International trends and employment in Australia: key findings Phil McKenzie & Gerald Burke

1. International trends and employment in Australia: key findings Phil McKenzie & Gerald Burke CEET National Conference 28 October 2005 Ascot House Melbourne CEET

2. Key issues • Trends in the international economy and employment • Economic development, especially in China • Rapid growth in international trade & investment • International trade is relatively small in the Australian economy • The more open countries have grown more quickly • But, high adjustment costs for trade-displaced workers • Trade only one of the drivers of employment change • Trends in the Australian economy • Recent industrial trends • Related changes in employment by occupations by skill level • Growth of the workforce– effects of ageing and immigration • Education and training provision CEET

3. Changes in GDP CEET

4. Impact of China • Produces 15% of world output • Accounts for 7% of world trade • Contributed 40% of increase in world output in 2004 • Largest recipient of foreign direct investment • Australia’s 2nd-largest trading partner (Australia is China’s 12th largest trading partner) Source: Australia China Business Council (2005) CEET

5. Growth and benefits of world trade • World trade increased 16-fold 1950-2000 • In OECD countries trade flows relative to GDP (“trade openness”) doubled from 1970-2000 • 1% increase in trade openness associated with increase of per capita income of 0.5% to 2% • Countries that were more open to international trade and investment grew at twice the rate of less open countries during the 1990s Source: OECD (2005) Employment Outlook CEET

6. Australia is a relatively low trade country • Trade flows (exports + imports) relative to GDP grew from about 20% in 1970-74 to 45% in 2000-2004 in Australia • But, Australia was the 3rd-lowest of 30 OECD countries on this indicator in 2000-2004: country median was about 80% • The countries with the highest trade flows tend to be relatively small, close to wealthy markets, and with few trade barriers e.g. Ireland 200% • Japan and the USA had the lowest trade flows relative to GDP of all OECD countries in 2000-04 • Source: OECD (2005) Employment Outlook CEET

7. Potential losers from greater trade • Rising trade, especially with low-wage countries, is associated with greater income inequality in developed countries • Biggest losers -- poorly educated, older workers, especially in manufacturing • Trade-displaced workers experience longer unemployment, and lower earnings in subsequent jobs (earnings loss lower if they find work in the same industry) • Adverse impact most marked when trade liberalisation leads to specialisation (more likely in small countries) • International trade only one of the factors leading to employment changes: changes in technology and consumption patterns are generally more significant • Equity and efficiency arguments for assistance for trade-displaced workers Source: OECD (2005) Employment Outlook CEET

8. Australian employment: shares by industry CEET

9. Australian employment shares by industry (cont) CEET

10. Job growth 2005 to 2013 by occupation and qualification (about 1.1 million extra jobs)Australia ‘000MONASH COPS Forecast CEET

11. Job openings to new entrants 2005 to 2013 by occupation (nearly 3 million) Australia '000 CEET

12. Employment versus labour supply • Projected employment growth 1.4% per annum next 10 years • Projected labour supply about 1.0% per annum –but will vary with changes in immigration and participation rates CEET

13. Education and training implications • Jobs openings tending to more qualified • professionals • associate professional • trades – shortages as well as new openings • still large number of low skill jobs • Need to increase proportion of new workers with qualifications • Need to increase proportion of existing workers with qualifications • Need to increase qualifications of those underemployed or not employed including older persons to increase employability CEET