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The Output Implications of Higher Labour Force Participation

Author

Listed:
  • David Gruen

    (Treasury, Government of Australia)

  • Matthew Garbutt

    (Treasury, Government of Australia)

Abstract

This paper examines the output implications of a significant rise in Australian labour force participation over the next forty years. Using the projections in the Commonwealth Government’s 2002-03 Intergenerational Report as a benchmark, it generates alternative projections assuming that, for each age-and-gender cohort, Australian participation rates rise gradually over (roughly) the next twenty years to reach the 80th percentile of the distribution of current participation rates across the OECD. Over the following twenty years, it assumes that Australian participation rates remain at these higher values. These alternative projections, if they were realised, would imply gradually rising aggregate labour force participation in Australia for most of the next twenty years, rather than gradually falling participation, as projected in the Intergenerational Report. Output in twenty years time would be about 9 per cent higher than that projected in the Intergenerational Report, and would remain about 9 per cent higher for the following twenty years. About one-third of the rise in output in these alternative projections would be accounted for by higher participation by 45-64 year old males, and between one-sixth and one-quarter by higher participation by people aged 65 and over. Some of the rise in participation rates in the alternative projections could occur as a consequence of recent rises in educational attainment flowing through to older age groups over time. Much of the rise, were it to occur, would need to come about as a consequence of changes in policy and in community attitudes, particularly to older workers.

Suggested Citation

  • David Gruen & Matthew Garbutt, 2003. "The Output Implications of Higher Labour Force Participation," Treasury Working Papers 2003-02, The Treasury, Australian Government, revised Oct 2003.
  • Handle: RePEc:tsy:wpaper:wpaper_tsy_wp_2003_2
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    File URL: http://archive.treasury.gov.au/documents/702/PDF/Paper%20No%202%20Higher%20Participation%20Screen%20Optimised.pdf
    File Function: First version, 2003
    Download Restriction: no

    References listed on IDEAS

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    1. Stanley Fischer, 1999. "On the Need for an International Lender of Last Resort," Journal of Economic Perspectives, American Economic Association, pages 85-104.
    2. Peter B. Kenen, 1994. "Managing the World Economy: Fifty Years After Bretton Woods," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 48.
    3. Citrin, Daniel & Fischer, Stanley, 2000. "Strengthening the International Financial System: Key Issues," World Development, Elsevier, vol. 28(6), pages 1133-1142, June.
    4. Peter B. Kenen, 2001. "International Financial Architecture: What's New? What's Missing?, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 335.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Ralph Lattimore & Clinton Pobke, 2008. "Recent Trends in Australian Fertility," Staff Working Papers 0806, Productivity Commission, Government of Australia.
    2. Grant Johnston, 2005. "Women’s participation in the labour force," Treasury Working Paper Series 05/06, New Zealand Treasury.
    3. David Gruen & Matthew Garbutt, 2004. "The long term fiscal implications of raising Australian labour force participation or productivity growth," Treasury Working Papers 2004-01, The Treasury, Australian Government, revised Apr 2004.
    4. Patrick Laplagne & Maurice Glover & Anthony Shomos, 2007. "Effects of Health and Education on Labour Force Participation," Staff Working Papers 0704, Productivity Commission, Government of Australia.
    5. Steven Kennedy & David Hedley, 2003. "A Note on Educational Attainment and Labour Force Participation in Australia," Treasury Working Papers 2003-03, The Treasury, Australian Government, revised Nov 2003.
    6. Robert V. Breunig & Carol Gisz, 2009. "An Exploration of Australian Petrol Demand: Unobservable Habits, Irreversibility and Some Updated Estimates," The Economic Record, The Economic Society of Australia, pages 73-91.
    7. Bell, William Paul, 2005. "An evaluation of policies to reduce fiscal pressure induced by population ageing in Australia," MPRA Paper 38286, University Library of Munich, Germany.

    More about this item

    Keywords

    Intergenerational Report; labour force participation; ageing;

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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