26th Australian Labour Market Research Workshop

Program Venue

Flinders University at Tonsley, Room 1.01 1283 South Road, Clovelly Park, SA 5042

Date

Thursday 3rd and Friday 4th December 2015

Hosted by

The National Institute of Labour Studies (NILS), Flinders University

Sponsored by

Australian Bureau of Statistics (ABS)

Keynote Lecture

Professor Tom Karmel Professor Karmel is Adjunct Professor at the National Institute of Labour Studies, Flinders University. He is also a member of the Council of the University of Canberra, a Senior Research Fellow for the UNESCO Chair at The Hong Kong Institute of Education, and is a member of the editorial boards of the Australian Journal of Education, the Australian Bulletin of Labour and the National Centre for Vocational Research. He is also on the higher education reference group for the Grattan Institute. Professor Karmel was appointed as Managing Director, National Centre for Vocational Education Research (NCVER) in August 2002, retiring from that position in August 2013. Prior to this position he held senior appointments in the Australian government areas of education, employment, labour market research and the Bureau of Statistics. From 1995 to 2002 he was responsible for a wide range of functions relating to the higher education programme, including Ministerial briefing, budget coordination, legislation, educational developments, cross-sectoral matters, international matters, quality assurance, the higher education statistics collection, research and analysis (into higher education policy issues), the graduate destination survey, workplace relations issues within the higher education sector, equity and access issues, and labour market issues as they relate to the higher education sector. His research interests have centred on the labour market and the economics of education.

Day One, Thursday 3rd December 2015 8:30 – 8:45

Registration and Arrival Tea & Coffee

8:45 – 9:00

Welcome Session 1 Chair: Kostas Mavromaras

9:00 - 9:40

Far Removed: An Insight into the Labour Markets of Very Remote Communities in Central Australia Michael Dockery (Curtin University) Discussant: Cezary Kapuscinski

9:40 - 10:20

Who Cares and does it Matter for the Labour Market?: A Longitudinal Analysis of the Labour Force Status of Indigenous and Non-Indigenous Carers Boyd Hunter (Australian National University) Discussant: Stéphane Mahuteau

10:20 – 10:40

Morning Tea Session 2 Chair: Stéphane Mahuteau

10:40 - 11:20

Does Poor Health Increase the Likelihood of Flexible Employment? Joanne Flavel (National Institute of Labour Studies) Discussant: Lixin Cai

11:20 - 12:00

Casual Employment and Long-term Wage Outcomes Mark Wooden (The University of Melbourne) Discussant: Kostas Mavromaras

12:00 – 12:30

ABS Information Session: Enhanced Labour Statistics Carmen Kong

12:30 - 13:10

Lunch

13:10 – 14:00

Keynote Lecture: Tom Karmel (National Institute of Labour Studies) Session 3 Chair: Greg Connolly

14:00 - 14:40

Can we improve on a headcount? Estimating unobserved labour input with individual wage data David Hansell, Thai Nguyen and Franklin Soriano (ABS) Discussant: Tom Karmel

14:40-15:20

Inter-Temporal Labour Supply of Married Australian Women Lixin Cai (Department of Employment) Discussant: Rong Zhu

15:20 – 15:50

Afternoon Tea Session 3 (continued)

15:50 - 16:30

In Good Company: Neighbourhood Effects in Female Employment Alfredo Paloyo (University of Wollongong) Discussant: Nicolas Hérault

16:30 - 17:30

Annual General Meeting

19:00

Conference Dinner at the River Café, Adelaide

Day Two, Friday 4th December 2015 8:45 – 9:00

Arrival Tea Session 4 Chair: Phil Lewis

9:00 - 9:40

Employment Practices and Performance in Australian Low-wage Firms Joshua Healy (The University of Melbourne) Discussant: Peter Sloane

9:40 - 10:20

Skills Mismatch amongst University Graduates: An Historical Overview Cezary Kapuscinski (Australian Government Department of Education and Training) Discussant: Michael Dockery

10:20 – 11:00

Long and Short Term Developments in the Youth Labour Market Geoff Gilfillan (Parliamentary Library, Canberra) Discussant: Zhang Wei

