We must rethink migration to fill the gaps retiring Baby Boomers leave behind
I’ve written about the concept of the retirement cliff before and mentioned it in last week’s column when discussing how Baby Boomer business owners are now in their last decade of work.
Australia’s workforce is heading for a retirement cliff – especially in lower-skilled roles.
The retirement cliff describes the swelling number of workers already past the age 65 and those aged 55-64 who are likely to exit the workforce in the next decade.
This looming exodus of workers will hit some sectors much harder than others.
Let’s start with education. Younger generations are more highly educated than older generations. As expected then, we see relatively steep retirement cliffs among the workers with low educational credentials.
We see many relatively uneducated workers retire in the next ten years. How are we going to fill their jobs?
Today, 80 per cent of Australian students finish year 12. Of those, more than half (53 per cent) head to university. That leaves fewer young Australians entering trades or service-sector jobs that require less formal education – just as we face a wave of retirements in these roles.
A friendly reminder that “low-skilled” is not a judgment of the worker or the work but just a technical term used to describe jobs that require relatively little formal training.
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Scanning through the 20 professions with the highest numbers of uneducated workers (below a year 10 education), we see that jobs in hospitality and retail are dominating.
Once these workers enter their well-deserved retirement, they need to be replaced – we probably need to add even more workers in these industries considering that Australia merrily continues to add around 360,000 people each year.
Won’t AI help us?
Sure, we will see huge investments into AI and your management consulting or law job will look very different, but retail assistants will still be there to staff an outlet, kitchen hands will still be needed in huge numbers, and waiters will still carry food around (don’t expect an all encompassing take over of those cute Japanese tray robots with kitten faces).
Robot kitten waiters may not be the answer. Photo: YouTube/Nikkei
OK, in many instances, these occupations are springboard jobs for young workers while they gain higher qualifications. Who among us hasn’t worked in retail or hospitality in their teens and early 20s?
Many of these jobs have very low shares of workers under the age of 55.
We will continue to attract young workers for a relatively short period of their careers to work in these occupations. We will still feel the pain of workers retiring out of these jobs.
For now, we must assume that neither AI nor robotics will massively improve the number of meals a waiter can serve, fill supermarket shelves faster or clean your office faster. This suggests that we value the increasingly rare resource of waiters, shelf fillers, and cleaners more and try to lure them into our businesses with higher wages.
For business this means higher operating costs. For customers this means higher prices. For the economy this means higher spending. For the RBA this means higher interest rates to curb the inflationary spending.
The impacts of this job shortage on consumption and interest rates aren’t massive, but they point in the wrong direction.
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Now let’s make our lives easier and look at the industries that will face the steepest retirement cliffs.
Agriculture is famously dominated by an aging workforce as farmers delay retirement because their kids aren’t interested in taking over the family farm.
So far, mechanisation in agriculture has allowed our farms to increase yields while shrinking their workforce. This trend will continue for quite some while, but we will still need well over a quarter of a million workers directly and permanently employed in agriculture, no matter what.
The seasonality of agriculture will continue to create short-term surges of employment. How are we going to fill these jobs? Most likely some sort of imported labour, as is the case right now with the Seasonal Worker Program (SWP) or the Pacific Australia Labour Mobility (PALM) schemes, as well as backpackers (Working Holiday Makers).
Self-driving vehicles and dark (as in fully automated) warehouses will do their bit to automate the logistics industry.
Considering that Australia continues to grow its population and that we continue to shift more of our retail to online, we would expect demand for logistics workers to grow even as automation eases some pressure.
But aging drivers and warehouse workers still need to be replaced now.
The need to replace the aging workers makes job forecasts by industry even more dramatic.
Jobs and Skills Australia, for example, expects that we need to add close to 600,000 health jobs in the next 10 years – these are net figures and don’t take into account the above-average replacement needs of the healthcare sector. Ouch.
Ensuring adequate healthcare to Australians in 10 years is going to be a huge challenge, and I am not entirely optimistic that we will achieve these employment goals.
With two million new jobs to fill this decade on top of huge replacement needs in aged care and healthcare, Australia simply cannot afford to slash migration. That doesn’t mean we don’t need reform.
Let’s shift the focus from degree-mill student visas to skilled migration that strategically fills these gaps.
I hope this column has achieved three things:
First, I wanted to make you aware of how severe our existing skills shortage will be amplified by the steep retirement cliff.
Second, I want Australian employers and politicians to embrace AI, automation and robotics without fear that it would lead to huge unemployment rates in our future.
Finally, I hope that these shocking employment projections help us to move away from simplistic and rather unhelpful discussions about cutting migration down to zero to meaningful exploration about migration reforms that help us to channel more desperately needed workers into our workforce in the coming decade.
Simon Kuestenmacher is a co-founder of The Demographics Group. His columns, media commentary and public speaking focus on current socio-demographic trends and how these impact Australia. His podcast, Demographics Decoded, explores the world through the demographic lens. Follow Simon on Twitter (X), Facebook, or LinkedIn.
