Tasmania’s ageing population creates an abundance of opportunity for our youth.  The ability to transform that opportunity into reality however will require significant investment – including foresight, planning and commitment.

Population ageing is more often than not viewed negatively.  This is an over-reaction.  Population ageing presents challenges resulting from change.  Just like any change, government and society need to adapt and innovate to capture the opportunities attached to that change. 

The problem with population ageing is not that there are too many older people but that there are not enough young people to 1) provide the products and services required by a changing demographic and 2) pay tax to fund the increasing demand for publicly funded services (e.g. health and aged care and pension entitlements).

The below figure illustrates the imminent loss of workers from the Tasmanian labour force due to retirement (or exit from the workforce), the immediate replacement labour (those aged say 25 to 45) and the imminent labour market entrants - our youth.  Each of these cohorts are significantly smaller in size than the cohort exiting the workforce. 

As a State we need to invest in each of these successive cohorts to ensure the opportunity for labour force participation, skill utilisation and productivity is maximised.  

Over the next 15 years in Tasmania over 100,000 workers will exit the workforce (based on the average age of retirement over the past five years - 61.5 years - as identified by the ABS in their Retirement and Retirement Intentions Survey).  This exodus creates employment opportunities for our youth.

Some of the jobs of these older workers may need to be replaced, some may not, but an older population will also transform the consumer market and require new jobs to be created. 

In Tasmania, we do not have enough people in the younger population (aged under 45) to replace these older workers, highlighting the critical importance of ensuring we shape and nurture our youth to take advantage of these opportunities. The ratio of labour market entrants to labour market exits in Tasmania is less than one, and has been since 2011.  This means that for every person aged between 55 and 64 (assumed labour market exit age) there is less than one person aged 15 to 24 (assumed labour market entry age). This ratio is projected to continue. In addition, this measure of future labour supply does not consider the complement of education, training, skills and experience which will be essential from a potential working population.  

This is where smart, timely and informed investment in education, training and skill development is required.  As a State, we have a window of opportunity to to get it right.  

There are a number of things that need to happen to capture this opportunity:

1) Recognise that ageing workforces will result in a transformation of the workforce from one which is older with lower levels of educational attainment but life long experience to a younger workforce with high(er) levels of educational attainment but lower levels of applied work experience.  
2) Industry, regions and organisations need to undertake extensive workforce planning to identify future demand, profile their workforce (by age, occupation and exit intentions) and identify critical job roles which have the potential to impact on growth and training capacity and then invest accordingly. 
3) Acknowledge that wealth creating industries may not necessarily be job creating industries. As such it is important not to ignore the domestic economy and the demand within the population.  There is already a deficit in the provision of care with an ageing population and the roll out of the NDIS will extend this deficit.  Care related jobs are real jobs, with real skills and real wages.  
4) Ensure investment in education and training is informed by demand - i.e. industry led with an employment outcome. This will increase efficiency in education and training investment and reduce the mismatch between educational attainment and job creation.
5) Recognise that social services, equity policy and 'second chance learners' also deserve an employment outcome opportunity.

Tasmania's ageing population is creating employment opportunities - both in replacement labour for ageing workforces and changing demographic demand - but the ability to capture this opportunity is dependent upon ensuring that investment in education and training matches changing employment demand.  Our youth are not round pegs who will fit into round holes - they need to be appropriately shaped.  
 

We need only look back less than ten years to know that Tasmania can have a strong economy, low unemployment (including low levels of underemployment and long term unemployment) and high levels of labour force participation for men and women across all ages. 

From June 2008 to September 2008, Tasmania's unemployment rate was 4.1 per cent and the labour force participation rate was above 62 percentage points for seven consecutive months.  The total number of people employed peaked at 241,964 in October 2008 (its now 235,965).  

In the five year period to December 2008, employment grew by 29,672 people, or 14 per cent.  During this same time, the population grew by 22,630 persons (natural increase 12,556, net overseas migration 7,105 and net interstate migration 2,969).  Employment growing at a greater pace than population growth is an ideal situation for both the economy and society. 