11:00 - 11:30

Morning Tea Session 5 Chair: Peter Sloane

11:30 - 12:10

Public-Private Sector Wage Differentials in Australia: What are the Differences by State and how do they Impact GST Redistribution Decisions Kostas Mavromaras (National Institute of Labour Studies) Discussant: Phil Lewis

12:10 - 12:50

The Effects of Income Support Settings on Incentives to Work Nicolas Hérault (The University of Melbourne) Discussant: Greg Connolly

12:50 – 13:00

Concluding Remarks

13:00 – 13:40

Lunch/Close

Abstracts KEYNOTE Has the graduate labour market been swamped? A study into the labour market transition of new graduates Tom Karmel (NILS, Flinders University) The graduate labour market has been quite tough in recent years, with the proportion of new graduates in full-time employment declining for the last six years according to the graduate destinations survey. At the same time, the general labour market has been desultory, with the unemployment rate creeping up. This labour market weakness has occurred at the same time as record numbers of graduates flood onto the labour market. While it may be the case that poor labour market conditions, together with the size of the cohort, will impact on the proportion of new jobs getting a full-time job, our interest is in whether that is a satisfactory explanation. Can we expect a recovery in the job prospects of new graduates or are we witnessing a structural change with new graduates facing a much more difficult transition into the labour market than has been the case in the past?

SESSION 1 Far Removed: An insight into the Labour Markets of Very Remote Communities in Central Australia Michael Dockery (Curtin University) There is ongoing national debate about the livelihoods of Aboriginal and Torres Strait Islander Australians living in remote communities, the economic viability of those communities, and the role for policy in addressing socio-economic inequality. Employment opportunity is an important dimension to this debate, which in mainstream labour markets is in turn linked to opportunities for education and training. Preparation for and access to employment in mainstream labour markets will be welcomed by those who ultimately see the demise of such remote communities as the solution to addressing Indigenous socio-economic inequality. Alternatively, labour market policy may seek to contribute to enterprise development and sustainability within communities, promoting the so called ‘hybrid economy’. Such discourses, however, are conducted with limited empirical evidence on the actual functioning of labour markets in remote communities and likely efficacy of policy alternatives. Unique survey data collected from Aboriginal and Torres Strait Islanders living in 21 remote communities in central Australia for the Cooperative Research Centre for Remote Economic Participation’s Population Mobility and Labour Markets project are used to examine these labour markets, with a focus on the role of education and training. Examining access to education, employment opportunity, welfare dependency and other structural factors, it is clear that the reality of economic engagement in these communities is far removed from the functioning of mainstream labour markets and the assumptions that underpin policy formulation. It is argued that policies to promote employment opportunity within communities hold a greater chance of improving livelihoods for these peoples.

Who Cares and does it Matter for the Labour Market?: A Longitudinal Analysis of the Labour Force Status of Indigenous and Non-Indigenous Carers Boyd Hunter, Matthew Gray and Heather Crawford (Australian National University) Indigenous Australians experience higher rates of severe or profound disability than other Australians and the gap between Indigenous and non-Indigenous Australians increases with age. The relatively high rates of disability amongst the Indigenous population leads to relatively caring burdens within Indigenous households. It has been well established that carers of a person with a disability have lower rates of paid employment than do non-carers. However, relatively little is known about the impact of caring on the employment rates of Indigenous carers and virtually nothing about the impact of caring on changes in labour force status. This paper uses the recently released Australian Census Longitudinal Data to, for the first time, describe the labour market dynamics of Indigenous and non-Indigenous carers and the extent to which this differs to the dynamics of those who are not carers. By exploiting the longitudinal nature of the data we are able to examine how labour force status changes following commencement as a carer and exiting from caring. Employment probabilities and labour force transitions are analysed using bivariate and multivariate techniques. The analysis raises questions about how caring decisions are made within households and the extent to which the costs of caring may differ between Indigenous and non-Indigenous households.

