The workforce demographics shaping the property market recovery

The growing number of individuals entering the workforce translates into a higher demand for housing, particularly in areas where job opportunities are abundant. Picture: Bloomberg

The demography of work plays a crucial role in shaping the prospects of the property industry. Over the past decade, the labour market has experienced substantial fluctuations.

The years from 2013 to 2019 showed a substantial growth in the Australian workforce, with a robust increase. However, the onset of the pandemic caused a dramatic decline in employment.

Remarkably, an incredible recovery was under way in 2022 and into 2023, with these trends helping to ­determine the direction of the home and commercial markets.

The Australian Bureau of Statistics quarterly data on the labour force ­offers insights into the shifting workforce patterns. In May 2013, the Australian workforce comprised 11.4 million individuals, and it subsequently grew by 1.4 million, reaching 12.8 million by May 2019. On average, approximately 280,000 people were added to the workforce each year during this period.

However, the pandemic was a significant setback, resulting in a loss of approximately 700,000 workers in the 12-month period leading up to May 2020. This reduced the workforce to 12.1 million. Nevertheless, the subsequent 12 months witnessed a rapid recovery, as employment increased by 1 million, surpassing pre-pandemic levels and reaching 13 million by May 2021. This upward trajectory set Australia on a path toward recovery.

Since then, the workforce has continued to expand, with an additional 918,000 individuals joining the workforce, bringing the total to 14.1 million as of May 2023. These figures paint a story of resilience and recovery, showcasing the ability of the labour market to bounce back from challenging times.

The increase in the overall workforce can be attributed to the opening-up phase post-pandemic. Lost jobs were reinstated, skills shortages were addressed with the arrival of skilled migrants, and the demographic factors, such as an increase in the population available to work, had a direct impact on workforce participation rates.

Female workforce participation has also increased, from 58 per cent in May 2020 to 63 per cent in May 2023, surpassing pre-pandemic levels. Similarly, the overall employment-to-population rate has risen from 58 per cent to 65 per cent in the same period. The employment-to-population ratio is the highest since May 1999.

The number of full-time workers has increased by 2 per cent since May 2021. Picture: NCA NewsWire / Damian Shaw

This demographic shift and the expanding workforce have significant implications for the property industry. The growing number of individuals entering the workforce translates into a higher demand for housing, particularly in areas where job opportunities are abundant.

A growing workforce also leads to the expansion of businesses and industries. This could drive hoped-for demand for commercial real estate, including office spaces and retail outlets, and is already seen in industrial properties. As companies seek to accommodate their expanding workforce, they may lease or purchase additional space, stimulating the commercial property market.

Out of the 14.1 million persons employed in May 2023, 70 per cent of the workforce (9.8 million) were engaged in full-time jobs, while 30 per cent (4.2 million) held part-time jobs. The number of full-time workers has increased by 2 per cent since May 2021.

It is noteworthy that unemployment rates dropped to record lows since May 2022. The unemployment rate remains stably low at 3.5 per cent, which is a decrease from 6.9 per cent in May 2020 and significantly lower than pre-pandemic levels. In fact, the unemployment rate in May 2023 is even lower than the pre-global financial crisis rate in 2008.

The ongoing growth in full-time employment, combined with an unemployment rate that is well below its pre-pandemic average, indicates a more efficient utilisation of the workforce and less spare capacity.

The growth of job opportunities across different occupation groups in Australia fills out the picture. Each job in the country is assigned a skill level ranging from 1 to 5, which indicates the qualifications and experience required to perform the tasks associated with the job.

Skill level 1 jobs demand the highest qualifications, usually a bachelor’s degree or higher, while skill level 2 jobs require a diploma. Skill level 3 jobs necessitate a Certificate III or IV, skill level 4 jobs require Certificate II or I, and skill level 5 jobs typically require only secondary education, as most skills are acquired on the job.

Employment trends indicate a shift towards jobs that require some level of post-secondary education or qualification and away from jobs that typically do not demand such qualifications.

During both the pre-pandemic and post-pandemic periods, skill level 1 jobs experienced the highest growth. Between May 2021 and May 2023, skill level 1 jobs increased by 360,000, accounting for 39 per cent of the overall job growth during that time.

The second-highest job growth was observed in skill level 4 jobs. Over the same period, they grew by 285,000, constituting 31 per cent of all new jobs. Skill level 2 jobs saw an increase of 162,000, accounting for 18 per cent of the total job growth.

Skill level 3 and skill level 5 jobs experienced more modest growth, with an increase of 64,000 and 44,000 respectively. These accounted for 7 per cent and 5 per cent of the total job growth during the period.

Data scientist Hari Hara Priya Kannan.

About 95 per cent of the total employment growth has been in occupations that typically require post-school qualifications, highlighting the significance of higher education and vocational education and training systems in fostering a highly skilled Australian workforce.

These proportions provide insights into the workforce composition and growth, highlighting both a substantial presence of higher-skilled jobs with higher incomes and a significant number of lower-skilled jobs with relatively lower incomes.

This distribution pattern signifies a lack of middle-tier jobs, often referred to as middle Australia. The absence of a substantial proportion of mid-level skilled jobs indicates a gap in the workforce. This imbalance suggests a need for a more balanced distribution of job opportunities across skill levels to foster a diverse and inclusive ­labour market.

Critically, this skills and income-based segregation directly affects the housing market as it creates diverse customer segments. This makes it more important to consider housing options that promote inclusivity, social cohesion and provide opportunities for upward mobility.

Creating mixed-income housing developments can help foster socio-economic diversity within communities. These developments consist of a range of housing types, including affordable housing units, middle-income homes, and higher-end properties. This approach helps prevent the segregation of different income groups and promotes interaction and understanding among residents.

Developing affordable housing options is crucial for ensuring that low-income individuals and families have access to safe and decent housing. These initiatives can involve subsidised housing programs, rent-controlled units, or public housing projects. Providing affordable housing opportunities helps to mitigate the negative impacts of gentrification and promotes economic diversity.

To relieve some pressures seen in the current housing crisis, while also preparing for the growing workforce, it is essential to prioritise affordable housing initiatives. This can involve implementing policies and incentives to encourage the construction of affordable units, supporting rent control measures, and investing in social housing programs.

Public-private partnerships can play a significant role in providing affordable housing options. Exploring innovative housing solutions such as modular construction, micro-housing, and adaptive reuse of existing structures can also help increase housing supply and affordability.

Challenges in terms of infrastructure and planning include ensuring that transportation networks, utilities, and public amenities keep pace with population growth. Investment in infrastructure upgrades and expansions is crucial to support the increased demand for services and prevent congestion.

Collaborative efforts between the property industry and government entities are needed to address these challenges and ensure sustainable and well-planned development.

Hari Hara Priya Kannan is Data Scientist at The Demographics Group