However, we know not long after that the GFC hit and the strength of the global economy deteriorated.  Five years on, there are signs of potential recovery.  The unemployment rate is now 7.5 per cent and participation is 60.9 percentage points. Employment is lower than its high in 2008 by 5,999 people yet at the same time, the population grew by over 12,000 people.

A number of factors conspired positively for Tasmania specifically to bring about this growth in the mid 2000s. The introduction of low cost airlines and increased access to the state, relative housing affordability, increased use of the internet in the home and the introduction of real estate websites, the first of the baby boomers turning 55 and able to access their superannuation entitlements and, most significantly, the introduction of the redistribution of GST to the states. Plus the state was coming off a very low base.  Growth was fast and outpaced the nation at times. 

In terms of the states population, during the five year period 2003 to 2008 Tasmania experienced positive net interstate migration in three of those years.  In the past 17 years, Tasmania has only experienced positive net interstate migration six times (the other three were in 2002, 2009 and 2010).  Importantly, however, is that during these positive periods of net interstate migration, Tasmania experienced net interstate migration losses for the ages 15 to 29.  So while Tasmania experienced population growth, this growth was contributing to the state ageing at a faster rate which will ultimately negatively impact on the state's employment to population ratio. 

While Tasmania's largest employing sectors are health care and social assistance, retail trade and accommodation and food services, the greatest employment growth experienced in the five year period February 2004 to February 2009 was in the construction, retail and professional, scientific and technical services sectors. During this time, employment contracted in manufacturing, information media and telecommunications and other services. 

Since the GFC, the greatest employment growth has occurred in health care and social services, education and training and other services (which returned to 2004 levels).  The greatest contraction occurred in construction, administration and support services, retail and manufacturing. 

While employment has contracted since the GFC, the population has continued to grow, albeit at a slower rate.  In the five years to September 2013, Tasmania's population grew by 12, 335 people (natural increase 9,845, net overseas migration 6,645 and net interstate migration minus 4,155).  As such, the employment to population ratio deteriorated significantly, placing greater pressure on both the economy and society, increasing the proportion of the population who are dependent on support from a smaller proportion of working people. 

In terms of what this means for Tasmania's future, the state is in a similar situation as it was in the early 2000s.  We are coming off another very low base, we are experiencing relative housing affordability, we have a recognised lifestyle and climate advantage, the perception of the state is changing largely thanks to the MONA effect (however our reputation as a mendicant state prevails also) and, as superannuation savings are now exceeding pre-GFC levels, more baby boomers are confident in retiring.  

Access to the island is likely to increase with an extension of the Hobart Airport runway and a re-prioritisation to passenger services by the TT-Line. The dropping of headworks charges, the introduction of a "Regulation Reduction Co-ordinator" and a renewed focus on streamlining the planning scheme/s will likely reinvigorate the construction industry.  However, construction is a cyclical sector and will only create employment in the short term if not supported by efforts to achieve long term, sustained employment growth, through structural change and increased confidence in the private sector.  The introduction of an Office of the Co-ordinator General to attract and facilitate investment in the state will assist this process, however its effectiveness will be dependent upon an appropriate budget allocation to proactively encourage investment in Tasmania.  Also working in Tasmania's favour is an increasing global demand for agribusiness products and services, as recognised and supported by the current and previous Governments as a significant growth opportunity for the state.

Future employment growth will come from sectors experiencing organic growth (e.g. health, aged care, community care and child care largely resulting from an ageing population, the NDIS, and increasing participation in the labour market by mothers) and sectors receiving strategic support from the government (e.g. agribusiness). Increased demand for employment will also come from an increasing number of people retiring due to the ageing of the workforce.  Some sectors and occupations are much older than others (e.g. health, education and farming). As the economy returns to sustained positive performance, employment growth will occur in consequential sectors (e.g. retail, hospitality, real estate and financial services).

