Human Capital

11-12 June 2024 
H.C. Coombs Centre 
122A Kirribilli Avenue, Kirribilli  NSW  2061

The Jobs and Skills Summit (September 2022) and the Employment White Paper (September 2023) have set out the Governments’ response to challenges and opportunities facing the Australian labour market and economy. Through the lens of human capital, this conference will explore how data, and new measurement approaches, can inform the research and policies addressing these challenges and opportunities.

A review of how economists’ thinking about human capital has evolved and the current state of research on human capital in Australia

Abstract: This paper reviews developments in thinking about human capital, and the state of research on human capital in Australia.  Given the vastness of the literature, the review is necessarily impressionistic.  As well, we draw almost exclusively from the economics literature, and use the well-known Mincer earnings function to delineate the scope of our review. Section 2 describes evolution of concept of human capital and its measurement, beginning with Becker-Mincer seminal contributions.  Section 3 reviews Australian research motivated by or based around the concept of human capital.  Section 4 discusses the availability of data and what new research may be possible data that has become recently available.

It all adds up: how to redesign points-tested visas

Abstract: Migrants make significant contributions to Australia – socially, culturally, and economically. The largest part of Australia’s permanent migration program is the skilled stream.  Points-tested visas, which allocate points to potential migrants depending on their age, proficiency in English, education, and work experience, account for two-thirds of all permanent skilled visas issued by Australia over the past decade. On current trends, Australia will offer nearly 1 million points-tested visas over the next decade. Measuring which characteristics predict the long-term earnings of Australian migrants has been difficult historically because of data limitations. Most past studies were only able to measure short-term earnings and employment. With the ABS's new Person Level Integrated Data Asset (PLIDA), analysing what characteristics predict long-term success has recently become feasible. PLIDA allows the linkage of information about migrant's visa histories, characteristics such as English proficiency and education, and the incomes they earn in Australia over the longer term. 

Our analysis shows that points-tested visas are not working as well as they should. Applicants are often awarded points for characteristics that reward their persistence in securing permanent residency, rather than the talents that suggest they will succeed in Australia. Points-tested visas are offered to a subset of skilled occupations where workers are deemed to be ‘in shortage’. This shuts Australia off from many talented migrants, and distorts the study and career choices of many temporary visa-holders already here. Offering separate state and regional points-tested visas results in Australia selecting less-talented migrants who are less likely to succeed in here in the long term. And many regional points-tested visa-holders do not stay in the regions for long.

Children and the Gender Earnings Gap: Evidence for Australia

Abstract: We estimate the impact of children on the gender earnings gap in Australia using an event study approach. We show the arrival of children has a large and persistent impact on the gender earnings gap, reducing female earnings by 53 per cent, on average, in the first 5 years of parenthood. We attribute the gap in earnings to lower participation rates and reduced working hours amongst mothers. Although the decline in earnings for women is similar regardless of their breadwinner status prior to children, women with greater access to workplace flexibility are more likely to remain employed after having children. This is a joint paper with Elif Bahar, Natasha Bradshaw, Nathan Deutscher and Maxine Montaigne.

This work has been published previously as a Treasury working paper (link here).

Towards an estimate of Aboriginal and Torres Strait Islander Human Capital and how it is changing over time

Abstract: Public policy in Australia has historically failed to provide the supports and infrastructure for the Aboriginal and Torres Strait Islander population to engage in formal education in a way which meets the needs and aspirations of the population. This includes early childhood, school, and postschool education. For this reason, human capital development including but not limited to school completion and post-school attainment has been less than equitable, leading to worse outcomes by standard measures (income, employment, and health) and also by Indigenous-specific measures that Aboriginal and Torres Strait Islander Australians have cause to value (including access to land, language, and culture). Over recent years, there has been substantial improvement in the level of education completion for the Aboriginal and Torres Strait Islander population, although the measurement of this change is complicated by changing patterns of identification and location. The aim of this paper is to use publicly available data to measure the level of Aboriginal and Torres Strait Islander human capital and document how it is changing through time. The process of this measurement involves estimating the level of education, calculating the economic and other returns to that education, and then projecting the Aboriginal and Torres Strait Islander population through time under different population and human capital scenarios.

Understanding barriers to work and successful transitions in a post-COVID labour market

Abstract: While understanding and surmounting employment barriers has consistently been a policy goal, its focus and priority has been elevated by governments in recent years. Overcoming barriers and broadening opportunity was one of the five objectives in Working Future - The Australian Government's White paper on Jobs and Opportunities, and investment in more frequent and detailed data is supporting additional analysis and monitoring. This paper explores new insights from ABS data on barriers to work and working additional hours, changes in labour market transitions, and how increasing participation is being supported by changes in hours worked, particularly by women. It also captures how some of these dynamics were influenced by the pandemic and the tight labour market that followed it, challenging some of the prevailing assumptions.

Just how efficient is the Australian Labour Market?

Abstract: Efficiency, in the context of labour markets, can be thought of as being a measure of how successful the labour market is at matching available jobseekers to available jobs. In this research, a Stochastic frontier approach is used to obtain estimates of how efficient this production system is operating across geographical regions in Australia. The relevance of the work stems from the additional insights it provides into how different labour markets within Australia operate, and consequently, the ability of decision makers to design appropriate policies for those labour markets.

