Australia’s transformation to a knowledge economy continues…but why don’t we feel rich?

How is our Australian workforce shaping up?

Well, since the 2016 Census, our workforce has been bunching up.

In other words, we lost, in relative terms, skill-level 4 and 5 jobs while adding skill-level 1, 2, and 3 jobs.

Structurally we now have more higher and middle-income earners and fewer low-income earners.

In his column in The New Daily, leading demographer Simon Kuestenmacher explains that...

Australia continues to transform into a knowledge economy

As Mr Simon Kuestenmacher explained:

"We have lots of skill-level 1 workers (now 34.1 per cent) and lots of low-income jobs in skill levels 4 and 5 (39 per cent).

Finally, the relative decline of middle-skilled (level 3) jobs has been halted.

I am relieved to learn that Australia added a significant number of skill-level 3 jobs since the 2016 Census (up 296,000).

The relative growth of skill-level 3 jobs from 13.8 per cent of the workforce in 2016 to 14.7 per cent in 2021 was however mostly due to the very low growth in the number of skill-level 4 (up 26,000) and skill-level 5 (up 47,000) jobs.

Low-skilled jobs were the first ones to be cut during the pandemic.

As the lockdowns continued in the first year of the pandemic alone, our net migration turned negative, and we lost 90,000 migrants instead of adding our annual quota of 180,000.

The exodus of international students, many of whom usually hold a skill-level 4 or 5 job, contributed to our current skills shortage.

Over 630,000 jobs in skill-level 5 are held by people aged under 25.

Take away international students (aged almost exclusively under 25) and you see why low-skilled, part-time jobs are so hard to fill.

There is a natural progression from low-skilled jobs towards high-skilled jobs as workers progress their careers.

While you are in education (first high school, then TAFE or university) you take on low-skilled, low-income jobs before you acquired the necessary qualifications to work in higher-paying jobs."

Highly educated people most likely to work post-retirement age

At age 18, only 4 per cent of workers hold a skill-level 1 job.

Obviously, this number rapidly shoots up as they progress through university and peaks at age 40 when 43 per cent hold a skill-level 1 job.

Millennials (born 1982-1999) have the highest share of skill-level 3 workers.

Mr Kuestenmacher commented:

"Our youngest workers almost exclusively hold skill-level 5 jobs as they couldn’t possible have earned a formal qualification just yet.

At 15 year of age 82 per cent of workers have a skill-level 5 jobs.

This number then drops quickly to nine percent at age 39.

Low-paying skill-level 4 and 5 jobs are also often held by women that re-enter the workforce after a decade or two of child rearing.

These women regularly hold qualifications for more highly skilled jobs.

This contributes to the gender income gap (women earning fewer dollars than men) but not the gender pay gap (different dollars for men and women doing the same job)."

Skill levels by capital cities

Within our Capital Cities, workers live segregated based on their skill level.

The inner suburbs (5km from the CBD) are dominated by skill-level 1 workers who want to be close to their office towers (54 per cent), whereas on the urban fringe (within the Capital City but more than 25km from the CBD) they only make up 27 per cent.

Mr Kuestenmacher further explained:

"The pattern is simple, high-income earners live close to the CBD while low-income earners must move far away from the CBD to afford a home.

Many skill-level 3 workers are tradies who tend to move to the urban fringe as they prefer properties with big garages for their utes and tool as their jobs are mobile by nature."

A final note

Clearly, as a nation, we are moving towards a higher income profile.

Ideally, in the long run, we permanently shrink the number of skill-level 4 and 5 jobs and push more young people that would’ve otherwise pursued skill-level 4 and 5 work into skill-level 3 jobs.

Mr Kuestenmacher said:

"An economy that creates so many skill-level 1 jobs should feel richer than we currently do.

The reason here is yet again housing.

Even dual-income households with two skill-level 1 workers struggle to buy a family home.

For our nation to actually be as wealthy as we could, we need to improve housing affordability."

Source of charts and commentary: The New Daily 

About Joseph Ballota Joseph is a Property Coach who put hundreds of people on the road towards wiping away their mortgage in under 5 years through expert Property Investment Plans.