Challenges for Tasmania's future economic prospects include fiscal constraints to proactively pursue investment opportunities, the perceived and actual risk of doing business in Tasmania, freight challenges and the potential acceleration of population ageing as a result of short term population growth (resulting in further deterioration of the employment to population ratio).  

The ability of the government to provide for the Tasmanian population as it inevitably ages will be dependent on its ability to reverse the current downward trend in the employment to population ratio as well as maintain, or preferably increase, over the longer term.   

Note: employment figures are total and are the sum of full and part time employment and in trend terms.  Source ABS.

Last week at the CEDA Economic and Political Outlook for Tasmania Ivan Colhoun, Chief Economist at the ANZ Bank, suggested that the unemployment rate is the cheat's guide to providing an indicator of economic performance.  Given slight improvements in Tasmania's unemployment rate in recent months I thought I would revisit an article I wrote in October 2011 for tasmanianjobs.com at a time when there were also "encouraging signs that our economy is on the road to recovery".  My article concluded then that the unemployment rate and the labour force participation rate demonstrated the potential for a downward spiral to continue.  My recommendations then was that we were at a point in time in the economy that we needed stability and direction to enable an increase in confidence (see the October 2011 article here).

So, this morning I have updated the data from that article, and unfortunately I was right - the downward spiral of increasing unemployment rates and decreasing labour force participation rates continued.  See the below chart.

I recap how to interpret this chart.  The gap between the two lines can be interpreted to represent the strength and confidence in the economy at a point in time.  The greater the distance in the gap between the two lines, the stronger the economy as more people are confident of participating in the labour market and less people are unemployed.  When the lines move together in an upward trajectory, labour force participation and unemployment are both increasing, indicating that there is confidence in gaining employment but there is a short time lapse between entering the labour market and securing employment (Point A). This pattern tends to be a very short lived one as employment catches up to supply.  When the lines move in different directions and the labour force participation rate is increasing and unemployment decreasing (Point B) it indicates that the supply of labour (new entrants to the labour market) can not keep up with the demand for labour.  Conversely, when the labour force participation rate is decreasing and the unemployment rate is increasing (Point C), there is a lack of confidence, people are losing their jobs and joining the unemployed status.  This may result in the unemployed eventually becoming despondent and exiting the labour market all together.  This occurs when both lines move in a downward trajectory (Point D) - that is labour force participation and unemployment are both decreasing.  This could be for a number of reasons; either a lack of confidence and growing despondency in the ability to gain employment or a factor of the age of our population. 

So, where is Tasmania now? We are currently just past Point D, experiencing a stablisation of both the labour force participation rate and the unemployment rate - but both are yet to make an upward movement (as in Point A) - the sign of momentum in a recovering economy.  We are in much the same place as we were in October 2011, however the economy didn't recover then as it was anticipated to do. 

My advice remains the same as it was then - a need for stability and direction to build confidence.  Don't take the foot off the pedal and don't count the chickens before they hatch. 

Understandably, youth unemployment has been the topic du jour this week.  Many have offered insights into causes and solutions, based either on supply or demand side arguments.  

On the supply side, causes are identified as lack of appropriately skilled and experienced youth who are work ready with an acceptable work ethic.  On the demand side,  there are few jobs available in Tasmania for our youth.  From the perspective of solutions, on the supply side is to increase investment in educational attainment and on the demand side, create confidence in the economy and thus jobs.

While from a helicopter view, these explainers for the causes and solutions of high levels of youth unemployment are well supported, greater understanding of the interaction between education and its influence on employment outcomes is required.  

Critically there is a misconception about who of our youth is unemployed.  Assumptions are that it is those who have low levels of educational attainment, particularly literacy and numeracy.  While there is a proportion of our youth who do fit this description, there are many recent graduates (and not quite complete apprentices) who fill the unemployment queue, particularly in Tasmania.  This is primarily due to the mismatch between educational qualifications and employment opportunities, including whether or not educational qualifications prepare an individual for the workplace.  Many argue that tertiary education does not.  This leads to our youth being overqualified and under-experienced.  Eventually these overqualified people leave the state, adding to our population challenges.

