Saxon Davidson On Worker Shortage Research ABC Far North – 14 September 2023

The Institute of Public Affairs’ Saxon Davidson joined Adam Stephen on ABC Far North to discuss the unprecedented nationwide worker shortage and how it is affecting regional communities the most.

All media appearances posted onto the IPA website are directly related to the promotion and dissemination of IPA research.

Below is a transcript of the interview.

Adam Stephen:

It won’t surprise you to learn that regional Queensland is amongst the toughest place in Australia to find workers. New analysis from the think tank the Institute for Public Affairs has shown Queensland has three of the five worst areas in Australia for worker shortages. And the author of this report is encouraging the federal government to activate the gray army by removing disincentives to work for pensioners, amongst other things. Saxon Davidson from the Institute of Public Affairs is with us this afternoon on ABC Radio across regional Queensland. Saxon, thanks for your time.

Saxon Davidson:

Thank you for having me.

Adam Stephen:

So, just can you let our listeners know the toughest places in Australia to find workers?

Saxon Davidson:

Yes, so Australia, as a nation, is currently in the midst of an unprecedented worker shortage crisis. There are over 431,000 job vacancies across the country. This represents a 235% increase over the last three full years. And one in four businesses cannot find the workers they need. This is a roadblock to economic activity, and is costing Australians approximately $32 billion in foregone wages during a cost-of-living crisis, and the federal government, $7 billion in foregone income tax in a time of budget constraints. Our research-

Adam Stephen:

Sorry, did you say 400,000 job ads at the moment across the country?

Saxon Davidson:

Yes, across the country. The research that we released today analyzes the worker shortage crisis at a more local level. We do this through the job vacancy crunch rate. The job vacancy crunch rate is the ratio of job openings to working-age Australians not currently in the labor force, and demonstrates the extent that local employment must expand to meet the number of jobs available for immediate filling. We used this measure across 35 separate geographic zones across the country, and we found that regional Australia, and particularly regional Queensland, is being hit the hardest by worker shortages. With Far North Queensland the fifth-hardest geographic zone in the country, with a crunch rate of about 7.6%, and outback Queensland the fourth-hardest hit region with a crunch rate of 9%.

Adam Stephen:

Why do you think it’s instructive to look at the crunch rate when we’re trying to analyze whether we can solve this problem ourselves?

Saxon Davidson:

Well, we need to look at the crunch rate because we need to get Australians back into the workforce, and that looks at how much that workforce needs to expand. And to do that the most efficiently, we need to remove unfair red tape and tax barriers that prevent Australians from working, specifically Australian pensioners, Australian veterans, and Australian students on the Youth Allowance.

Adam Stephen:

But didn’t we just make changes to make it more attractive for pensioners to work?

Saxon Davidson:

We did, but it has failed to work thus far. So, they increased the work bonus, which is the amount that an Australian pensioner can earn before they start to get taxed at an effective marginal tax rate of about 69%. So, they increased that amount from $150 a week to $226 a week. However, the participation amongst pensioners has stagnated at about 3%, whilst job vacancies have only decreased by about 3% in the two quarters since that change was brought in.

Adam Stephen:

So, 3% of pensioners are working at the moment?

Saxon Davidson:

Yeah. This is compared to New Zealand, where one in four work, where they don’t have these unfair tax barriers preventing them from doing so. They only pay the combined nominal tax rate, whereas Australian pensioners face a tax rate of 69%. This is 50 cents on the dollar after they work just about a day and a half per week on minimum wage, plus the nominal tax rate of 19%.

Adam Stephen:

Yeah, you’re not getting too many people out of bed to go to work to lose 69 cents in the dollar, hence why you’re not seeing a rush of pensioners to work extra hours. But what makes us think that there’s a whole lot of pensioners out there that would want to work more than one and a half days a week?

