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Men Not at Work: An Analysis of Men Outside the Labour Force

Staff working paper

This paper by Ralph Lattimore was released on 23 January 2007. This staff working paper is part of a stream of Productivity Commission research focused on labour participation issues, which commenced with the Commission's study for CoAG on the Economic Implications of an Ageing Australia.

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Of the 8 million Australian males in the adult male civilian population in 2005-06, at any one time over 2.2 million or nearly 30 per cent were outside the labour force - neither working nor looking for work. A staff working paper, Men Not At Work: An Analysis of Men Outside the Labour Force, released by the Productivity Commission today, provides information on these men, where they live, why they are outside the labour force and the impacts of their economic inactivity.

The staff working paper finds that, in contrast to women, the rates at which men are disengaged from the labour force have increased four fold over the last century, rising particularly rapidly over the last 50 years.

The paper finds that there are many drivers of this transformation in Australian labour markets. Some of it is due to population ageing, which swells the ranks of retirees. (But the impacts of ageing will be greater in the future than they have been in the past.) Younger men are spending longer in education and older men are enjoying a longer voluntary retirement. Men generally are now much more involved in domestic and child care tasks - that explains 30 per cent of those aged 35-44 years old absent from the labour market. The view that many of the 'inactive' are at work in the 'shadow economy' was found to be a myth.

Many prime aged males leave the labour market due to injury, ill-health, disability or premature 'retirement', with about half the men aged 25-64 years old who are outside the labour force in receipt of the Disability Support Pension. An important explanation for the lower labour force participation rates of these men is the shift away from unskilled manual work in an increasingly service-sector and skill-based economy.

Inactive men are more likely to be living alone, to be poorly educated, and of Indigenous or non-English speaking migrant background. For example, a man aged 45-54 living alone is about four times more likely to be outside the labour force than one who is married or who has a partner.

This staff working paper is part of a stream of research on labour participation issues initiated by the Commission following its 2005 study on the Economic Implications of the Ageing of Australia's Population.

Background Information

Ralph Lattimore (Assistant Commissioner) 03 9653 2176

Leonora Nicol (Media, Publications and Web) 02 6240 3239 / 0417 665 443

Contents

Preliminaries
Cover, Copyright, Contents, Foreword, Acknowledgments, Abbreviations

1 Introduction
1.1 What this report is about
1.2 What does 'outside the labour force' mean?
1.3 A snapshot of non-participation in the labour force
1.4 Structure of the report

2 The dynamics of labour market inactivity
2.1 Transitions in labour market status
2.2 Trends in male and female inactivity rates differ
2.3 Snapshots across age groups suggest the important dynamic effects over the lifecycle
2.4 Ageing versus trend effects in the past
2.5 Cohort effects

3 Who are they?
3.1 Introduction
3.2 Inactivity by family and relationship type
3.3 Educational and occupational characteristics of men outside the labour force
3.4 Indigenous males
3.5 Does migrant status affect male inactivity?
3.6 The role of institutionalisation

4 Where do they live?
4.1 Variations by States and Territories
4.2 A regional picture
4.3 What leads to spatial segmentation in inactivity rates?

5 Why are men outside the labour force?
5.1 What do men give as the reason?
5.2 The hidden reasons

6 Ill-health and disability
6.1 The role of illness, injury and disability in economic inactivity
6.2 How has the role of illness, injury and disability changed over time?
6.3 Summary

7 Impacts of being out of the labour force
7.1 Introduction
7.2 Aggregate economic impacts
7.3 Personal impacts
7.4 Wider effects
7.5 Conclusions

8 The Disability Support Pension
8.1 The role of Disability Support Pension
8.2 Trends over time and duration of 'spells' on the DSP
8.3 High DSP coverage is not just about underlying health conditions
8.4 What are the factors underlying uptake of the DSP?
8.5 Why are men with disabilities now less employable?
8.6 What remedies have been suggested?

9 Education and participation
9.1 In snapshot data, the less educated are more vulnerable to labour market withdrawal
9.2 Policy is oriented to increasing education duration
9.3 Males with poorer education have become more vulnerable, but women have not
9.4 Simple longitudinal studies show some gains for males who complete school
9.5 But the link between education and participation can be confounded by other influences
9.6 Taking account of the differences generally reduces the labour market benefits of schooling for non-completers
9.7 What does the large literature on returns to education imply?
9.8 Education and labour market outcomes for special groups
9.9 What do international comparisons reveal?
9.10 Conclusion

10 The effects of what schools do
10.1 Strategies for particular groups or problems
10.2 Changes in vocational education
10.3 Literacy and numeracy
10.4 Early childhood development
10.5 Conclusions

A Work expectancy
A.1 Introduction
A.2 Methods

B Illness, injury and disability data

C Engagement of people on DSP

D Output effects of inactivity
D.1 Economic impacts
D.2 The gross costs of labour market engagement
D.3 The feasible change in the participation rate
D.4 The gross benefits of engagement
D.5 Some wrinkles in this story

E The productivity of outsiders

F Will population ageing reduce male inactivity rates?
F.1 Conceptual framework
F.2 Cross-country evidence

G Moral hazard and the DSP
G.1 Are less verifiable conditions more prevalent among DSP beneficiaries?
G.2 Early retirement?
G.3 Employment propensities of those on DSP
G.4 Low outflow rates?

References