SESSION 2 Does Poor Health Increase the Likelihood of Flexible Employment? Joanne Flavel (NILS, Flinders University) This paper uses dynamic multilevel multinomial modelling to provide evidence on the effect of health on form of employment for the working age population. The determinants of form of employment are estimated to establish whether persons in poor health are more likely to be employed on part-time or casual terms, or not employed at all. The models use data from the first ten waves of the Household, Income and Labour Dynamics in Australia Survey (HILDA) and account for initial condition, state dependence and unobserved heterogeneity. The results show that health, measured by a constructed health index, has a significant effect on form of employment. Poor health significantly increases the likelihood of part time and casual employment however the magnitude of the effect is small. While there is an effect of poor health on form of employment, the greater effect is on the likelihood of employment. Casual Employment and Long-term Wage Outcomes Irma Mooi-Reci and Mark Wooden (University of Melbourne) While temporary and other forms of non-standard employment are an important feature of modern labour markets, relatively little is known about how much and under what circumstances such employment arrangements impact on long-term wage outcomes. Using longitudinal data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey spanning the period 2001-2013, we examine how observed employment patterns earlier in a working career are associated with subsequent wage dynamics. Estimation of regression models of real hourly wages that include correlated random effects reveal that casual employment is negatively associated with long-term wage outcomes among men but not women. We also find that the scarring effects of casual employment among men are

least pronounced at the start of one’s career. The skewed scarring effects along lines of age and gender suggest that expectations and norms about “ideal careers” may be an important explanatory factor underlying these wage penalties. Finally, interpretation of these results is sensitive to the choice of reference group.

SESSION 3 Can we improve on a headcount? Estimating unobserved labour input with individual wage data David Hansell, Thai Nguyen and Franklin Soriano (Australian Bureau of Statistics) Headcount measures of employment are frequently used as a proxy for labour input despite known problems, such as ignoring the individual variation of full and part-time employees. With the advent of large employee-employer databases, statisticians often possess annual individual wage payments but not hours worked. We advance several methods for estimating labour input using individual, annualised wage data and employer characteristics. We evaluate these methods using ABS microdata where hours are observed, and then select the best estimator to compare full-time equivalent employees with population estimates and the headcount measures from taxation data. Our estimators outperform headcount measures in terms of levels and variance across almost every test and so can facilitate the decomposition of hours worked and productivity by business characteristics. Inter-Temporal Labour Supply of Married Australian Women Lixin Cai (Department of Education, Government of Australia) Using the first 13 waves of the Household, Income and Labour Dynamics in Australia (HILDA) Survey, this study investigates the determinants of the labour supply of married Australian women, with a focus on whether and to what extent there is state dependence in the labour supply. It is found that both observed and unobserved individual heterogeneity contributes to observed inter-temporal persistence of the labour supply of married Australian women, but the persistence remains even after controlling for these factors. It is also found that nonlabour income, age, education, health and the number and age of young children have significant effects on married Australian women’s labour supply. In Good Company: Neighbourhood Effects in Female Employment Peggy Bechara, Lea Eilers (RWI, Germany) and Alfredo Paloyo (University of Wollongong) Using a uniquely assembled panel dataset, we estimate the impact of neighbourhood and peer effects on female labour supply. Non-random sorting and unobserved heterogeneity at the individual and neighbourhood levels make recovering these parameters more complicated in the absence of (quasi-)experimental variation in neighbourhood attributes. Our strategy rests on using a hedonic pricing model to control for neighbourhood-level unobserved heterogeneity and on using a fixed-effects approach to account for the correlation induced by individual time-invariant unobservables. The results suggest that there exists endogenous peer effects on women’s extensive labour supply, i.e., that it is significantly and positively affected by peer participation decisions. The magnitude, however, is quite small (0.96 percent for a one-percentage-point increase in the neighbourhood female employment rate). The intensive labour supply does not exhibit an endogenous peer effect.