Even tertiary educated individuals require on-the-job training to get them in a position where they make a positive, productive contribution to the business - this period of training is an investment (cost) to the employer and can take many years to achieve (around three years for most occupations).  In order for an employer to take on either an apprentice/trainee or a recent graduate they need confidence in the (long term) market to achieve a return on this investment. In Tasmania three years is a long time to invest getting an employee to productive stage.  It also means freeing up resources (skilled people, time and money) to train individuals, meaning those resourced are also not fully productive.  

So what do we do?  Take a step back and reassess - focus on three areas of responsibility: education, integration between education and employment and employers. 

1) The foundations of literacy and numeracy are critical.  Unless these levels meet national standards, employment will be difficult for individuals (at any time of their life).  Our youth needs to want to be educated.  They need to be surrounded by jobs to which they aspire to do, jobs which require completion of year 12 and further education. High school must go to year 12.  Subject choice needs to be reduced.  The foundations of education; literacy, numeracy, problem solving, critical thinking, expression and creativity are the priority.  A large subject choice narrows students abilities and choices in the future.  In an economy always changing and with occupations no longer guaranteed to exist in 10 years time, our youth need solid foundation skills and abilities. This will widen their opportunities in the future. 

2) There is complete miscommunication between industry and education providers with regard to skills and abilities required in the workplace, partially to blame is the way in which education is funded.  In any case, both industry and education providers have a responsibility to each other, to prospective students and employees about expectations and outcomes.  

Efforts to improve educational attainment are evident, however, the recently signed MoU between TasTAFE and UTAS includes increasing the level of educational attainment and the number of completions, however, it does not include securing employment by graduates in its scope.  There is little point the state investing in the education and skill development of Tasmanian-based students if they can not be retained in the state (essentially we are investing in the future prosperity of another state).  Furthermore, while UTAS has introduced a formal internship process for international students with the objective of retaining them in the state upon completion, aimed at completing the link between education and employment, the same internship process is not available for Tasmanian students.  

3) Employers also need to adapt and compromise.  This is particularly evident in the type of entry level jobs offered to our youth.  While our teaching styles have evolved over time to encourage independent thinking, using initiative and problem solving, entry level jobs have not adapted to these new skills and abilities offered by our youth (I wrote more about this here).  Accusations of youth being transient and unloyal are the direct result of lack of job security offered in employment.  While businesses mitigate against future risks by offering less than permanent employment, youth also mitigates their risks by continuing to pursue employment opportunities which will provide security (or increased experience).  

A final, important point, is that our youth are our future, and always will be.

Solutions to the challenges of population ageing forget about the opportunities provided by our youth and future generations.  As we enter a period of time in which there will be more labour market exits (due to the large cohort of baby boomers reaching retirement age) than labour market entrants, maximising the utilisation of the available supply of labour is paramount.  In Australia, the focus is on increasing the labour force participation rate of women and older ages (as well as productivity).  This solution does not consider the contribution of youth at all.
 
In fact, since the early 2000s Australia, and to a lesser extent, Tasmania, has been experiencing a mini-baby boom.  Critically, this cohort of children will enter the labour market as the last of the baby boomer reach retirement age (around 2023).  This generation is what my colleagues, Brendan Churchill and Natalie Jackson, and I call the Thank God You're Here Generation (Gen TGYH).  Gen TGYH will be the replacement labour that we are so desperately seeking.  However, they are not round pegs who will fit in round holes (left vacant by baby boomers).  Gen TGYH need to be shaped and nurtured to meet our future needs.

It is the responsibility of parents, educators and employers to ensure that Gen TGYH and subsequent generations have strong foundations on which to build knowledge, skills, flexibility and adaptability as well as build a career.   

Much emphasis is placed on the creation of full time jobs in Tasmania, but the reality is that the growth in employment since data collection began in 1978 has been in part time employment (or less than full time - 35 hours per week).

