Belling the cat on Australian productivity
This interesting graph above on Australian productivity is doing the rounds at the moment. What I am curious about is that people are surprised that any of this is occurring. We have known for decades that the population will age, and that more resources will be needed in the health sector. As a country, we have brought the National Disability Insurance Scheme into being, which also needs funding and peopling on a large scale. By the same token, we live in a world that puts a premium upon education, so there is huge demand for educators at every level.
In all of these cases, therefore, it stands to reason that there is a boom in non-market employment. But another question is this; exactly what level of jobs are being created? Are they highly productive and remunerative positions suited to generating innovation and new businesses?
For the most part, the answer is no. Over the past 10 years, while there has been substantial growth in the tech sector, it’s dwarfed by the health, social welfare and education sectors (https://kpmg.com/au/en/home/media/press-releases/2025/05/the-fastest-growing-jobs-and-the-ones-slowly-going-extinct.html). But after doing some analysis, I suspected these reported figures didn’t consider how many other roles actually fit into the health and education sectors. I went to the Labour Force Trending report from Jobs and Skills Australia for May 2025, and put figures from that into the following table:
Graph created from figures in https://www.jobsandskills.gov.au/news/new-labour-force-trending-data-reveals-australias-shifting-job-market on 20 July 2025.
So, Australia’s tech workforce is equal to 47% of the health workforce, or 59% of the welfare support workforce. If we add education to these two sectors, the entire tech workforce is just 16% of the size of these non-market sectors.
The Jobs and Skills Australia also has something interesting right at the bottom of the document; the pure numbers of people at each skill level. Adding them all together gives a total workforce of 14,646,200 people. Breaking it down by skill level looks like this:
I wonder if anyone in government has looked at the Skilled Occupation List
https://immi.homeaffairs.gov.au/visas/working-in-australia/skill-occupation-list over the last decade, and checked to see which of the occupations has actually been able to effectively fill its labour shortages? In other words, is the system working? I suspect that they haven’t, or at least, not in a holistic manner.
There is definitely a need for the education, health and welfare sector workforce. However, we know that part of the issue in these sectors is that they are relatively low-paid, despite the increasing amount of work and regulation surrounding them. So, for the last decade our answer to this problem has been immigration. By definition, this means bringing foreigners with varying levels of English proficiency, life and professional experience.
But let’s think about what this means on the ground. A person studies for some time to gain a local qualification. If they have prior experience in the field, and strong English skills, they will get hired rapidly. If they’re proactive and well-connected, they will be working or volunteering in their chosen field part-time while they study. It’s clear that doing so has many benefits; they graduate at a run, so to speak, and start earning faster. However, in these sectors, they soon hit diminishing returns. And given that they are (a) proactive, (b) increasingly well-connected, and (c) motivated to earn more, they very quickly look to apply their skills in another sector where they can earn more.
As for the remaining immigrants who face greater challenges, the outcomes are nowhere near as good. We already know that many international students face challenges in making local connections (https://wordpress.meldmagazine.com.au/2016/04/local-international-student-divide/), and it has been for a long time (https://theconversation.com/why-international-students-need-to-make-aussie-friends-30820). So, if many immigrants have limited contact beyond service-industry roles, then it stands to reason that both their English-language skills, but more importantly, their professional skills, and their broader cultural understanding, will be delayed. This translates to many not understanding the need to proactively pursue opportunities for broader knowledge beyond their existing fields and social circles.
I think we have a situation where the best and brightest immigrants do well, and rapidly leave the low-paid sectors behind. But for the remainder, they get stuck there, as this article highlights - https://theconversation.com/why-its-important-young-unemployed-australians-get-a-good-job-instead-of-just-any-job-260817
This is not of benefit to anyone. Apart from the obvious harm to the people in question, a disengaged, disempowered workforce is not one that is going to innovate. Nor will they have either the inclination or the ability to do anything more than just go through the motions. And if these individuals churn from one poorly-paid job to another across these low-wage sectors, then any progress an individual business makes towards higher productivity will be lost.
If our current policy arrangements lock large numbers of people into low productivity sectors, it shouldn’t surprise anyone that the issue is aggravating our other public policy problems. Housing is the obvious one, but it also has a geographic and social aspect to it. If immigration is not fixing the problems, then it is high time to take a different approach. I am certainly not being anti-immigrant here; what I want is for Australia to think beyond plugging gaps with people is a long-term solution.
Where are the incentives for the health and education sectors to innovate? Where is the research being undertaken in these sectors actually being applied? What are managers in health and education sectors able to do in terms of introducing innovations to their workplaces – what are the barriers and incentives to doing so? If an employer cannot find staff to do the job, are they looking into software or robotics to solve the problems – and if not, why not?
