Tackling the challenge of Tasmania’s ageing population

Tasmanians wait for the royal visitors to arrive earlier this year. The state has a population both the oldest in the country and ageing fastest.

Along with stagnating economic growth, Tasmania is facing a major demographic challenge - rising unemployment and a population which is both the oldest in the country and ageing faster than any other state or territory.

While other states are experiencing the economic conditions to address population ageing, Tasmania has the challenge of a growth in total dependency exceeding its growth in labour productivity.

Labour Productivity and Total Dependency Ratio - Tasmania. ABS National Accounts Cat. No. 5206.0, Labour Force Data Cat. No. 6202.0, Australian Demographic Statistics Cat. No. 3101.0

But Tasmania does have untapped opportunities and resources which may provide a solution to some of the state’s challenges.

1. A largely untapped supply of labour not participating in the labour market

While the contraction in Tasmania’s working age population suggests a lack of available labour and skills, only a persistently low and falling rate of unemployment indicates a true lack of labour. More important than size to economic performance is the productivity of the labour force.

Almost 40% of Tasmania’s potential labour force is not participating in the labour market. On top of that the state has a large proportion of the population either unemployed or underemployed.

A lower level of labour market engagement by women is particularly evident, despite higher levels of educational attainment for all age groups, while varying levels of confidence are evident.

2. A ‘brain gain’ as a result of net migration movements

Tasmania’s population is influenced by migration movements in and out of the state. While net losses in the working age population have dominated discussion of Tasmania’s future supply of labour, a report by the Demographic Change Advisory Council identified migration movements between Tasmania and other Australian states between 2001 and 2006 actually resulted in a ‘brain gain’ for the state.

The percentage of the adult population with post-school qualifications increased from 36.7% in 2001 to 37.0% in 2006. This net gain was the sum of a brain drain of the 15-24 year olds and a brain gain from the 25 to 65+ age groups. However, only 56% of those who arrived in the state gained employment, compared with 67% of those who left the state. This suggests a large number of the migrants who are not active in the labour market once arriving in Tasmania. For the older migrants, however, it is likely that they come to the state to retire and are not seeking work.

3. Stabilising fertility rates at replacement level rates

In recent times, Tasmania’s fertility rates have exceeded the population replacement level (2.1 births per woman in her lifetime). The total fertility rate (TFR) reached a low of 1.797 in 1997, and since that point has trended upward. The TFR average for the past ten years is 2.074.

These births are critical to Tasmania for two reasons. Firstly, should this trend continue, Tasmania has the opportunity to stabilise and grow its population. While the birth rates are not significant enough to replace previous population losses, the opportunity to prevent any further losses is available.

Secondly, the timing of the increases in birth numbers in Tasmania advantages those born in the last five to ten years entering the labour market as the last of the baby boomers reach retirement age and exit the workforce (around 2023). These recent-borns are referred to as the “Thank God You’re Here” Generation as they will provide welcome relief in replenishing lost labour, provided Tasmania can retain the generation in the state.

4. Government commitment to industry diversification under the Tasmanian Forests Intergovernmental Agreement (TFIA).

The only way for Tasmania to safeguard itself against rising dependency ratios into the future is to increase productive investment by increasing the capacities of the factors of production.

Previously, Tasmania has made the mistake of focusing its investment in the human capital educational component of the factors of production, primarily channelling funds to the unemployed. This large-scale investment has not been reciprocated with the equivalent level of investment for increasing demand. Essentially, there is little point in investing in human capital and enhancing skill supply, particularly given evidence of relatively low levels of labour usage, limited evidence of skill shortages, and low demand for labour, unless a comparative effort is invested in increasing the demand for labour and skills.

Tasmania is in the unique position where it may actually be able to achieve this.

In August 2011 the TFIA was signed. The TFIA is designed to support the forest industry to progressively transition to a more sustainable and diversified footing and to build regional economic diversity and community resilience. Some $120 million of the total $277 million package provided under the TFIA is to be directed to identifying and funding appropriate regional development projects.

This is a one-off, significant opportunity for Tasmania to increase the state’s capacity to build demand for labour and skills.

By creating demand through the TFIA economic diversification project, Tasmania has the opportunity to set the foundations for its future, establish a new direction for its industry base and capitalise on its comparative and competitive advantages.

The TFIA provides Tasmania the opportunity to create the demand needed to both stimulate economic activity and increase labour force participation while also prepare for the future challenges of population ageing.

Despite a persistent reputation as a mendicant state, Tasmania has four factors in its favour for achieving economic and social sustainability. While the first three; an underutilised labour market, a net brain gain from interstate migration and replacement level fertility, combined with effective policy, could achieve this in their own right, it is the impetus of the fourth factor; investment in economic diversification through the Tasmanian Forests Intergovernmental Agreement which will enable complete regeneration of the state’s economy.