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Is WA’s workforce flexible enough to adapt to labour market transition?

Media release

A new report into Western Australia’s labour force explores the future growth trajectory of the State and assesses how well prepared the WA workforce is to adapt to labour market transition.

Dr Ruth Shean (DTWD) , Professor Alan Duncan (BCEC), Irina Cattalini (WACOSS), Dr John Edwards (RBA) and David Nolan (Bankwest) at the BCEC launch.

Workforce and Skills: Western Australian labour markets in transition, released today by the Bankwest Curtin Economics Centre (BCEC), examines where WA’s labour market has come from; where it currently stands; and where it is heading with expected increases in the labour force market over the next ten years.

WA’s labour force has already grown by around one-third to 1.4 million over the past decade, and it is anticipated to increase by a further 30 per cent, reaching 1.75 million by 2025.

The report – the third in the BCEC’s Focus on Western Australia series – uses the latest data to provide an overall picture on a range of WA workforce issues ranging from labour market composition, the happiness of workers, to barriers to employment, changing work environments and the balance between work and family.

BCEC Director, Professor Alan Duncan said the report was intended to provide government, industry and the wider Western Australian community with the most up-to-date knowledge of WA’s labour market.

“Employment growth in the mining sector has accelerated significantly since the beginning of the GFC, more than doubling in the last five years alone from 54,000 to 120,000 workers.

“However, the WA labour market is in transition. The proportion of the workforce employed in mining has decreased over the last two years by around 2 percentage points from its peak in 2012, and now sits at 7.5 per cent in May 2014,” Professor Duncan said.

“Mining continues to play an important role in the WA economy, with mining output valued at more than $70bn in WA in the last financial year. This represents 58 per cent of the total gross value of Australia’s mining industry”.

Despite this, the share of the WA workforce employed in the mining sector (at 7.5 per cent) ranks only sixth behind retail (at 10.7 per cent), construction (10.1 per cent), and health care and social assistance (10 per cent).

“There has been huge employment growth in the construction industry over the past decade or more,” Professor Duncan said.

“The construction workforce in WA has increased 75 per cent from around 80,000 in 2001 to around 140,000 in May this year, and construction remains one of the stronger industries in the State.

“Our modelling has shown that there is an expectation that future industry growth in construction and mining will moderate from recent annual growth of 5 per cent to around 2 per cent by 2025, but that other industries will pick up over the next ten years”.

Professor Duncan said there is cause for optimism in relation to future employment opportunities for West Australians, but urged policymakers to consider the overall wellbeing of the State’s workers.

“Maintaining our economic trajectory is hugely important, but we shouldn’t neglect some broader priorities – equality of access and opportunity, a balance between work, family and community, and the care and support of those at the margins of our society,” Professor Duncan said.

The report is the first to identify the main drivers of the gender pay gap in WA, which at 25 per cent is the highest in Australia. The report finds that differences in labour market experience between men and women and occupational segregation are two of the principal reasons for high gender wage differentials.

Professor Duncan said that policies to reduce women’s barriers to employment, and increase their ability to combine work with family responsibilities, would be effective in counteracting the high gender wage gap in WA.

“The persistent shortage of child care workers and managers in WA gives some cause for concern in this regard, and should be addressed as part of the State’s future skills strategy.

“Economic prosperity is ultimately supported by West Australian individuals and families, and can’t be delivered without a healthy, happy and motivated workforce,” Professor Duncan said.

Key findings

WA’s labour market

  • The labour market is in a transition period. A number of industries have been slowing or contracting. When mapped, these changes vary considerably across WA’s regions.
  • Mining as a sector of employment is only the sixth largest employer in terms of workforce numbers, behind sectors such as retail trade, construction, and health care and social assistance.
  • WA’s working age population has increased by 29 per cent since 2005 and the labour force has grown by 33 per cent from 1.08million to 1.44million.
  • The flow of skilled workers into Western Australia has been essential to the sustained economic growth experienced by the State over the course of the resources boom.
  • Net interstate and overseas migration has been tracking alongside iron ore prices since the start of the boom in the early 2000s.
  • Annual net migration into WA from overseas has fallen considerably from its peak in 2012 (down 8,600 to 35,000), with net inter-state inflows halving over the same period (from 8,900 in 2012 to 4,300 in 2013).
  • Future employment in WA is forecast to grow by up to 2.5 per cent per annum across all industries by 2025, with relatively high annual employment growth to 2025 projected in agriculture (3.1 per cent), health care (4.3 per cent), education and training (3.1 per cent) and accommodation/food services (3.7 per cent).
  • Annual economic growth (gross value added) is projected to increase from 4.1 per cent from 2015-2018 to 5.1 per cent by 2025.

