With the release of the second tranche of the 2021 Census data this week, we now have access to a real treasure trove of data regarding the Australian workforce.
This week we will look at my favourite dataset: Skill levels.
Skill levels are a simple way of categorising the workforce into five groups, based on the minimum formal education that is required to perform that job.
Skill level 1 jobs require a university degree; skill-level 3 jobs require a technical degree (VET, TAFE); and skill-level 5 jobs require no formal qualification. A higher skill level job pays significantly more money than the skill level just below.
Let’s start with the most important update.
Since the 2016 Census, our workforce has been bunching up. We lost, in relative terms, skill-level 4 and 5 jobs while adding skill-level 1, 2, and 3 jobs. Structurally we now have more higher- and middle-income earners and fewer low-income earners.
The general shape of the workforce remains. We have lots of skill-level 1 workers (now 34.1 per cent) and lots of low-income jobs in skill-levels 4 and 5 (39 per cent). Finally, the relative decline of the middle-skilled (level 3) jobs has been halted.
In a previous column I introduced the Weet-Bix spectrum to explain how businesses should adjust their offering in a market with lots of high-income earners, lots of low-income earners, and a shrinking middle-class.
My previous analysis and the lessons for businesses stay highly relevant, but I am relieved to learn that Australia added a significant number of skill-level 3 jobs since the 2016 Census (up 296,000).
The relative growth of skill-level 3 jobs from 13.8 per cent of the workforce in 2016 to 14.7 per cent in 2021 was however mostly due to the very low growth in the number of skill-level 4 (up 26,000) and skill-level 5 (up 47,000) jobs.
Low-skilled jobs were the first ones to be cut during the pandemic. As the lockdowns continued in the first year of the pandemic alone, our net migration turned negative, and we lost 90,000 migrants instead of adding our annual quota of 180,000.
The exodus of international students, many of whom usually hold a skill-level 4 or 5 job, contributed to our current skills shortage. Over 630,000 jobs in skill-level 5 are held by people aged under 25. Take away international students (aged almost exclusively under 25) and you see why low-skilled, part-time jobs are so hard to fill.
There is a natural progression from low-skilled jobs towards high-skilled jobs as workers progress their careers. While you are in education (first high school, then TAFE or university) you take on low-skilled, low-income jobs before you acquired the necessary qualifications to work in higher paying jobs.
At age 18, only 4 per cent of workers hold a skill-level 1 job. This number rapidly shoots up as they progress through university and peaks at age 40 when 43 per cent hold a skill-level 1 job.
Our youngest workers almost exclusively hold skill-level 5 jobs as they couldn’t possible have earned a formal qualification just yet. At 15 year of age 82 per cent of workers have a skill-level 5 jobs. This number then drops quickly to nine percent at age 39.
Low-paying skill-level 4 and 5 jobs are also often held by women that re-enter the workforce after a decade or two of child rearing. These women regularly hold qualifications for more highly skilled jobs. This contributes to the gender income gap (women earning fewer dollars than men) but not the gender pay gap (different dollars for men and women doing the same job). I’ll dedicate a full column to equal pay soon – stay tuned.
Looking at the skill level data through the generational lens is great fun, but most reflects the age profile from earlier in this column. Millennials (born 1982-1999) have the highest share of skill-level 3 workers.
Within our Capital Cities, workers live segregated based on their skill level. The inner suburbs (5km form the CBD) are dominated by skill-level 1 workers who want to be close to their office towers (54 per cent), whereas on the urban fringe (within the Capital City but more than 25km from the CBD) they only make up 27 per cent.
The pattern is simple, high-income earners live close to the CBD while low-income earners must move far away from the CBD to afford a home.
Many skill-level 3 workers are tradies who tend to move to the urban fringe as they prefer properties with big garages for their utes and tool as their jobs are mobile by nature.
As a nation we are moving towards a higher income profile. Ideally, in the long run we permanently shrink the number of skill-level 4 and 5 jobs (I discussed this further in a previous column) and push more young people that would’ve otherwise pursued skill level 4 and 5 work into skill-level 3 jobs.
An economy that creates so many skill-level 1 jobs should feel richer than we currently do. The reason here is yet again housing.
Even dual income households with two skill-level 1 workers struggle to buy a family home. For our nation to actually be as wealthy as we could, we need to improve housing affordability.
Demographer Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. Follow Simon on Twitter or LinkedIn for daily data insights.