SESSION 4 Employment Practices and Performance in Australian Low-wage Firms Joshua Healy (The University of Melbourne) Much has been written about the characteristics of Australia’s low-paid workforce but few studies examine the characteristics of low-wage firms. Using new data from the Fair Work Commission’s Australian Workplace Relations Survey, this study connects low-paid workers to their firms and describes the practices and performance of these firms. A comparative approach is used to ask: are low-wage firms different from other firms? The results suggest that low-paid Australians are more likely to work in ‘lacklustre’ firms when judged by several aspects of firm quality. Their firms offer fewer skill development opportunities and fewer flexible work options than other firms. These shortcomings are likely to narrow and constrain the capacity of low-paid workers to improve their skills and compete for better jobs. However, low-wage firms look similar to other firms in terms of their recent profitability. Some low-wage employers may therefore have the capacity to improve their employment practices. Skills Mismatch amongst University Graduates: An Historical Overview Cezary Kapuscinski (Department of Education and Training, Government of Australia) Employees’ skills and the level of education, alongside work tenure, are all indicators of primary importance in the labour market. The utilization of skills gained through education in one’s job is of immense importance. The skills-job mismatch has been linked in the literature to a wage penalty and lower probability of promotion. From the macroeconomic perspective, the employment of overskilled workers is an inefficient outcome and leads to lower productivity and the actual output below the potential output. From the government’s point of view, the presence of overskilled workers is an indication that the education sector may not be developing the combination of skills required in employment. The issue of skills mismatch is of particular importance for university graduates given the economic value of the tertiary education sector. In this paper we explore the issue of skills mismatch for university graduates using time series data derived from the HILDA survey. We compare the incidence of overskilling amongst graduates and the general population in the context of developments in the labour market since 2001 and demonstrate the cyclical variation in overskilling. By considering the strength of mismatch as well as a separate identification of skills-job match, we identify their different behaviours over the business cycle and discuss some of the reasons for these variations. We also discuss the differences in overskilling between males and females and across broad age groups. Industry decomposition of overskilling allows also to identify major contributors to the overall skills-job mismatch. Finally, a simple model of the relationship between overskilling and the tightness of the labour market is presented and we explore its applicability to forecast the incidence of overskilling. We conclude with a discussion of how the knowledge about the behaviour of overskilling over the business cycle can be utilized in policy development and offer some suggestions for further work.

Long and Short Term Developments in the Youth Labour Market Geoff Gilfillan (Parliamentary Library, Canberra) There are interesting parallels between the impact of the downturn following the Global Financial Crisis (GFC) and the recession of the early 1990s. In both cases young people suffered much more in terms of sluggish or negative growth in employment in the years following these events compared to employment growth for prime aged (25 to 44 years) and mature aged (45 years plus) people. The youth labour market has changed significantly over the past thirty years. This is partly in response to structural changes in the economy which has witnessed the decline in employment in some industries and growth in others as well as higher rates of participation in full time education. This paper compares unemployment rates of young people relative to other age groups and establishes whether youth unemployment rates today are high by historical standards. The paper also looks at occupational and industry employment trends in the youth labour market and examines where Australia’s youth unemployment rate ranks alongside other OECD countries. The paper also sheds light on whether young people have borne the brunt of weakness in the labour market since the Global Financial Crisis (GFC) of 2008 in terms of indicators such as employment growth (or loss), labour force participation, unemployment and underemployment.

SESSION 5 Public-Private Sector Wage Differentials in Australia: What are the Differences by State and how do they Impact GST Redistribution Decisions Kostas Mavromaras, Sue Richardson and Rong Zhu (NILS, Flinders University) This study contributes to the understanding of the public-private sector wage differentials in Australia. Using data from the 2001-2013 waves of the Household, Income and Labour Dynamics in Australia survey, we show that on average, public sector employees earn higher hourly wages than their counterparts in the private sector. We also find that the wage gap is higher in NSW, VIC, QLD, SA and WA than in TAS, NT and ACT. The paper investigates how hourly wages are determined in the public and private sectors in Australia as a whole and within each state/territory. We employ the Oaxaca-Blinder decomposition to disentangle the wage gaps into two components: an explained/ composition/characteristics part attributable to the differences in workers’ productivity and an unexplained/coefficient/market effect attributable to the differential wage returns to these characteristics. Results to date find that the composition part contributes more to the public-private wage gap than the coefficient part in Australia and in each state/territory. Detailed decomposition results show which individual variables (or sets of related variables) are responsible for the wage gap between the two sectors and how these factors vary by state. We also examine the extent of wage dispersion (as a measure of inequality within each State in the two sectors, and we show that the dispersion of raw/unconditional wages is larger in the private sector than in the public sector. Using a regression method, we find evidence that that this difference in wage dispersion is mainly attributable to the public-private sector differences in employees’ characteristics and that it varies by State.

