Principle 3: Remove barriers and disincentives to work

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While Australia’s economic rebound and the associated rapid fall in unemployment experienced following periods of localised lock down was positive, it also exposed both short-term challenges resulting from the pandemic, as well as long-term structural issues within the labour market that need to be addressed.

The strong demand for both skilled and unskilled labour saw more Australians than ever entering the workforce. But it also resulted in labour constraints, with workforce shortages emerging in certain sectors, and regional areas being particularly hard hit.

If we are to boost participation and employment, we need to understand and address existing barriers and disincentives to work where possible. Removing these frictions will also assist in enhancing labour market efficiency. Barriers can take many forms, ranging from skills mismatches; the type of work and its associated wages and conditions; perceived or real regional disadvantages; cultural mindsets regarding the employment of certain groups including people with disability, and Indigenous Australians, accessible and affordable childcare; broader socio-economic disadvantage and impediments to labour mobility such as housing affordability and availability, access to amenities and occupational regulations.

How Australians work is changing and has been accelerated by the COVID-19 pandemic. The Productivity Commission found that up to 40% of employed people were working from home in early 2021, supported by critical enablers such as the rollout of the NBN.10 Workplace flexibility can provide opportunities for people who face barriers to work, such as people with disability or caring responsibilities.

Industry needs to play a central role in promoting the attractiveness of their job opportunities and increasing the retention of workers. Employers also need to support workplace flexibility, culturally safe workplaces, a pathway for career progression and support for staff to upskill and reskill.

Over the long-term, there is also opportunity for industry to consider the need for systemic reforms to make their jobs more attractive and fulfilling to prospective workers, and to be agile in considering how these workers may fit their requirements - for example, those transitioning from careers in the Australian Defence Force.

Global insights

One means of boosting workforce participation is through incentivising key cohorts. Workforce drop outs for some cohorts can be prevented by targeted action towards specific barriers, such as childcare support for working parents. Likewise, geographic mobility can be encouraged by addressing financial or regulatory barriers, including subsidies for relocation, and automatic skills recognition.

Singapore’s ‘Work-Life Grant’ aims to incentivise companies to maintain the use of flexible work arrangements for employees to create work-life harmony. The Flexible Work Arrangement Incentive encourages companies to implement flexible working arrangements for employees, and the Job Sharing Incentive encourages employers to implement job sharing

10 Productivity Commission, Working from home Research Paper, September 2021