Saxon Davidson:

There was a recent leading survey by National Seniors Australia, which found that 20% of Australian pensioners would rejoin the workforce if these tax barriers were removed. Now, I’m not suggesting that every single job available in the market at the moment is going to be suitable for an Australian pensioner, or even veteran, or student. However, this is a simple reform that is available to the federal government, that could help alleviate a large portion of the worker shortages. Now, 20% of Australian pensioners is equivalent to about 518,000 ready and willing workers, and that is a number that is greater than the total vacancies across the country.

Adam Stephen:

Talking to Saxon Davidson here, he’s from Institute of Public Affairs. He’s run these numbers, looking at the crunch rate in different regions across Australia when it comes to the difficulties in finding workers. Queensland has three of the five biggest crunch rates in Australia. One of them is Brisbane, the other two, Far North Queensland and outback Queensland. And you’re convinced that pensioners can play a role, but you’ve mentioned veterans and students as well. What disincentives are there for veterans or students to work?

Saxon Davidson:

The disincentives for veterans is almost exactly the same as the disincentives for Australian pensioners, that tax rate of 69%. Students actually face a higher effective marginal tax rate. When a student earns just under $300 a week, they are actually faced with an effective marginal tax rate of 79%. And these are young Australians who need the work experience before they leave their studies, basically. And-

Adam Stephen:

You pointed out New Zealand does it differently and New Zealand gets a lot more activation of their pensioners in their workforce, but does New Zealand still face the same problems we do in terms of a worker shortage?

Saxon Davidson:

Their worker shortages… I don’t have the numbers in front of me. But as far as I’m aware, they’re not in the midst of a worker shortage crisis. There will always be job vacancies in the economy because there are always jobs to be filled. But to my understanding, New Zealand is not under these sort of pressures.

Adam Stephen:

It’s instructive to look at this crunch rate if only to see that there is still quite a lot of people in a lot of these areas we’re broadcasting today, who aren’t working for various reasons. You’re sort of suggesting that some of them would dearly love to be working more, but there’s disincentives to them being able to work. Why have we been resistant, as a nation, to allowing pensioners to work more? What’s the case or the argument that’s made against increasing hours for pensioners?

Saxon Davidson:

Well, the government have really pursued in a lazy and shortsighted direction of unplanned migration. The current projective intake of around 1.7 million over the next five years is set to create a shortage of around 250,000 homes, according to our analysis. And migration has thus far failed to alleviate worker shortages. It was admitted earlier this week by immigration minister, Andrew Giles, that the government’s aged care industry labor agreement, which was designed to fast track foreign workers into the aged care sectors, has only enticed a total of eight out of over 3,000 aged care providers into the program, despite the shortage of workers that exists, particularly in aged care.

Adam Stephen:

It’s interesting to think that… We can’t solve maybe everything, but we can certainly alleviate some of the stress in finding workers in Australia by looking at things a little different. Why do you think regional areas feature so prominently in your map of places struggling the most for workers?

Saxon Davidson:

Well, I mean employees in the regions know how hard it’s to find workers at the best of times. We do a bunch of regional tours across regional Australia at the IPA, and this is something that has been consistently told to us throughout these regional tours. But this crisis is not being addressed by our leaders. It is affecting the viability of many small and medium enterprises that simply cannot operate to the level they need to. And at the complete other end of the scale, this is affecting our most productive industries, such as tourism and agriculture. The more employment we have in our regional communities, the stronger, more resilient the regions become. This means more Australians and regional Queenslanders can build a long-term future in their communities with greater confidence.

Adam Stephen:

Interesting, Saxon. I’m going to put it to our audience now to see whether we do have the appetite amongst pensioners to actually work more if the tax settings were changed. Thanks for running us through your analysis.

Saxon Davidson:

Thank you for having me.

Adam Stephen:

That’s Saxon Davidson with us. He is with the Institute of Public Affairs,

This transcript with Saxon Davidson talking on ABC Far North from 14 September 2023 has been edited for clarity.