Collapsing immigration boosts Australia’s workforce participation

Following the 1982-83 and 1990-91 recessions, Australia’s labour force participation rate – defined as the sum of all workers who are employed or actively seeking work as a share of the total working-age population – fell significantly.

For example, between 1990 and 1993, Australia’s participation rate fell by 1¾ percentage points as the economy entered recession.

The COVID-19 recession has been different. As shown in the next chart, Australia’s participation rate is now hovering around an all-time high at 66.1% seasonally adjusted after briefly falling sharply as lockdowns took effect:

This compares to an average labour force participation rate of around 60% between 1999-2003 and an average of 66% between 2018-2019.

The result is surprising given the Morrison Government temporarily boosted the JobSeeker unemployment payment via the Coronavirus Supplement, which according to employment groups has reduced incentives to look for work and driven labour market shortages. The sharp lift in the participation rate debunks this claim as it suggests the number of people interested in working is at an all-time high.

According to Roy Morgan Research, labour force participation is also highest among Australians across the three age groups aged 18-49:

Overall, 89% of people aged 18-24 are in the workforce (72% employed and 17% unemployed), 88% of people aged 25-34 are in the workforce (78% employed and 10% unemployed) and 88% of people aged 35-49 are in the workforce (81% employed and 7% unemployed).

Roy Morgan CEO, Michele Levine, also believes the collapse in immigration is part of the reason why Australia’s labour force participation rate has rebounded so strongly:

“These figures show that one of the most direct impacts of the COVID-19 pandemic is to accelerate the trends of the last twenty years and increase workforce participation to record highs as immigration to Australia has plunged and many foreigners on working visas have departed.

“The acceleration of the long-term trend over the last twenty years provided by COVID-19 means the workforce participation rate of those aged 18-49 is now approaching 90%”.

This statement would assume that migrants have lower labour force participation than the Australian born population – a point confirmed by the Australian Bureau of Statistics’ Characteristics of Recent Migrants Report:

As shown above, temporary residents (most notably international students) have lower labour force participation rates than the Australian born population.

Accordingly, it is reasonable to assume that the sharp loss of temporary migrants due to the COVID-19 pandemic has worked to increase the average labour force participation rate across the nation, especially among younger age groups where temporary migrants dominate.

Unconventional Economist
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Comments

  1. And if that doesn’t go to show that the usual talking head suspects just trot out their favourite old biases without doing any sort of research or fact checking then I don’t know what does.

  2. Jumping jack flash

    Good.
    I hope they hold off on reopening the gates until after the US stimulus starts being doled out, at the very earliest.

    Wage theft destroys economies. It is the epitome of trickle-up economics, and capitalism on acid.

    If you destroy the purchasing power of your clientele by stealing their wages and then expect to be able to sell your products then you’re totally crackers. Sure, as a business owner you can pay yourself more and afford more debt while your prices remain the same (and you get a boost to productivity, maybe), but you can make all the coffee, sandwiches and curry you like, have a fleet of vehicles with trailers full of lawnmowers, and rooms full of hairdressers, nail-painters and masseurs, but if nobody can use them because their wages are also being stolen, what is the good of it?

    This is the problem we were facing by the end of 2019.

    And when you add essential debt into the equation, you get an entirely new dimension to the problem.

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