In the 15 years since 1998, part time employment in Tasmania has increased by 37.8 per cent, compared with 8.5 per cent for full time employment (overall jobs growth of 15.3 per cent).

There are a number of reasons explaining this increase in part time employment.  First, the considerable increase in female labour force participation rates (increased from 39.9 percentage points in February 1978 to 55 percentage points in December 2013).  Compared with men, a higher proportion of women are employed on a less than full time basis, particularly those who combine paid work with the role of raising a family.  Second, structural change in Tasmania's industry sector base combined with an ageing population, has resulted in growth in services sectors such as health and community care and education.  These sectors are traditionally feminised workplaces and thus have a higher prevalence of part time employment.  Third, recent efforts in job creation have focused on industry sectors which have a higher proportion of employment in less than full time work such as tourism and retail. 

Important to recognise however, is that part time employment is not necessarily a bad thing.  In fact, the availability of part time and flexible work has the potential to increase labour force participation for both men and women in all age groups. 

Job creation, whether it be full or part time work, is of critical importance for Tasmania, economically and socially.  However, as evident in the above chart, employment growth in the state has been volatile at best.  Since the GFC in 2009 which resulted in a contraction of employment of nearly 4 per cent, the only period of growth in employment occurred in 2010 and was supported by Federal Government economic stimulus packages such as the building the education revolution and nation building infrastructure.  Since then, employment in Tasmania has continued to contract. 

Importantly, future job creation is likely to continue to be dominated by less than full time employment, influenced by increasing female labour force participation, maintaining labour force attachment of older workers through policy strategies such as transitioning to retirement and the increasing trend of men working part time as they 'share the care' of raising families with their partners. 

As this trend continues, the number of jobs created will become less important, and the productivity of those employed will become more important.  Productivity can be measured in a number of ways, but when assessing from an employment to population perspective, labour underutilisation provides a significant insight into the true state of the employment market.  Labour underutilisation is the sum of those unemployed and those underemployed (that is those who have a job but are working less hours than they would like to and are able to). 

So while part time employment is desirable for many people and can facilitate increases in labour force participation, if people are not working as many hours as they would like to, they are not being utilised effectively.  As is evident in the below chart, labour underutilisation is significant in Tasmania and trending upwards with over 20 per cent of women and 17 per cent of men underutilised in the labour market.  Underemployment masks the true nature of the employment market in Tasmania.

Any analysis of job creation and employment growth in Tasmania and its contribution to the economy must also consider labour utilisation. 

The short answer, in recent times, very little.

The below chart shows the labour force participation rate for those of prime working age (15 to 64 years) and the working age population (all those aged over 15).  The difference between the two rates can be described as the ageing effect.

When the difference between the two rates increases, this can be explained by an increasing ageing population.  From around 2010, the gap between the two rates started to widen, co-inciding with the time that the first of the Baby Boomers starting reaching retirement age, indicative of an ageing effect on the working age population labour force participation rate.

However, since around 2012, both the labour force participation rates of the prime working age population and the working age population have declined considerably which can not be explained by an ageing effect.  The decline suggests that the primary reason for the most recent drop in the labour force participation rates is due to cyclical factors such as poor economic performance and people losing confidence in finding employment - therefore withdrawing from the labour force. 

Additional explainers for the ageing effect include a preference of employers to employ younger workers, particularly in tough economic times, as well as an increase in confidence of older people to retire given that superannuation performance has returned to pre-GFC levels. 

Regardless, while the gap between the two labour force participation rates has only increased marginally in recent times, it can be expected to continue, and even increase, given that there are now more people of labour market exit age than entry age in Tasmania. When a return to positive economic performance occurs, it is likely that Tasmania's labour force participation rates will remain relatively low, compared with other states and territories) giving the accelerated rate of ageing in the state. 

