An ageing population and labour force participation in Queensland
The labour force figures released by the Australian Bureau of Statistics (ABS) continue to display interesting results, with the official unemployment rate falling by a further 0.1 points to 6.0 per cent in October.
While this fall in unemployment would suggest improving economic conditions, with an associated rise in employment growth, the drop in unemployment rate was again the result of a declining participation rate.
With the proportion of people engaged in the labour force falling, it is increasingly likely that a number of unemployed people have become discouraged through the lack of employment opportunities and, as a result, have stopped searching for work.
Essentially, if a person is unemployed, but not actively looking for work, they are not counted as being part of the labour force and, as a result, are not included in the official unemployment figures published by the ABS.
While it is reasonable that the falling participation rate is being driven by a rise in the number of discouraged job seekers that have stopped looking for work, it is possible that the composition of the working age population in Queensland could also be having an effect.
Across Australia, and many other countries, the population is increasingly shifting towards older age categories, with people aged 55 and over accounting for a higher proportion of the working age population than ever before.
It is possible that some of the decline in labour force participation could be explained by there being an older population with a lower participation rate, as increasing numbers shift into retirement.
By isolating the impact of changes in the overall composition of the ageing population on the participation rate, it is possible to more accurately explain the deterioration in labour force conditions in Queensland.
Analysis of the working age population reveals that across the past 15 years the proportion of people aged 55 and over has increased by 5.2 per cent to 32.1 per cent.
Source: ABS; CCIQ
Across the same time period, the proportion of youth (15-24), and prime aged (25-54) workers has fallen by 0.9 per cent and 4.3 per cent respectively, suggesting that shifts in the composition of the working age population could be influencing the participation rate.
In Queensland, the labour force participation rate peaked at 68.0 per cent in February 2009 before beginning a gradual decline, and at October 2016, the official participation rate for Queensland was 63.8 per cent, which is the lowest level since November 1993.
By fixing the population proportions at the values observed in February 2009 it is possible to estimate the impact an ageing population is having on the labour force participation rate in Queensland.
Analysis suggests that approximately 64.4 per cent of the decline in labour force participation, between the peak in February 2009 and October 2016 is the result of a larger proportion of the working age population shifting into the 55 years and over category.
As this age group has a lower participation rate than youth (15-24) and prime aged (25-54) workers, this is having an impact on overall labour force participation, and partially explains the observed decline in Queensland.
The remaining variation however, is likely being driven by other labour market effects, part of which could be a rise in the number of job seekers that are no longer actively looking for employment.
While further analysis is needed to better understand how shifts in the demographic composition of the working age population in Queensland is impacting labour force participation, there is clear evidence that it is not the only cause.
An initial investigation would suggest that much of the variation that is unexplained by demographic shifts is the result of falling participation in the youth (15-24) age group, which has seen sharp falls across the past decade.
Source: ABS; CCIQ
Whether this observed drop in participation among younger workers is the result of limited opportunities and openings for entry level positions, or other causes such as prolonged periods of education, it is unclear from this evidence alone.
Regardless, it is clear that the ageing population is having an impact on labour force participation in Queensland, but other factors are also having an influence on this decline, much of which appears to be isolated within the youth workforce.
Further investigation and analysis is needed on this particular issue however, and CCIQ will continue to monitor labour force releases in the coming months to ensure a better understanding of the forces that are influencing the Queensland labour market is achieved.