OECD Employment Outlook 2024 - Country Notes: Australia

This country note provides an overview of the labour market situation in Australia drawing on data from OECD Employment Outlook 2024. It also looks at how the transition to net-zero emissions by 2050 will affect the labour market and workers’ jobs.

Labour markets have been resilient and remain tight

Labour markets continued to perform strongly, with many countries seeing historically high levels of employment and low levels of unemployment. By May 2024, the OECD unemployment rate was at 4.9%. In most countries, employment rates improved more for women than for men, compared to pre‑pandemic levels. Labour market tightness keeps easing but remains generally elevated.

• Despite a slight increase in unemployment since last year from 3.6% (May 2023) to 4% in May 2024, Australia’s labour market shows several positive developments. Labour force participation of the working-age population (persons aged 15‑64) has increased by 1.8 percentage points between pre‑COVID‑19 crisis and Q1 2024, while the employment rate has increased by 2.7 percentage points over the same period. This upward trend in employment has been particularly strong among young people, with the youth employment rate (persons aged 15‑24) increasing by 3.9 percentage points.

• Despite a projected slowing of the Australian economy in 2024 before recovering in 2025, the labour market is projected to remain tight with the unemployment rate rising to reach 4.3% in Q4 2025. The growth in unit labour cost is translating into relatively high inflation for labour-intensive items such as some market services.

• A long-awaited visa programme overhaul is expected to partially address skill and labour shortages in key industries. The Skills in Demand Visa, which will come into effect by the end of 2024 and will replace the Temporary Skill Shortage Visa, aims to address labour market needs by offering visa holders more flexibility in changing employer during their stay and a clearer pathway to apply for permanent residency. The system will target specialist, core and essential skills, providing incentives for employers to attract and retain skilled worker.

Real wages are now growing but there is still ground to be recovered

Real wages are now growing year-on-year in most OECD countries, in the context of declining inflation. They are, however, still below their 2019 level in many countries. As real wages are recovering some of the lost ground, profits are beginning to buffer some of the increase in labour costs. In many countries, there is room for profits to absorb further wage increases, especially as there are no signs of a price‑wage spiral.

Figure 1. Unemployment rates remain at historically low levels in many countries, though it is expected to rise further in Australia

Unemployment rate (percentage of labour force), seasonally adjusted data

Note: The latest data refer to March 2024 for the United Kingdom, and June 2024 for Canada and the United States.

Source: OECD Employment Outlook 2024, Chapter 1.

• In Australia real wages are still 4.8% lower than they were just before the pandemic in Q4 2019. This is one of the largest drops in real wages among OECD countries. Real wages grew in 2024 for the first time in nearly three years, but households are still facing pressure under the cost-of-living crisis.

In May 2024, the real minimum wage was 12.8% higher than in May 2019 on average across the 30 OECD countries that have a national statutory minimum wage. The average figure is driven in part by particularly large increases in some countries, but the median increase was also quite significant, at 8.3%.

• In May 2024, the nominal minimum wage in Australia was 22.7% higher (cumulative change) than May 2019. However, the real minimum wage increased by only 2.3% in the same period, less than in most OECD countries and below the median OECD average of 8.3%.

• The Fair Work Commission has announced a 3.75% increase to the National Minimum Wage and minimum award wages as of 1 July 2024, an increase that will cover most employees in the country.

Climate change mitigation will lead to substantial job reallocation

The ambitious net-zero transitions currently undergoing in OECD countries are expected to have only a modest effect on aggregate employment. However, some jobs will disappear, new opportunities will emerge, and many existing jobs will be transformed. Across the OECD, 20% of the workforce is employed in green-driven occupations, including jobs that do not directly contribute to emission reductions but are likely to be in demand because they support green activities. Conversely, about 7% is in greenhouse gas (GHG)-intensive occupations.

• The Australian labour market displays similar characteristics to the OECD average, with 21% of Australia’s workforce employed in green-driven occupations while 7% are employed in GHG-intensive occupations.

• Many high-skilled emission-intensive and green-driven jobs are very similar in their skill requirements, meaning that high-skilled workers can move from emission-intensive to climate‑friendly industries with relatively little retraining. However, this is not the case for low-skilled workers, who will require more retraining to move out of emission-intensive occupations.

• Many policy initiatives and programmes in Australia aim to fill this gap by providing training and support for adults and young people transitioning into the green sector. The Australian New Energy Apprenticeship Program seeks to support 10 000 apprentices in the clean and renewable energy sector through training, career guidance and financial support, while the New Energy Skills Program assists training organisations in developing up-to-date and industry-relevant training on the green energy transition. Increasing participation of underrepresented groups is an important part of Australia’s strategy for the clean energy transition, and the Fee‑Free TAFE initiative will deliver 180 000 places in vocational education courses free of cost for priority groups for in-demand occupations, including occupations key in the energy transition.

Job loss in high emission sectors carries larger costs than in other sectors

The net-zero transition induces a contraction of high emission sectors, which account for 80% of GHG emissions but only 7% of employment. Workers in these sectors face greater earnings losses after job displacement, averaging a 36% decrease over six years after job loss compared to 29% in other sectors. Policies that support incomes and facilitate job transitions are essential to mitigate these losses and ensure support for the net-zero transition.

• Workers in high-emission sectors in Australia face an earnings loss of 29% over six years relatively close to the 25% average earnings loss for workers in low-emission sectors. The small difference of 4 percentage points in displacement cost could be connected to a well-functioning labour market as well as comprehensive place‑based policy initiatives in Australia. For example, following the decline of the Australian car manufacturing industry and its potential employment effect in South Australia and Victoria, the Australian Government established the Growth Fund in 2014 which included various sub-programmes designed to support high-value manufacturing, encourage investment in new business opportunities, and assist supply chain companies to diversify. This provided a strong incentive to transition production and employment to new sectors. Workers received funding for training and job search assistance, while the state governments and car manufacturing companies provided additional transition and diversification support for workers.

Figure 2. Workers in high emission sectors face larger job displacement costs than in other sectors

Brief description: The figure shows the difference in average earnings losses for workers displaced in high and low emission sectors over six years after job loss across 14 OECD countries.

Source: OECD Employment Outlook 2024, Chapter 3.

This work is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and arguments employed herein do not necessarily reflect the official views of the Member countries of the OECD.

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.