Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 584

A significant shift in the jobs market

Job figures for September 2024 reveal that nearly all the additional hours worked over the past year have been in the non-market sector. Much of this has come from the ‘care economy’ - the fastest growing sector over the past decade, and the most common destination for workers switching industries. This has accelerated a long-standing trend in the Australian economy: its transition from goods production—particularly in agriculture and manufacturing—towards services - such as education, tourism, hospitality, and retail.

An ageing population that demands more healthcare, boosts to wages for aged care and child care workers, potential new investments in cheaper child care, and the continued growth of the National Disability Insurance Scheme (NDIS) underpin projections that this shift will continue.

These projections of an ever-growing care economy often do not consider how the economy’s supply-side adjusts to accommodate it. Looking at employment shifts between sectors over the decade to 2022 can help unpack this.

The shift towards the care economy is stark in these terms.

You can also see the clear trend away from employment in goods sectors. In fact, employment growth has been negative or small in most major goods industries – meaning they are falling as a share of the workforce. Many workers are leaving these sectors or retiring out of them. The one exception is construction, which has seen robust employment growth and stayed similar as a share of employment. Construction is an anomaly reflecting the high demand for homes and infrastructure running up against declining productivity, possibly in part due to zoning restrictions.

The care economy may look like a participant in the march towards a service-based economy. But the growth of the care economy differs from other service sectors in three key ways, with important economic implications.

First, while other service sectors have grown largely through new migrants and drawing workers from non-employment, the care economy has grown largely from workers switching in from work in other industries in the year prior. New research from e61 shows that over half of those switching into the care economy came from two major ‘churn industries’ – Accommodation & Food and Retail. Australians often use those industries as the first rung on the job ladder and the care economy has been capturing many of the subsequent steps.

Other significant contributors include Administration & Support, and Public Administration & Safety. This shift has caused market services' share of employment to decline for the first time in decades, dropping from 53% pre-pandemic to below 51% today.

Second, the care economy has seen almost no measured productivity growth over the past decade, while most other service industries have shown solid gains. Although productivity growth is difficult to measure in the care economy (and appears to be underestimated in healthcare), a significant expansion in labour—reliably measured—has been essential to drive the growth of the care economy.

By contrast, other service industries have generally grown through productivity growth alone. This is true both in service industries which use technology heavily (such as IT and professional services – with finance being an exception) and those which are more people-driven. Looking at the industries supplying care economy workers: over the past decade, retail labour productivity is up 13%, accommodation & food by 18%, and administrative services by 23%.

However, this trend doesn't hold in the care economy, or for that matter, its companion “non-market” industry, education and training, where output has increased only by adding more workers, given productivity has been stagnant. The longstanding fear that 'services will slow productivity growth' is not being realised. Service sectors are not a monolith. Some service sectors – particularly in the `non-market’ sector - are experiencing weak productivity growth, but not all.

Third, policymakers may have to reconceptualise what productivity growth looks like on the ground. Productivity growth in market services over the past decade can be easy to visualise. Self-checkouts and restaurant QR codes, though sometimes inconvenient, reflect investments in labour-saving technology. Online retail can also improve efficiency in warehousing and inventory management. These changes – potentially also a response to a tight labour market and competition for workers from the care economy, where relative wages have risen materially over the past decade – mean firms can grow output with less labour use.

In contrast, imagining labour-saving productivity improvements in childcare or aged care is more difficult. In these sectors, preserving quality may be more important. It’s difficult to imagine a "self-checkout" equivalent for aged care. Instead, productivity growth might come from improving service quality without increasing worker numbers, as the Productivity Commission found in healthcare, rather than cutting labour while maintaining the same quality.

The expansion of the care economy represents the most profound structural change since the mining boom. It also offers the chance to ensure high-quality care for the most vulnerable—something a prosperous country like Australia can and should achieve. However, this brings fresh challenges, particularly in terms of labour demands and the impact on productivity growth both within the sector, and beyond.

 

Matthew Maltman is a Research Economist at the e61 institute, and previously worked at the Australian Productivity Commission.

 

RELATED ARTICLES

Why is Philip Lowe worried about productivity?

Jobs Summit keynote: the changing Australian economy

Are older Australians re-assessing the job market?

banner

Most viewed in recent weeks

Vale Graham Hand

It’s with heavy hearts that we announce Firstlinks’ co-founder and former Managing Editor, Graham Hand, has died aged 66. Graham was a legendary figure in the finance industry and here are three tributes to him.

The nuts and bolts of family trusts

There are well over 800,000 family trusts in Australia, controlling more than $3 trillion of assets. Here's a guide on whether a family trust may have a place in your individual investment strategy.

Welcome to Firstlinks Edition 583 with weekend update

Investing guru Howard Marks says he had two epiphanies while visiting Australia recently: the two major asset classes aren’t what you think they are, and one key decision matters above all else when building portfolios.

  • 24 October 2024

Warren Buffett is preparing for a bear market. Should you?

Berkshire Hathaway’s third quarter earnings update reveals Buffett is selling stocks and building record cash reserves. Here’s a look at his track record in calling market tops and whether you should follow his lead and dial down risk.

Preserving wealth through generations is hard

How have so many wealthy families through history managed to squander their fortunes? This looks at the lessons from these families and offers several solutions to making and keeping money over the long-term.

A big win for bank customers against scammers

A recent ruling from The Australian Financial Complaints Authority may herald a new era for financial scams. For the first time, a bank is being forced to reimburse a customer for the amount they were scammed.

Latest Updates

Shares

Looking beyond banks for dividend income

The Big Four banks have had an extraordinary run and it’s left income investors with a conundrum: to stick with them even though they now offer relatively low dividend yields and limited growth prospects or to look elsewhere.

Exchange traded products

AFIC on its record discount, passive investing and pricey stocks

A triple headwind has seen Australia's biggest LIC swing to a 10% discount and scuppered its relative performance. Management was bullish in an interview with Firstlinks, but is the discount ever likely to close?

Superannuation

Hidden fees are a super problem

Most Australians don’t realise they are being charged up to six different types of fees on their superannuation. These fees can be opaque and hard to compare across different funds and investment options.

Shares

ASX large cap outlook for 2025

Economic growth in Australia looks to have bottomed, which means it makes sense to selectively add to cyclical exposures on the ASX in addition to key thematics like decarbonisation and technological change.

Property

Taking advantage of the property cycle

Understanding the property cycle can be a useful tool to make informed decisions and stay focused on long-term goals. This looks at where we are in the commercial property cycle and the potential opportunities for investors.

Investment strategies

Is this bedrock of financial theory a mirage?

The concept of an 'equity risk premium' has driven asset allocation decisions for decades. A revamped study suggests it was a relatively short-lived phenomenon rather than the mainstay many thought.

Vale Graham Hand

It’s with heavy hearts that we announce Firstlinks’ co-founder and former Managing Editor, Graham Hand, has died aged 66. Graham was a legendary figure in the finance industry and here are three tributes to him.

Sponsors

Alliances

© 2024 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.