Strong and responsive VET pathways  

Abstract: The newly released VET National Data Asset (VNDA) is a collaborative project between Jobs and Skills Australia, the ABS and the National Centre for Vocational Education Research (NCVER). VNDA is unique in being able to track changes to a student’s economic outcomes before and after training and over a period of time. The presentation will share the latest findings across a range of VET courses and different student cohorts such as those with disabilities, First Nations people and women. The insights provided by this data demonstrate the opportunities that can be realised from pursuing VET pathways. 

Graduate Outcomes Survey

Abstract: The Graduate Outcomes Survey (GOS) is part of the Quality Indicators for Learning and Teaching (QILT) suite of surveys undertaken for the Department of Education which seek feedback on the experience and outcomes from higher education students and graduates from commencement to three years after graduation as well as employers.  The GOS and GOS-Longitudinal are largely based on the ABS Labour Force Survey and report on metrics such as employment and underemployment, salaries, industry and occupations but also collect data on other measures such as perceived overqualification, preparedness for current job, satisfaction with their completed course and skills development.  In this presentation we will highlight a few of the insights from the surveys and how we work with the sector to utilise these data to improve the experience and outcomes for their students, and also how we might work to ensure that these surveys are ‘fit for purpose’ going forward.

The Effect of the COVID-19 Recession on the Youth Labour Market in Australia

Abstract: The COVID-19 pandemic hit the Australian economy hard in 2020, ending nearly three decades of growth and causing serious disruptions to the Australian labour market. Young workers always suffer more than older workers during recessions, but the COVID-19 economic shock was particularly bad for the youth labour market. The Australian economy recovered strongly from the COVID recession. Many young Australian workers benefited from the recovery, with the youth unemployment rate declining significantly. But, as this paper shows, not all young Australians have shared in the economic recovery and some have been left behind. We identify groups of young Australians that have not shared in the benefits of the recovery and are most vulnerable to long-term economic scars. These vulnerable groups include 1) young people that are working but are not well matched to their jobs, 2) young people that have not worked for a sustained period, 3) young people that have not been working or studying, particularly men aged between 20 and 24 years and 4) young students that were disproportionately affected by school closures and the shift to remote learning.

Occupational mobility and the efficient use of human capital

Abstract: Labour mobility has implications for how well the Australian labour market makes use of existing human capital. There is evidence that workers are moving more slowly from low-productivity firms, and the decline in mobility is costly to reallocation and productivity growth. Less is known about declines in occupational mobility. Has occupational mobility declined more or less than job-to-job mobility (after controlling for demographics)? Declining occupational mobility could reflect that human capital has become more specific to an occupation and is best used in that occupation. But it could reflect an inefficiently low level of transitions. Firms may be unaware of the knowledge spillovers gained by hiring from other occupations, or of the productivity gains from emphasising ability over experience in hiring. We identify the most frequent occupational transitions in order to draw inferences about their efficiency. This is a joint paper with Catherine de Fontenay, Benjamin Mitra-Kahn, Hudan Nuch, Colin Burns, Jasper Sheehan, and Nick Fransen. This paper uses the Longitudinal Labour Force Survey (LLFS).

Reflections on worker and firm investments in human capital

Abstract: There is an ongoing debate since Gary Becker as to what share of human capital investments should be provided by an employer, and what share should be funded by students. Australia has a range of formal adult education options for lifelong learning, with subsidies and loans available to students for some courses, and many highly specific course offerings. As a result, one might expect that employers would provide less training in Australia than elsewhere and that workers would pay for more of their training themselves, and would enjoy the returns to this training in the form of higher wages. However, analysis of adult education undertaken by workers shows that the measured labour market returns to such education appear to be small and isolated; this result is similar to findings from previous studies and studies overseas. However, adult education is shown to have a positive effect on job satisfaction, which suggests that most adult education is not a substitute for firms investing in workers. The presentation will conclude with some reflections on what data the ABS might be able to gather to understand firm investments in human capital, and what it might mean to measure the efficiency of investments or the return on investments.  

The ties that bind: Post-employment restraints in Australia

Abstract: Australia’s productivity and wage growth slowdown over the past 15 years has been characterised by a decline in job mobility and firm entry. The rise of non-compete clauses in employment contracts, along with other types of restraint clauses, has emerged as a potential contributing factor and a new frontier for inclusive growth and competition policy. It is also a new frontier for economic measurement, with very little previously known about their prevalence in the Australian context, let alone their consequences for productivity and wage growth. This paper follows on from a paper at the 2023 Conference, which summarised the initial exploration of this by e61 and the ABS, and initial worker-side insights from a May 2023 McKinnon Poll. Since then, e61 and the ABS have collaborated on firm-side measurement, with the ABS running a short survey of employment conditions in late 2023, as a follow-up to the 2023 Survey of Employee Earnings and Hours. This provides a world-leading evidence base for understanding the prevalence of non-competes and other restraint clauses, providing an important input into the Competition Review. The new data shows that a large share of Australian workers are subject to restraint clauses and they are often applied indiscriminately, their use has increased over the past 5 years and is expected to increase, are highly prevalent in knowledge-based service industries, and firm entry and job mobility rates appear to be lower in industries where restraint clauses are more prevalent.

Measuring labour quality in (closer to) real time using emerging microdata sources

Abstract: One explanation put forward  for recent weakness in productivity is a decline in the ‘quality’ of labour, as more low productivity workers have entered the labour market. Unfortunately, existing labour quality statistics use fairly lagged data. In this paper we explore the ability to use timely microdata and other detailed data sources to construct labour quality statistics. We also extend existing approaches to consider other factors that could indicate a workers productivity, and which could be incepted into statistics going forward using integrated microdata sources.