Weekly economic briefing: Skilling up – qualification trends in Australia

The Weekly Economic Briefing is written by two senior Deloitte Economists, David Rumbens from Deloitte Access Economics in Australia and Ian Stewart Deloitte’s Chief Economist in the UK. They provide a personal view on topical financial and economic issues. Subscribe to receive the Weekly Economic Briefing in your inbox!

In this week’s blog:

Australian economic briefing
UK economic briefing
International economic briefing

Australian economic briefing by David Rumbens

This section of the briefing provides a snapshot of key economic data and issues of relevance to Australia.

Skilling up – qualification trends in Australia

Australians are skilling up.

The results of the 2016 census reveal that, as a nation we are undertaking more formal qualification, and at higher levels, with the share of the Australian population aged 15 to 64 with a post-school qualification increasing from under 45% in 2006 to almost 58% in 2016. The rise is partly a result of changing government policy, but more broadly, people are responding to changes in the economy and the need for skills from industry.

As technology, innovation and deeper global linkages provide businesses with new opportunities, their workforce needs are also changing. Government policy, including measures to increase school retention, the skilled migration program and making education easier to access have also contributed to a more highly qualified workforce.

Chart 1 Post-school qualifications as a share of the population, age 15-64

Source: Derived from ABS, Census 2006, 2011 and 2016 data.

Part of the growth story in the share of people with qualifications is the rising participation of women in the workforce encouraging more women to invest in education and training. Chart 2 shows that, as a share of the working age population, female qualification attainment is now equal to the male share.

Chart 2 Post‑school qualifications as a share of population age 15-64*, male and female

Source: Derived from ABS, Education and Work cat no. 6227.0

 

Growth in the take-up of qualifications has not been uniform across all qualification types. Chart 3 shows that certificate III and IV, as well as undergraduate qualifications, remain the most widely held highest post-school qualification among Australians. From 2006-2016 the proportion of working age people with an undergraduate qualification as their highest, increased from 14% to over 19% – or more  than one million people. And certificate III and IV holders increased from under 17% to over 20% – or nearly 780,000 more. By contrast, the number of people reporting their highest qualification as certificate I or II decreased from 2006 to 2016, partly as a result of school retention increases.

Chart 3 Highest qualification as a share of population, age 15-64

Source: Derived from ABS, Census 2006, 2011 and 2016 data.

 

Employment growth over the last decade has favoured occupations and industries that generally require higher level qualifications. As technology advances like automation change the nature of work, the skills required to do business are also changing.

Technology creates many new opportunities for employment, but can also, of course, see job losses in other areas. Automation of business processes and tasks is leading to the decline in employment in occupations that involve routine, or which do not require high level cognitive reasoning or personal human interaction.

In 2015, Australia’s Office of the Chief Economist analysed 335 occupations and gave each an automation score from most to least likely to be automated (0 is least likely and 300 is highly likely)[1]. Chart 4 below shows some of the occupations least likely to be automated (scores of 0-4). These occupations also recorded relatively strong employment growth over the last 10 and require higher level skills – generally higher than a school level qualification. Hence the lift in people with post-school qualifications.

Chart 4 Occupations by 10 year annual average employment growth, likelihood to be automated and number of employed in 2016-17

Source: Deloitte analysis of ABS, Detailed Labour Force, Quarterly and automation scores from Australian Department of Industry, Innovation and Science.

 

Note: bubble size is number of people employed in 2016-17. Automation scores from 0 (highly unlikely to be automated) to over 330 (highly likely to be automated).

[1] Edmonds D, Bradley T (2015), Department of Industry, Innovation and Science analysis, Mechanical boon: will automation advance Australia? https://industry.gov.au/Office-of-the-Chief-Economist/Research-Papers/Pages/Mechanical-boon-will-automation-advance-Australia.aspx

For more information on the Australian brief, please contact co-authors David Rumbens and Emma Richardson.

 

UK economic briefing by Ian Stewart

A personal view from Ian Stewart, Deloitte’s Chief Economist in the UK. Subscribe to and view previous Monday Briefings at: http://blogs.deloitte.co.uk/mondaybriefing/

Christmas Quiz 2017

Our Christmas Quiz offers an eclectic test of knowledge of economics and business. The answers, and a brief explanation of the factors at work, are at the end of this note.

 

