Qld can no longer blame a higher participation rate for its higher unemployment rate

Queensland has typically had a higher unemployment rate than the national average, and for many years this has been attributed by some commentators to Queensland having a higher workforce participation rate (and proportionately more people wanting to work).[1] But Queensland’s participation rate of 65.8% is now below the national average of 66% (see chart below), while the state’s June-19 unemployment rate was 6.3%, 1.1 percentage points higher than the national average of 5.2% (check out Queensland Treasury’s briefing on the June data). We cannot blame higher workforce participation and must consider whether other factors, such as poorer regulatory policy settings, explain Queensland’s higher unemployment rate.

prates_aus_v_qld

Why is the national average participation rate now higher than Queensland’s? It’s likely due to a mixture of demographic and economic factors.

First, as workers get older on average, participation rates of older age groups get higher weightings in calculating the total participation rate. Queensland has a significantly higher youth participation rate than the national average, but this is becoming less important as the average age of the workforce increases.

Second, as I have noted many times on this blog, Queensland lacks the corporate HQs and the full range of professional jobs that other states have, and this means fewer career opportunities. This may partly explain the lower participation rate in Queensland among 25-34 year old people.* Finally, the greater professional opportunities in southern states may explain why 55-64 year old people in the rest of Australia are more likely to participate in the labour market (see chart below). It’s a bit easier for professionals to continue working as they age than people in manual labour jobs.

Prate_age

The higher participation rate for 25-34 year old people in the rest of Australia has become more important over time in explaining differences in participation rates between Queensland and the rest of Australia. The share of 25-34 year old people in the total 15+ population has increased significantly in the rest of Australia, possibly due to immigration, while it has remained stable in Queensland (see chart below).

Shares_pop

I intend to look deeper into this issue in a future post, and I will continue to advocate for a comprehensive review of Queensland’s policy settings. In this September 2018 post I wrote:

I’d suggest the Queensland Treasury urgently investigates Queensland’s ongoing economic under-performance, delving into whether it’s due to inferior policy and regulatory settings relative to other states and territories. This could be a good job for a revived Office of Economic and Statistical Research (OESR). This arm of Treasury was doing excellent work researching the drivers of state economic growth in the late 1990s and early 2000s. But, in recent years, it has been operating under its original historical name, the Queensland Government Statistician’s Office, and it now appears to lack sufficient resources and ministerial support to undertake in-depth economic research. The state government should consider reviving OESR, with a view to better understanding Queensland’s relative economic performance.

[1] The participation rate is the labour force (employed plus unemployed people) as a percentage of the civilian (i.e. non-military) population aged 15 and over.

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