Immigration, Ageing and the Labour Force in Australia

Peter McDonald

Professor of Demography

Melbourne School of Population and Global Health

University of Melbourne

Japan The classic case of population ageing

Australia’s Age Distribution in 2011 and 2061

Source: ABS 2013. Population Projections, Australia. ABS Catalogue No. 3222.0

Dark = 2061

Light = 2011

In 2061, the bulge remains in the working ages.

% Difference in the 2051 Population Projected by ABS

in its 2003 and 2013 Projections, by Age Group

0

10

20

30

40

50

60

70

80

90

0-9 25-34 35-44 65-79 80+ Total

Age Group

% Migrants get old just like everyone else. Yes, but they are much younger than the OZ population when they arrive and they have babies before they get old.

Ratio of Population Aged 15-24 in 2050 to

Population Aged 15-24 in 2010

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

Australia has a higher growth rate of the labour force entry ages than all of these Asian nations

Per Cent of Population Aged 65 Years and Over in 2053 Under Varying Assumptions of Annual

Net Overseas Migration

Level of Net Overseas Migration

Per Cent of Population Aged 65 and Over, 2053

0 28.4

100,000 25.2

180,000 23.4

300,000 21.2

% Aged 65+ in 2016 15.3

Population ageing is modified significantly by immigration

How does immigration affect the size of the Australian labour force?

11000000

13000000

15000000

17000000

19000000

21000000

23000000

25000000

2012

2015

2018

2021

2024

2027

2030

2033

2036

2039

2042

2045

2048

2051

2054

2057

2060

0 100 180 300

Constant labour force participation rates;

Migrants assumed to have Australian labour force participation rates

Net migration of zero means no future growth of the Australian labour force

GDP per Capita Growth Rate (2013-2053) under different levels of net overseas migration

Annual

Growth

Rate of

GDP per

Capita

%

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.92013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

2047

2049

2051

2053

0 100 180 300

Assumption: Migrants have same labour productivity as other Australians: 1.6%

GDP per Capita is 12% higher in 2053 with 180K migrants compared with zero migrants – due only to the impact of migration on age structure

Is there a desirable range for annual migration?

• The impact of immigrants on GDP per capita (through changing the age composition of the population) is subject to diminishing returns.

• By examining the increments to the growth rate of GDP per capita for each additional 10,000 migrants, McDonald and Temple conclude that a range of 160,000 to 220,000 optimises the effect.

• The Australian Government migration programme has been set at 190,000 for the past six years.

Factors Contributing to Change in Employment in Australia, June 2011 – June 2016

-200

-100

0

100

200

300

400

500

15-24 25-54 55+

Migration

2011-2016

Population

Growth –

no migration

Participation

TOTAL

Annual Employment Growth: 0.2% without migration 0.8% with migration

Employment Change, 2011- 6, ’s

Gender Effect

Without With

Migration Migration

Males 6 306

Females 120 433

Employment Change, 2011- 6, ’s

Age Effect

Without With

Migration Migration

<55 years -143 452

55+ years 268 286

Migration yields a much younger age distribution for employment

What are the impacts of immigrants on other workers?

• From June 2011 to June 2016, the unemployment

rate in Australia rose from 4.8% to 5.6%.

• Among migrants in the labour force who arrived

between 2011 and 2016, 4.0% were unemployed in

June 2016, 1.6% points lower than the Australian

average.

Frédéric Docquier, Çalar Özden and Giovanni Peri (2010)

• THE WAGE EFFECTS OF IMMIGRATION AND

EMIGRATION, National Bureau of Economic Research

Working Paper 16646

• The reverse takes place in Canada and Australia

where immigration strongly helps the wages of the

less educated (+3.3 and +4.5% respectively) .

Migration Council of Australia, 2016

• Based on: Independent Macro–econometric

Model (Macro Model), Independent Economics

• The economic impact of migration flows through

into every aspect of the economy. It has a

profound positive impact not just on population

growth, but also on labour participation and

employment, on wages and incomes, on our

national skills base and on net produ ti ity .

Robert Breunig, Nathan Deutscher and Hang Thi To (Economic Record 2017)

• The Relationship between Immigration to Australia

and the Labour Market Outcomes of Australian-Born

Workers

• We find almost no evidence that immigration harms

the labour market outcomes of those born in

Australia .

Kate Golebiowska, Amani Elnasri & Glenn Withers (Australian Geographer, 2016)

• The two-step visa process for regional migrants—has allowed substantial and effective regional

location encouragement for immigrants over the past

de ade .

• The job-creation dimensions of immigration may

mean that regional policies seeking greater

population gro th … an e benefited by the use of

targeted migration visa entry onditions .

Productivity Commission Report, 2016: Key Points

• Australia’s current immigration profile is

projected to deliver a demographic dividend to

Australia and higher economic output per

person.

Change in Numbers Unemployed 2011-2016

Increase in Numbers Unemployed Due To: ’s

• Population Change (without migration) 12

• Change in Unemployment to Population Rates 97

• 2011-2016 Migrants 31

• TOTAL 140

Change in Numbers Aged 15 Years and Over Not in the Labour Force

2011-2016

Increase in Numbers Not In The Labour Force Due To: ’s

• Population Change (without migration) 510

• Change in Labour Force Participation Rates -130

• 2011-2016 Migrants 224

• TOTAL 604