  1. Which of the following countries has the most affordable housing market relative to incomes, according to The Economist’s house price affordability index?
    1. Singapore
    2. UK
    3. Germany
    4. Japan
  1. Which of the following ranks as the world’s happiest country in the UN’s World Happiness Report for 2017?
    1. US
    2. China
    3. Costa Rica
    4. Norway
  1. In which of the following countries do people work the longest hours?
    1. UK
    2. Poland
    3. Mexico
    4. Germany
  1. Which country’s currency is the most undervalued against the British pound using the the Economist’s Big Mac index?
    1. Norway
    2. Ukraine
    3. Sweden
    4. Switzerland
  1. United Airlines temporarily suspended flights to which city this year as a result of concerns over poor air quality?
    1. Bangkok
    2. Beijing
    3. London
    4. New Delhi
  1. According to a Credit Suisse study the wealthiest 1% of the world’s population own what proportion of global wealth?
    1. 10%
    2. 30%
    3. 50%
    4. 90%
  1. A parking space in the UK sold for £40,000 this year. Where was it?
    1. Mayfair – London
    2. Chelsea – London
    3. Sandbanks – Poole
    4. St Ives – Cornwall
  1. Which of the following countries scores highest in the World Bank’s ease of doing business index?
    1. UK
    2. UAE
    3. US
    4. New Zealand
  1. The Chartered Society of Physiotherapists said that which of the following is damaging our muscles?
    1. Sedentary jobs
    2. Online shopping
    3. Fast food
    4. Ride-hailing services
  1. In a blind taste test of champagnes by a panel of experts conducted by Which? magazine Co-op’s Les Pionniers NV scored 76%, higher than the more expensive Moet & Chandon Brut Imperial NV Champagne (72%). The Moet & Chandon costs £34 a bottle; how much does the Co-op champagne cost?
    1. £13.99
    2. £20.50
    3. £16.99

Answers

  1. Which of the following countries has the most affordable housing market relative to incomes, according to The Economist’s house price affordability index?
    1. Singapore
    2. UK
    3. Germany
    4. Japan

Answer: Singapore. Property in Singapore is undervalued by 38% relative to a long-run average of incomes. Despite the city being well known for the expensive rents of western expats, four-fifths of the permanent population live in subsidised units built by the government, most of them as owner-occupiers.  Using the same metric UK housing is overvalued by 31% and the most overvalued, perhaps unsurprisingly is Hong Kong.  German property is undervalued by 7%, but this number has halved since 2008 thanks to rising house prices.

  1. Which of the following ranks as the world’s happiest country in the UN’s World Happiness Report for 2017?
    1. US
    2. China
    3. Costa Rica
    4. Norway

Answer: Norway. Norway has knocked Denmark off its perch as the happiest place on earth. The report measures “subjective wellbeing” across more than 150 countries. This year the report contains a chapter examining why happiness levels in the US are falling despite constant economic improvement.  The US is in 14th place and the UK ranks in 19th position. Measured happiness in China has lagged behind rapid growth in its economy. From 1990 to 2005 life satisfaction in China declined, since when it has turned up. However, for lower income and older Chinese people life satisfaction is below 1990 levels. Costa Rica ranks 12th in the UN happiness index, despite having a far lower GDP per head than similarly ranked nations.

  1. In which of the following countries do people work the longest hours?
    1. UK
    2. Poland
    3. Mexico
    4. Germany

Answer: Mexico. Mexico comes top of the 36 countries for which the OECD provide data on average annual hours worked. Mexican workers work on average 2,255 hours per year, which is equivalent to working for almost 9 hours a day,  five days a week, all-year round with no holiday.  German workers have the lowest workload at just 1,363 hours per year, meaning that they work on average 17 hours less per week than the Mexicans. The UK comes in around two thirds of the way down the list, with an average working week of 32 hours (not including holidays). However, working longer hours doesn’t necessarily mean more output. Average output per worker in Mexico is $18.5/ hour compared to $59.8/ hour in Germany, meaning Mexicans have to work for three hours to produce the same value of output that German workers produce in an one hour.

  1. Which country’s currency is the most undervalued against the British pound using the the Economist’s Big Mac index?
    1. Norway
    2. Ukraine
    3. Sweden
    4. Switzerland

Answer. Ukraine. The Big Mac index was invented by The Economist as a light-hearted guide to whether currencies are at their equilibrium rate. It is based on the idea of purchasing-power parity –  that in the long run currencies should move towards the rate that would equalize the prices of an identical basket of goods – or in this case a single product, a Big Mac – in any two countries.

A Big Mac in the Ukraine costs 44 Hryvnia and £3.19 in the UK. Thus the implied exchange rate is 13.8 Hryvnia for £1 while the official rate is 33.4 Hyrvnia per £1. This implies that the Hryvnia is undervalued by 59%, making it the most undervalued of the currencies that the Economist covers. A Briton could buy a Big Mac in Kiev for the equivalent of £1.32. According to the Big Mac index Switzerland has the most overvalued currency (by 64%) relative to sterling. Norway and Sweden are the second and third-most overvalued currencies compared to sterling.

  1. United Airlines temporarily suspended flights to which city this year as a result of concerns over poor air quality?
    1. Bangkok
    2. Beijing
    3. London
    4. New Delhi

Answer: New Delhi. Pollution in India’s capital reached hazardous levels earlier this year. Schools were closed and the government banned most construction and industrial activity. The UK Government warned travellers that “severe air pollution is a major hazard to public health in Delhi”. World Health Organisation data shows that the Delhi ranks 11th in the World for levels of dangerous ultra-fine particles in the air. The worst city is Zabol in Iran, followed by Gwalior in India.

  1. According to a Credit Suisse study the wealthiest 1% of the world’s population own what proportion of global wealth?
    1. 10%
    2. 30%
    3. 50%
    4. 90%

Answer: 50%. The Credit Suisse report shows that the share of global wealth owned by the top 1% has been on an upward path since the financial crisis. Global wealth inequality has risen in the post-crisis period and there are 2.3 million new dollar millionaires this year, taking the total to 36 million. These millionaires, who account for 0.7% of the world’s population, hold 46% of total global wealth which now stands at $280tn.

