is depressing wages and increasing under-employment specifically for low-skill younger workers.

If anything, the rise of elderly participation is a response to the failing wages growth arising from the mass immigration model as it destroys industrial relations, leaving households no choice but to work harder and longer.

In short, commentators need to examine the issue honestly and admit that the mass immigration ‘Big Australia’ policy is a key driver of Australia’s wage crisis.