Random Analytics: Peak Employment (Part I): Australia

by Shane Granger

One of the great aspects of research is that it often takes you in unexpected directions.

Over the past two months and previously in 2010 I conducted a series of hands-on research assignments in the area of contingent staffing. Although my current contingent research assignment has not completed (it has at least another two months to go) I started to delve into the macro level data and have made some interesting discoveries.

It has also got me thinking seriously about the following question which was not related to contingent staffing analysis.

When will Australia reach ‘Peak Jobs’?

First of all, let me explain what ‘Peak Jobs’ means.

In simple terms (via the blogosphere) ‘Peak Jobs’ is the idea that technology is replacing jobs faster than it’s creating them. For those more technically inclined it can also be attributed to the finalisation of the increased growth in average output (and income) per labour unit due to technological change since the 1820’s as put forward by Robert Solow. For another take on this subject the ABC’s online business reporter Michael Janda recently did a piece on Australia’s peak participation rate (it’s an excellent piece, however I am not a big fan of participation rate analytics, as it’s a data input which hides many sins but more on that in later articles).

Unless there is a major catastrophe and given that Australia’s population will increase significantly toward 2050 I am not going to go on the record today and say that Australia has reached the upper limit of its ability to employ more people. I will go on the record and say that within the next decade Australia will reach that number.

To commence the first in potentially many blogs about this subject here are some analytics.

1 - FTE & PTE Employment 1978-2013

Figure 1: Australian Full-Time and Part-Time Employment (Feb 1978 – Jan 2013). Source: ABS.

In the first graph I wanted to highlight the almost identical increase in contingent (part-time) employment over the past 25-years. Since February 1978 full-time employment has increased by 59.2% (3.016-million) while part-time employment increased by a massive 276.4% (2.520-million).

2 - FTE & PTE Employment Increases 1978-2013

Figure 2: Increases in Australian Full-Time and Part-Time Employment (Feb 1978 – Jan 2013). Source: ABS.

To emphasise the almost identical nature of full and part-time employment creation here is a look at the increases in both employment types since 1978. Notice the big drops in full-time employment from 1982/1983 and 1990/1991 (the last recessionary periods in Australian history) and the steady, almost linear growth of part-time employment during the past two and a half decades.

3 - Employment vs. Working Age Labour Force 1978-2013

Figure 3: Overall Employment versus Working Age Labour Force (Feb 1978 – Jan 2013). Source: ABS.

Using a similar representation I wanted to finalise the graphs with a look at the differential between total employment creation and the working age labour force. Australia has created an additional 5.536-million new full and part-time jobs, from 6.010-million in February 1978 to a record 11.546.7-million jobs as of January 2013. Contrary to populist belief the working age population of Australia has steadily increased since 1978 (due to a combination of higher than replacement fertility rates plus immigration), effectively outpacing employment creation by 2,400,000.

Two quick points in relation to the above. Firstly, to avoid wonkish angst it should be noted that my Working Age Labour Force number in this graphic has been worked out utilising the ABS participation rate data rather than my preferred method of using actual population statistics (you can see an example of this in my 2012 Abbott’s Promise piece). Secondly, although not included in the above graph from 2018 the Australian labour force grows by approximately 475,000 as the working age officially increases to 67 (as at 2011 there were 507,252 people between the age of 59 and 60 who will be 66 and 67 in 2018 and I’ve factored in a high mortality rate of approx. 6%).

In conclusion the start of my ‘Peak Jobs’ discussion is focussed on the increasing use of contingent labour in the Australian economy and a widening gap between growth in employment and the working age population. As shown in the data there is an undeniable trend over the past two and a half decades in terms to utilise part-time labour solutions rather than traditional full-time employment. In fact in 1978 the ratio of PTE to FTE jobs was 1:5.6 but this has decreased to just 1:2.4. It would only take another recessionary period to decrease this ratio further as demonstrated in the loss of FTE during previous downturns.

With an increasing working age population and a growing gap between jobs available the future is looking anything but certain, especially with the rise of labour augmentation and robotics replacing jobs quicker than they can be created.

In part two of this series I’ll be looking at similar data from comparable countries to see if the shift to part-time employment and potentially peak employment is a global phenomena.

Update 1 (25/02/2013): Initially this blog was going to be a series about Australian Peak Employment issues. However, given some excellent feedback and interest I’ve decided to look at other countries to see if this is a global issue (which I believe it is). For consistency, I have amended the original blog name from Australian Peak Employment (Part I) to Peak Employment (Part I): Australia.