  1. A parking space in the UK sold for £40,000 this year. Where was it?
    1. Mayfair – London
    2. Chelsea – London
    3. Sandbanks – Poole
    4. St Ives – Cornwall

Answer: St Ives. The parking space is within easy walking distance of the beach, harbour and town centre. Parking is at a premium in St Ives, which is a popular location for second homes, and car parks are often full kin summer. There are 970 of the 999 years left on the lease for the parking place.

£40,000 may sound excessive for a parking space. However, it costs £1/ hour to park a car in St Ives. If you assume that the spot is occupied for 12 hours a day for four months of the year (peak season), this saves £1,440, or an implied annual yield of 3.6% on a £40,000 investment. This doesn’t seem bad in a world of low returns.

  1. Which of the following countries scores highest in the World Bank’s ease of doing business index?
    1. UK
    2. UAE
    3. US
    4. New Zealand

Answer: New Zealand. New Zealand ranks highest overall as a result of the ease of starting a  business and registering property. The UK is in 7th place and the US in 8th place. The UAE is the Middle East’s highest ranked economy, ahead of several major nations including France, Japan, the Netherlands and Switzerland.

  1. The Chartered Society of Physiotherapists said that which of the following is damaging our muscles?
    1. Sedentary jobs
    2. Online shopping
    3. Fast food
    4. Ride-hailing services

Answer: Online shopping. Professor Karen Middleton, chief executive of the Chartered Society of Physiotherapy said “Online shopping may be convenient but it does mean that we are losing some of the methods that used to exist for strengthening our muscles”. Muscle-strengthening exercises are important in keeping people healthy in old age, and we should learn to build these into everyday life rather than relying on hitting the gym.

  1. In a blind taste test of champagnes by a panel of experts conducted by Which? magazine Co-op’s Les Pionniers NV scored 76%, higher than the more expensive Moet & Chandon Brut Imperial NV Champagne (72%). The Moet & Chandon costs £34 a bottle; how much does the Co-op champagne cost?
    1. £13.99
    2. £20.50
    3. £16.99

Answer: £16.99. The Co-op champagne costs £16.99 but won praise for being “lovely and mature” with “creamy aromas.” The panellists said it is “well balanced and elegant, with flavours of apple peel and lemon.”

 

OUR REVIEW OF LAST WEEK’S NEWS

The FTSE 100 ended the week down 1.5% at 7,300.

The pound rallied against the dollar on news that an agreement had been made between the UK and EU on the Brexit ‘divorce’ bill.

 

International economic briefing by Ian Stewart

Economics and business

  • Neil Woodford, a prominent City fund manager, said global stocks are in a “bubble” and a crash could prove “even bigger and more dangerous” than in 2008
  • UK manufacturing output hit a four year high in November
  • All major UK banks passed the Bank of England’s bi-annual stress tests
  • A study by the European Central Bank found that convergence between the euro area’s richer and poorer economies appears to be resuming
  • Euro area economic confidence hit a 17-year high in November
  • Hiring plans in the euro area reached a 30-year peak in November
  • The investment bank, Morgan Stanley, warned its clients that a Labour government under Jeremy Corbyn in the UK “may be perceived as a bigger risk than Brexit”
  • US senators have passed a sweeping tax cuts bill, the biggest since the 1980s. The Senate will have to merge its legislation with that passed by the House of Representatives before it can be signed into law
  • The Trump administration rejected China’s bid for recognition as a “market economy” in the World Trade Organisation
  • Bitcoin’s extraordinary run made history when the price of a coin reached $11,000 last week
  • The Bank of Korea raised interest rates for the first time in 6 years

 

Brexit and European politics

  • The UK will save more than £450 million a year and instead will have to spend £149m a year to replicate EU regulation after Brexit, according to the law firm Fieldfisher
  • Britain registered its sharpest 12-month drop in net migration since 1964, a fall of 106,000 in the year to June
  • Scotland’s Brexit minister, Mike Russell, said Holyrood will refuse to sign any exit deal unless its devolved powers are protected
  • The chief inspector of borders and immigration, David Bolt, warned that the extra caseworkers recruited to register EU nationals already living in Britain will have to make 100 decisions a day
  • Mark Carney, the Governor of Bank of England, suggested that the bankers’ bonus cap could be scrapped after Brexit
  • Iceland will be run by a left-right “grand coalition” after its leading parties, the centre-left Left-Green Movement and centre-right Independence party, reached an agreement
  • The EU approved Ireland’s early repayment of its International Monetary Fund bailout loans, in a move which will save around €150m in debt servicing costs
  • Ireland’s deputy prime minister resigned in response to links to a long-running political scandal and to avoid a snap election in the country

 

And finally…

A Japanese rail firm issued an apology on its website after an intercity service left a station 20 seconds earlier than scheduled. The statement said that management wanted to “deeply apologise for the severe inconvenience” – compenstation


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