Much debate exists around why youth unemployment is the highest of all age groups in Australia, with employers complaining that Gen Y has no work ethic, is disloyal,  arrogant, has unrealistic expectations and want it all.  General consensus is that society and educational institutions are failing to prepare 'work-ready' future generations.

The reality is, however, that successive generations are the product of the environment they were born into and spend their formative years.  This is particularly evident as the value of education becomes increasingly important. As the importance of education increases so too does the pressure on education providers to produce a quality product, so much so that teaching and learning practices are continually evolving to meet these demands.  Students are now encouraged and nurtured to develop ways of creative and independent thinking, problem solving and critical analysis.  Even before children start formal education, playgroups and childcare centres are fostering a culture of 'play-based learning' encouraging imaginative and creative play, utilising both the left and right sides of their brain. Our youth is experiencing a contemporary learning environment which encourages challenging the status quo - questioning the who, what, where, why and how. 

However, our workplaces have not evolved in the same way.  Entry level jobs prescribe how to do a job, where and when to do it and why.  The workplace experience is a total discord to the empowering educational experience Gen Y are provided to foster innovative thinking.  Organisations have not adapted to capture the new skills and thought processes which accompany Gen Y (and future generations) into the workplace. Job roles have remained stagnant and thwart any potential productivity gains attached to the skills and abilities of younger generations (which is critical in replacing a large, ageing workforce). Critically, Gen Y are not round pegs to fit into round holes left vacant by obsolete jobs or retired baby boomers.  While jobs have evolved as a response to the demands of new technologies and related opportunities; workplaces, structures and job descriptions have not.  Maintaining the historic trend and status quo attached to job design and workplace hierarchies inhibits the potential attached to the future supply of labour and their associated educational asset.  Evolution needs to occur concurrently - education, jobs, job design, workplace structure and culture.

While the education system appears to be preparing our future generations for the changing needs of an economy transitioning from an industrial-based economy to a knowledge, service based one, our workplaces appears to be failing to keep pace with the opportunities attached to our successive generations. The focus should be on achieving both contemporary educational outcomes and contemporary, productive workplaces rather than retrofitting Gen Y to out-dated workplace practices. 

Last week I attended the cepar International Conference on Population Ageing and following a long day of presentations and networking a group of us decided upon an impromptu dinner out nearby. Hailing a cab as you do, I jumped in the front seat as I find people interesting and enjoy speaking with taxi drivers. I didn't need to initiate conversation as the driver asked me what had brought me to be at the Uniiversity of NSW. Explaining I was attending a conference he asked me what I do. Keeping it simple I replied that I am a researcher in population ageing. He then asked if I was doing a PhD. Mildly taken aback I said yes, that I am, and I am researching the utilisation of skills in the labour market in response to the challenges of population ageing and the proposed 3Ps solution. He then asked if I asked people why they wanted to work. I advised him that I am a quantitative researcher and so do not interview people. He told me that was my mistake and proceeded to tell me his story. An Eastern European immigrant in his sixties with three degrees, one of which in engineering, from the very university at which I was attending the conference. He has never been able to get a job in Australia to match one of his qualifications and so has to drive taxis to make a living. By this time we had arrived at the restaurant we had booked, and all I could do was apologise to this highly articulate, obviously educated man, and wish him all the best. I wish I had been able to ask him more (qualitative) questions about why he wanted to work and also why he thought he couldn't get work in Australia, but instead I headed off for a night of networking with other population ageing researchers.

Often we get wound up in the technicalities and policies surrounding population ageing and completely fail to consider the human element. A lesson to be learned.

Initial reactions to Tony Abbott's parental leave scheme suggest that (big) business will be opposed to the levy placed on them to pay for it.  Here is a quick snapshot of why it would be good for business, as well as the economy and society in general.

• The policy will create a level playing field for all.  There is growing evidence that women are choosing their employers based on the parental leave entitlements and this occurs a number of years prior to child-bearing intentions. 
  
• Costs may decrease or increase for some organisations and industries, but will be constant and can appropriately be budgeted for. 