Furthermore, we examine how the public-private wage gap changes over time. We focus on two periods: 2001-2007 (pre global financial crisis) and 2008-2013 (post global financial crisis). We examine the raw wage gaps between the two sectors and also perform decompositions along the same lines as in the previous sections. The Effects of Income Support Settings on Incentives to Work Nicolas Hérault (The University of Melbourne) This study aims to improve the existing evidence base for specifying means-tested income support payments. The paper uses repeated cross-sectional data from Australia covering all working-age individuals (aged 25 to 54) between 1994 and 2010, a period that encompasses several policy reforms. Including a rich set of explanatory variables, reduced-form equations for labour force participation and hours worked are estimated separately for single parents, single men, single women, married men, and married women with and without children. A novelty of our empirical approach is the inclusion of three individual-specific explanatory variables that reflect the key levers of means-tested policy: benefit rates, withdrawal thresholds, and withdrawal rates. These variables are computed for each individual in our sample, accounting for their circumstances and the year of observation, using a microsimulation model to compute individual-specific benefit rates, benefit withdrawal rates and benefit withdrawal thresholds. The results suggest that for all groups except single men there is a negative association between hours worked (given employment), and net eligibility for benefits. For single adults (including single parents), higher withdrawal thresholds correlate with reduced labour force participation. Both the withdrawal-free threshold of couples and higher first withdrawal rates imply reduced participation rates. Results on the association between hours worked and withdrawal-free thresholds are mixed. However, most individuals with wage rates in the lower half of the distribution tend to work fewer hours when they are subject to higher first withdrawal rates.

List of Participants Name Alex Scherini Alfredo Paloyo Andrew Cameron Bilal Rafi Boyd Hunter Carmen Kong Catherine Hull Cezary Kapuscinski Clive Brooks David Carroll David Hansell Franklin Soriano Geoff Gilfillan Greg Connolly Greg Raymond Jeff Petchey Joanne Flavel Joshua Healy Karen Gallie Keith Hancock Kostas Mavromaras Lixin Cai Mark Collins Mark Wooden Matthew Gray Michael Dockery Nicolas Herault Peter Sloane Phil Lewis Rebecca Gale Rong Zhu Ross Christ Ryan Spencer Sam Kursur Stephane Mahuteau Sue Richardson Thai Nguyen Tim Carlton Tom Karmel Tristan Davies Yongping Li Zhang Wei

Affiliation Commonwealth Grant Commission University of Wollongong Commonwealth Grant Commission Department of Industry, Innovation and Science Australian National University Australian Bureau of Statistics Commonwealth Grant Commission Department of Education and Training Department of Treasury and Finance, VIC Graduate Careers Australia Australian Bureau of Statistics Australian Bureau of Statistics Parliamentary Library, Canberra Department of Employment Department of Treasury and Finance, SA Commonwealth Grant Commission NILS, Flinders University The University of Melbourne Department of Employment NILS, Flinders University NILS, Flinders University Department of Employment Department of Treasury and Finance, SA University of Melbourne The Australian National University Curtin University The University of Melbourne NILS, Flinders University University of Canberra Commonwealth Grant Commission NILS, Flinders University NSW Treasury Australian Bureau of Statistics NSW Treasury NILS, Flinders University NILS, Flinders University Australian Bureau of Statistics Commonwealth Grant Commission NILS, Flinders University Department of Treasury and Finance, SA Department of Employment NILS, Flinders University

River Café Dinner 3rd December @ 7.00 pm War Memorial Dr, North Adelaide SA 5006