The current workforce shortage in many industries has left employers struggling to find workers to fill their open positions.
While some may attribute this to a lack of motivation or work ethic among younger generations, the reality is that there are significant demographic shifts at play.
In his article in The New Daily, demographer Simon Kuestenmacher explored the role of demographics in answering the question, where have all the workers gone?
Australia's current age profile
At the outset of the pandemic, the federal government explicitly stated that financial aid would not be provided to international students and skilled migrants holding temporary visas.
Consequently, these workers chose to return to their home countries.
By now our migration intake is again very close to pre-pandemic levels, so why is it still so hard to find workers?
Mr Kuentenmacher explained:
"At first glance, the population profile of Australia looks promising.
After all, there are a whopping 16 million people of working age (18-64).
Over the last decade, Australia grew by 3.5 million people. Looking at the change in population since 2012 in more detail, we see how generational dynamics ensured that we would always see a skills squeeze by the 2020s.
The pandemic turned the skills squeeze into a real skills shortage, but it wasn’t the sole culprit.
Since 2012, Australia has added 524,000 people under the age of 18.
These kids go to school, eat Weet-Bix, and play sports, and through their existence they drive demand for workers (teachers, farmers, coaches) without adding to the workforce.
Over the last decade we also grew our population aged 85+ by 157,000 people."
He further explained:
It is labour-intensive it is for a nation to grow old.
Half of these 157,000 new people aged over 85 require assistance with daily activities (a nice way of saying they need care of some form).
An ageing population demands health and care jobs.
As Australia happily aged, the Baby Boomer generation (born 1946-63) started to exit the workforce.
That shouldn’t be a big problem, right?
People always retired, and a new generation entered the workforce in their place.
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This time around, a huge generation retires as a small generation enters the workforce.
To make things worse in the short-term, Gen Z (born 2000-17) is not only a small generation but also a hyper-educated one, meaning they don’t enter the workforce in a full-time capacity until their mid-20s.
Only half of the additional population in the last decade was of working age."
The most significant increase in population was observed among Millennials (individuals born between 1982 and 1999), with those aged 33 to 35 experiencing the most significant growth.
It so happened that many Millennials postponed having children until their mid-30s.
As a result, just when the workforce is already experiencing a shortage of skilled workers, Millennial parents, particularly women, temporarily leave their jobs to care for their children.
For some parents, the high cost of childcare may cause further delays in their return to work.
Although prioritizing child-rearing over paid employment is entirely natural for parents, it adds extra strain to an already stressed workforce.
What will the next few years look like?
According to Mr Kuestenmacher, there is another decade ahead of Millennials having kids and of Baby Boomers retiring.
This means that skills shortages are programmed into the demographic profile until then.
From the 2030s onwards, things ease significantly since it will be the small Gen X (born 1964-81) cohort that retires.
He further said:
It looks like interest rates will remain relatively high throughout 2023.
To keep living costs down, people spend less on products and services.
Businesses react by slowing hiring and might even resort to firing.
Jobs will be lost, and the unemployment rate will rise slightly.
Not too much though, since Baby Boomers continue to retire, and Millennials continue to take parental leave.
The skills shortage will ultimately only be solved by importing more workers through the skilled migration scheme.
That said, since our national housing and migration policies aren’t linked, an increase in migration can have negative cost of living effects which slows economic activity and leads to job losses.
As with everything in life, finding the right balance is key."
Source of charts and commentary: The New Daily