Comparative picture of the WA workforce

  • The WA workforce is the fourth largest among Australian states and territories and is characterised by high full-time employment rates, lower unemployment relatively and high wages.
  • In recent times, unemployment rates have been rising, increasing by 13 per cent in the 18 months to July 2014.
  • Youth unemployment has also been increasing and at a faster rate in some parts of the State.
  • Over the last ten years, youth unemployment rates in the Wheatbelt have risen from 7.3 per cent to 23.3 per cent – the highest in the State.
  • Full-time workers in WA earn on average 13 per cent more than the national average – $1,706 compared with $1,500 per week. Average earnings in WA have grown by 20 per cent relative to the rest of Australia since 2005.
  • In the 2012-13 financial year, the gross value of mining was more than $70bn in WA, representing 58 per cent of the total gross value of Australia’s mining industry in the same year.
  • Industry clusters are evident throughout the State. Workers are heavily reliant on the mining and agriculture sectors in regional areas, while Perth has more diversity.

Skills and education

  • In the ten years from 2003 to 2013, the proportion of 25-34 year olds in WA with a Bachelor Degree or higher has increased from 20 per cent to 30 per cent
  • Close to a million West Australians aged 15-64 years hold a non-school qualification.
  • The most common non-school qualification is a Certificate III/IV, with over one in three West Australians having obtained this qualification.
  • Since 2012 the number of apprentice and trainee commencements has declined, from 33,500 to 29,200.
  • Skill shortages have been easing in the state, particularly in recent times. Over the last four years, the number of applicants per vacancy has almost tripled across all occupations.
  • WA has one of the highest work-related training rates with around one in three employees participating in work-related training in the year to 2013.

Equality of labour market opportunity

Gender

  • There are considerable gender gaps in employment rates in WA, although they have been narrowing over time.
  • The current weekly earnings of men and women in WA were $1,778 and $1,338 respectively.
  • The resultant gender earnings gap of 25 per cent was the highest among the Australian states.
  • However, more of the earnings gap in WA can be explained by differences in the characteristics of men and women compared with the rest of Australia.
  • New research findings presented in this report show that over 58 per cent of the observed gender gap can be accounted for by differences in the characteristics of men and women in WA, with 38 per cent of the wage gap explained by labour market experience differences alone.

Indigenous

  • Existing population projections are for growth in the Indigenous population to continue to outstrip wider population growth, due primarily to continued higher fertility rates.
  • Among the working-age population (aged 15 and over), only 49.7 per cent of Indigenous West Australians were participating in the labour force in 2011, compared to 69.0 per cent for the remainder of the population.
  • The persistence, if not accentuation, of labour market disadvantage facing Indigenous West Australians is concerning given that the recent decades have provided almost the ideal circumstances under which to tackle these barriers.

Work, wellbeing and happiness

  • Economic success may have come at the expense of social cohesion, for West Australians are significantly less satisfied with their feeling of safety, being part of the local community, and the neighbourhood in which they live when compared with the rest of Australia.
  • Aggregate economic success and rising incomes cannot be relied upon alone to promote wellbeing.  Good policy is required to ensure those outcomes translate into improvements in people’s lives.
  • Maintaining low unemployment should be a priority for labour market policy when it comes to promoting wellbeing.
  • West Australians who work part-time are more satisfied with their jobs overall.
  • It is not so much a set number of hours or working arrangement that is important, such as part-time versus full-time status.  What matters for wellbeing is how those arrangements match workers’ individual preferences.
  • In 2012, one-quarter of workers in WA were ‘overworked’ in the sense that they would prefer to work fewer hours than they currently do, although this proportion has been trending downward since 2001.
  • One half of working parents in WA reported feeling ‘often’ or ‘almost always’ pressed for time.

Workforce and Skills: Western Australian Labour markets in transition provides a thorough examination of current patterns and trends of the West Australian workforce and what future industry and workforce scenarios may look like as the economy transitions. It also examines conditions needed to maximise WA’s workforce potential into the future.

“The report serves as a key reference piece and evidence base from which to inform and build policy,” Professor Duncan said.