Ageing Australia and the education and training sectors

1
Ageing Australia and the education and training
sectors

• National Skills Forum
• Melbourne, 16 September 2005

2
Australias Ageing profile 2002 - 2042
Index value (2002 base100)
Index value (2002 base100)
450
450
400
400
350
350
300
300
250
250
200
200
150
150
100
100
50
50
0
0
0 to 14
15 to 54
55 to 64
65 to 84
85
Total
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Intergenerational Reports

• Federal Budget 2002-03
• The Intergenerational Report (IGR)
• Productivity Commission Report 2005
• Economic Implications of an Ageing Australia
• looked at productivity, labour supply and fiscal
  implications for all levels of Government

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Commonwealth Budget IGR projections
5
The Fiscal Challenge (IGR)
Drivers
Impacts in 40 years
Health
4¼ GDP
Demography
Aged care
1 GDP
½ GDP
Payments to individuals
Average cost of programmes
-½ GDP
Education etc
Total
5¼ GDP
Fiscal adjustment
6
Policy choices

• Do nothing now -and raise taxes in the future
• effectively passes the problem on to our children
• Cut government expenditures by 5 of GDP
• equivalent to half the social security budget or
• equivalent to entire health budget
• Run deficits and accumulate debt
• effectively passes the problem on to our children
• Increase size of the economy
• a bigger economy means being better able to meet
  costs of ageing

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Components of GDP growth
Total population
Population
Share of population 15
Employment (hours)
Participation rate
GDP
Unemployment rate
Participation
Average hours worked
Capital deepening
Productivity
Multifactor productivity
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Population

• Fertility
• can government policy make a significant
  difference?
• increases dependency rates during the transition
  period
• Migration
• slows population ageing if migrants are younger
  on average
• but cant stop the process
• Mortality
• will longevity rates continue?

9
Observed maximum female longevity (Dr Heather
Booth, ANU)
10
Productivity

• Quantity and quality of output by individual
  labour unit
• IGR projections adopt accepted long run growth
  of 1.75 per cent
• latter half of 1990s - much stronger productivity
  growth
• Dividends from past microeconomic reforms
• product markets and, later, labour market
• Ongoing reform needed for continued growth
• human capital formation (education) will be an
  important input

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Participation

• Growth in labour force slowing
• over the next decade labour force will grow by
  about 1.3 million people
• expected to halve in the following decade
• over the 2030s decade expected to be about 40 per
  cent of current growth rate
• Participation declines with age
• Participation higher by educational attainment

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Participation agendaAustralias Demographic
Challenges, (Feb 2004)
Education and skills
Capacity
Health
Labour market
Flexibility
Job design
Taxation
Incentives
Income support
Retirement income system
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Education and EmploymentParticipation rates by
level of educational attainment
14
Participation rates of skilled males by age
15
Participation rates of unskilled males by age
16
Participation rates of skilled females by age
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Participation of unskilled females by age
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Education and Skills

• Mainstream programs remain important
• schools and higher education
• vocational education and training
• New Apprenticeships programme
• new Australian Technical Colleges
• Demand for mature age workers will increase
• So, lifelong learning will become more important
• re-training assists return to the workforce
• e.g. welfare reforms
• demand will mean some will choose to change
  occupations and/or increase skills base

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Mature Aged Workers

• Australias demographic trends mean a greater
  mature age population
• Employers will need to become more engaged on
  mature age workforce participation issues
• such as flexibility in hours, and
• more aware of ongoing training needs and
  potential for employees to learn new
  occupations/skills
• Employees will need to
• build skills and competencies
• not consider part time work inferior
  (particularly males)

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Summary

• Demographic pressures are building
• next decade will see low employment growth
• impacts on Commonwealth Budget are almost here
• but no need to panic as Australia is
  comparatively well placed
• Attitudinal changes will be important and some
  reforms will have long lead times
• Policy needs to consider demographic context
• i.e. medium term sustainability
• Education and training has pivotal role in
  increasing productivity and participation

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Median Voter Age