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More young people entering the labour market

More young people are entering the labour market. As at May 2023, the employment to population ratio for people aged 15 to 24 years is 63.6%, which is well above the three year pre-COVID-19 average.

Strong employment growth for young people aged 15 to 24 years has been associated with a fall in the proportion of full-time tertiary education attendance in Victoria (Figure 3.2). The strong labour market is encouraging more young people to forego tertiary education for employment. In addition, the rising inflation further increases the incentive to forego tertiary education for employment. These trends are also observed across Australia, as noted by Borland (2023).26

Figure 3.2: Proportion attending tertiary education full-time and employment to population ratio, 15 to 24 year olds, Victoria (May 2013 to May 2023)

Note: data are seasonally adjusted by the Victorian Skills Authority. The proportion attending tertiary education full-time is calculated by dividing the number of people aged 15 to 24 years by the civilian population for people aged 15 to 24 years. Source: Australian Bureau of Statistics (ABS) Labour Force, Australia, May 2023, Table 16; ABS, Labour Force, Australia, Detailed, May 2023, Datacube LM3.

Higher youth labour supply today could come at the cost of higher-order skills in the future. Young people are potentially foregoing their tertiary education and the knowledge and skills they would acquire through formal education. This may have longer-term consequences as the lifetime earnings of these individuals may be lower due to their lower level of formally recognised skills, as well as a higher likelihood of ending up in precarious employment.27

Ageing population

The proportion of working-age Victorians (defined as those aged between 15 and 64 years) is not keeping pace with the overall population as the population ages. In June 2022, around two-thirds (65.4%) of the population were of working age. This is expected to decrease to 63.9% in 2050. In regional areas, this proportion is expected to fall even more to 57.6% in 2050 (Figure 3.3).

This will result in fewer workers available to meet the employment demand triggered by overall population growth. Further, those outside of the working age population, such as children and retirees, generally need higher levels of support in terms of education, health, and aged care.

Figure 3.3: Proportion of population that is of working age, Victoria (2012 to 2056)

Note: Victoria in Future (VIF) Source: Australian Bureau of Statistics (ABS) National, state and territory population (June 2022); Department of Transport and Planning, Victoria in Future (2019).

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Notes

26 Borland (2023) Employment up, education down, Labour market snapshot #96.

27 For example, see Wilson J, Bryson F, Campi C, Batten N and Tuan Anh Ly I (2020) Research Paper for the NSW Council of Social Service: Measurements of Precarious Employment in NSW and Australia, University of Sydney Policy Reform Project.

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