• Support working mothers provide at least six months of critical infant care without the pressure to return to work
  
• Female labour force participation is likely to increase, and women will return to the workforce sooner after having children
• Protection for women from loss of income upon having children, employment security, superannuation continuity and engagement with the workforce provides greater equity for women as they age
• Women are over half the population and have greater levels of educational attainment than men, any loss of their contribution to the workforce is a cost to business
• Disincentives to employ or promote young women will be removed
• May increase incentives for some industries to improve their gender balance
  
• As population ageing increases and the supply of labour diminishes further, women will become increasingly important participants in the labour market, increasing the competition for them.
  
• Women will have greater opportunity to obtain senior positions and increase board representation (due to continuation in the workforce)
  
• The fertility rate will likely stabilise or slightly increase, providing insurance for a future supply of labour 

The empirical studies into the impact of both pronatalist policies and paid parental leave schemes in Australia suggest there is little capability of policy intervention influencing the increase of fertility rates, supporting the concept that low fertility and low female labour force participation is the result of observed market failure.  That is, it is society’s reliance on the tax transfer system which has shifted the economic benefit of having children from the private to the social domain, meaning that those who choose not to have children still have equal rights to the intergenerational transfers from other people’s future tax-paying children.  Essentially, those who have children create the future workforce and tax base, largely through their own private sacrifices.  Therefore, until greater value is placed on childbearing and rearing by society, and the opportunity cost of having children is significantly reduced, it is unlikely that fertility rates or labour force participation rates by women will increase further. 

Government and business believe that a solution to population ageing, stagnating economic growth and skill shortages is increasing immigration.  In fact, 80 per cent of the population growth projected in the 2010 Intergenerational Report will come from immigration and their yet to be born, highlighting the reliance of government on population growth to stimulate demand.  Opponents to population growth raise concerns to the carrying capacity of the nation which extend to environmental and social consequences.  However, there is another concern, that is, the economic opportunity cost of the current, and projected, high levels of immigration redirecting public monies to city-building infrastructure rather than productivity-enhancing initiatives. 

While immigrants on employment visas (as opposed to humanitarian and family visas) tend to be younger and more educated that the domestic population, there is little evidence that they are meeting the needs of employers in terms of skill shortages in regional and resource boom areas.  Most migrants flock to the metropolitan areas of Sydney and Melbourne, and given the conditions of the visa preventing access to welfare benefits in the first two years of arrival, migrants need to accept any employment offer, often crowding out domestic workers which at times also results in a dampening effect on wages, particularly in a competitive employment market as we are now experiencing.   It is estimated that migration contributes around 100,000 migrants to the workforce every year; however in 2012 only 115,000 jobs were created in Australia.  Not only are migrants not meeting skills shortage requirements, but their mass contribution to population growth not only puts pressure on existing infrastructure and pushes up costs, it creates further skill shortages in non-critical jobs to meet the demands of an increasing population, ‘justifying’ further high levels of immigration.  There is also evidence that the current high immigration and settlement in metropolitan areas is influencing domestic migration and the sea and tree change phenomena, creating similar infrastructure bottlenecks in regional and rural areas as being experienced in cities.  To cater for this increasing demand, governments (federal, state and local) are required to provide the necessary infrastructure and services to support the population (as expected from a first world country).

Given there is not a bottomless bucket of public money to spend, governments must decide how best to direct their revenue to support its population.  For a nation projected to grow from a population of 23 million in 2013 to 36 million in 2050, this spend is currently committed to city-building infrastructure.  This is despite the fact that the Commonwealth Government identifies in the 2010 Intergenerational Report that higher productivity is the key to balancing the needs of a changing demographic. 

Until the government determines the appropriate level of immigration to meet the needs of the current population, public money will be directed to supporting population growth as a result of immigration rather than to productivity-enhancing initiatives, such as information telecommunications, education and training, innovation support, research and development and regulatory reform.   As a consequence, it is likely that Australia will continue to report woeful productivity performance.