Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 584

A significant shift in the jobs market

Job figures for September 2024 reveal that nearly all the additional hours worked over the past year have been in the non-market sector. Much of this has come from the ‘care economy’ - the fastest growing sector over the past decade, and the most common destination for workers switching industries. This has accelerated a long-standing trend in the Australian economy: its transition from goods production—particularly in agriculture and manufacturing—towards services - such as education, tourism, hospitality, and retail.

An ageing population that demands more healthcare, boosts to wages for aged care and child care workers, potential new investments in cheaper child care, and the continued growth of the National Disability Insurance Scheme (NDIS) underpin projections that this shift will continue.

These projections of an ever-growing care economy often do not consider how the economy’s supply-side adjusts to accommodate it. Looking at employment shifts between sectors over the decade to 2022 can help unpack this.

The shift towards the care economy is stark in these terms.

You can also see the clear trend away from employment in goods sectors. In fact, employment growth has been negative or small in most major goods industries – meaning they are falling as a share of the workforce. Many workers are leaving these sectors or retiring out of them. The one exception is construction, which has seen robust employment growth and stayed similar as a share of employment. Construction is an anomaly reflecting the high demand for homes and infrastructure running up against declining productivity, possibly in part due to zoning restrictions.

The care economy may look like a participant in the march towards a service-based economy. But the growth of the care economy differs from other service sectors in three key ways, with important economic implications.

First, while other service sectors have grown largely through new migrants and drawing workers from non-employment, the care economy has grown largely from workers switching in from work in other industries in the year prior. New research from e61 shows that over half of those switching into the care economy came from two major ‘churn industries’ – Accommodation & Food and Retail. Australians often use those industries as the first rung on the job ladder and the care economy has been capturing many of the subsequent steps.

Other significant contributors include Administration & Support, and Public Administration & Safety. This shift has caused market services' share of employment to decline for the first time in decades, dropping from 53% pre-pandemic to below 51% today.

Second, the care economy has seen almost no measured productivity growth over the past decade, while most other service industries have shown solid gains. Although productivity growth is difficult to measure in the care economy (and appears to be underestimated in healthcare), a significant expansion in labour—reliably measured—has been essential to drive the growth of the care economy.

By contrast, other service industries have generally grown through productivity growth alone. This is true both in service industries which use technology heavily (such as IT and professional services – with finance being an exception) and those which are more people-driven. Looking at the industries supplying care economy workers: over the past decade, retail labour productivity is up 13%, accommodation & food by 18%, and administrative services by 23%.

However, this trend doesn't hold in the care economy, or for that matter, its companion “non-market” industry, education and training, where output has increased only by adding more workers, given productivity has been stagnant. The longstanding fear that 'services will slow productivity growth' is not being realised. Service sectors are not a monolith. Some service sectors – particularly in the `non-market’ sector - are experiencing weak productivity growth, but not all.

Third, policymakers may have to reconceptualise what productivity growth looks like on the ground. Productivity growth in market services over the past decade can be easy to visualise. Self-checkouts and restaurant QR codes, though sometimes inconvenient, reflect investments in labour-saving technology. Online retail can also improve efficiency in warehousing and inventory management. These changes – potentially also a response to a tight labour market and competition for workers from the care economy, where relative wages have risen materially over the past decade – mean firms can grow output with less labour use.

In contrast, imagining labour-saving productivity improvements in childcare or aged care is more difficult. In these sectors, preserving quality may be more important. It’s difficult to imagine a "self-checkout" equivalent for aged care. Instead, productivity growth might come from improving service quality without increasing worker numbers, as the Productivity Commission found in healthcare, rather than cutting labour while maintaining the same quality.

The expansion of the care economy represents the most profound structural change since the mining boom. It also offers the chance to ensure high-quality care for the most vulnerable—something a prosperous country like Australia can and should achieve. However, this brings fresh challenges, particularly in terms of labour demands and the impact on productivity growth both within the sector, and beyond.

 

Matthew Maltman is a Research Economist at the e61 institute, and previously worked at the Australian Productivity Commission.

 

RELATED ARTICLES

Why is Philip Lowe worried about productivity?

Jobs Summit keynote: the changing Australian economy

Are older Australians re-assessing the job market?

banner

Most viewed in recent weeks

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are franking credits worth pursuing?

Are franking credits factored into share prices? The data suggests they're probably not, and there are certain types of stocks that offer higher franking credits as well as the prospect for higher returns.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Latest Updates

A nation of landlords and fund managers

Super and housing dwarf every other asset class in Australia, and they’ve both become too big to fail. Can they continue to grow at current rates, and if so, what are the implications for the economy, work and markets?

Economy

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Retirement

Retiring debt-free may not be the best strategy

Retiring with debt may have advantages. Maintaining a mortgage on the family home can provide a line of credit in retirement for flexibility, extra income, and a DIY reverse mortgage strategy.

Shares

Why the ASX is losing Its best companies

The ASX is shrinking not by accident, but by design. A governance model that rewards detachment over ownership is driving capital into private hands and weakening public markets.

Investment strategies

3 reasons the party in big tech stocks may be over

The AI boom has sparked investor euphoria, but under the surface, US big tech is showing cracks - slowing growth, surging capex, and fading dominance signal it's time to question conventional tech optimism.

Investment strategies

Resilience is the new alpha

Trade is now a strategic weapon, reshaping the investment landscape. In this environment, resilient companies - those capable of absorbing shocks and defending margins - are best positioned to outperform.

Shares

The DNA of long-term compounding machines

The next generation of wealth creation is likely to emerge from founder influenced firms that combine scalable models with long-term alignment. Four signs can alert investors to these companies before the crowds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.