How 240,000 older workers could fix Australia’s skills shortage

Australia’s economy could grow by another $29 billion thanks to employers, making it easier for older workers to transition to the next role.

New research published by KPMG has found that the Australian workforce is missing the point by not embracing older workers.

KPMG urban economist Terry Rawnsley said Australia’s workforce participation had “stalled in the last five or 10 years” but bringing people aged 55 to 65 back into the workforce could help tackle the national skills shortage.

“If we could get these workers back into the workforce, that would be a pretty big productivity boost,” he said.

Australia’s labor force participation rate is relatively low compared to global peers, largely due to older Australians leaving the workforce.

Comparing Australia to the rest of the world, Mr Rawnsley noted our relatively poor participation rate of just 69 per cent.

Its global peers, including Sweden, Japan, Estonia and New Zealand, are all above 80 percent.

KPMG argues that bringing the participation rate closer to 77 percent, or adding about 240,000 new jobs, would strengthen the national economy and greatly reduce existing skills shortages.

Mr Rawnsley said Australia’s three pension pillars of pension, superannuation and private savings meant people could retire earlier in Australia, which could explain why Australia had fallen from 17th to 24th globally in workforce participation for 55-64 year olds.

“…in many other countries there are no pensions available to people,” he said.

Analysis of ABS data found that workers aged 55-64 who lost their jobs took on average 20 months to find a new job, compared to around nine months for prime-age workers.

Mr Rawnsley said this created a strong disincentive for them to continue to engage in the labor market.

If employers made a few simple changes to allow for older, more experienced workers, it would have a positive impact, he said.

For example, Mr Rawnsley said older workers tended to prefer part-time work, so if employers and employees agreed flexible arrangements they would be more likely to find the right employees for the role.

“(Businesses) that are successful in recruiting older age groups are those that offer flexible working arrangements, training and development,” he said.

“The labor market is quite tight, so there are still more job vacancies in Australia than before Covid, so businesses need to be flexible if they want to attract the right kind of workers.”

Mr. Rawnsley said an older employee might not be familiar with certain procedures, software or programs, but would likely have a lot of experience and might need training similar to what a business would give a more junior employee.

“I think this is once again a place where employers can come to the party too, because for some businesses this can require quite niche training,” he said.

Mr Rawnsley said increased employment of older workers would also help reduce inflation.

“We know our businesses are struggling with skills shortages and supply chain issues, so if we could magically find 240,000 workers from within the existing country, we could make it easier for businesses to do their jobs and reduce inflationary pressures,” he said.

“It’s a nice free shot to increase productivity in the economy.”