Chapter 2 The Australian labour market to 2020

State of Australia’s Skills 2021: now and into the future

Chapter 2 The Australian labour market to 2020

The Australian labour market has been transformed over the past 40 years.

There has been strong growth in higher skill level jobs, non-routine jobs and services jobs, and growing use of automation. These changes have also been reflected at both the occupation and industry level.

Alongside the changes in the types of jobs and the skills they require there have been enduring structural changes. Female employment and participation have grown strongly; and in response to higher skills needs, young people are spending longer in education.

These structural changes have been influenced by broad social and institutional changes. Workplaces have become more flexible, parents have greater access to child care, gender roles are changing and fertility rates have fallen. STEM skills (science, technology, engineering and maths) are an integral part of Australia’s labour market, which have helped facilitate the emergence of more complex, innovative work in many industries. Over the 20 years to February 2020, before the impact of the COVID-19 pandemic on the labour market, employment in STEM occupations grew by 85.0%. This is more than twice as fast as non-STEM occupations (which grew 40.2%).

On the whole, the labour market has responded well to these changes and to the shock of the COVID-19 pandemic.

Even so, these changes have repercussions for traditionally disadvantaged cohorts such as youth and the long-term unemployed.

The first section of this chapter, on the changing shape of the workforce, takes a 40-year view, as many important changes are more apparent from this vantage point. It describes the historical performance of the labour market until early 2020, before the COVID-19 shock hit the labour market.

The chapter then reviews the changes in the skills mix and occupations mix of the Australian labour force over the past 20 years. Structural change has facilitated considerable evolution of the needs of industry, as well as those skills used by workers. These structural shifts, together with several large economic shocks, have also been the catalyst for the decline in the availability of a number of lower-skilled entry-level jobs. This has encouraged younger people to seek greater levels of
education to improve their job prospects.

The effects of migration in this context are also significant, boosting labour force participation and increasing the diversity of the workforce 2. In recent decades, net overseas migration has been a key driver of population growth and since 2005-06 has consistently contributed more to population growth than has natural increase. The composition of the migrant intake is also an important consideration, with the refocusing of Australia’s migration program to target skilled migrants resulting in the permanent skilled intake being almost five times as large in 2020 as it was in 1996 3. The rationale for this shift is that
younger and more skilled migrants are best placed to make a positive economic contribution to Australia 4.

The next section discusses changes in the shape of Australian industry. These changes have been more marked over the past 20 years, so the discussion of these trends begins in 2000. There are case studies of two industries: health care and social assistance, and manufacturing.

Automation has also affected the labour market over the past several decades and will continue to do so in the years ahead. Greater use of technology has changed many jobs and encouraged growth in higher skilled jobs. The chapter reviews the effects of increasing automation by looking at jobs according to their level of automatability.



Treasury and Department of Home Affairs, Shaping a nation, 2018.


Centre for Population, Population statement, 2020.


Productivity Commission, Migrant intake into Australia, 2016.