Tuesday, February 17, 2015

School fees, incomes, VR and the next employment boom

Interesting piece by Tim Dodd in the Australian Financial Review, End to 40 year flight from public schools.I think that its based on the detailed tables attached to this ABS release. In simplest terms, the number in the public education system have stabilised, the rise in primary enrollments offsetting a continued decline in public high school enrollments.

Tim concludes, correctly in my view, that rising private school fees mean that more parents are choosing public primary education, shifting to the private sector in secondary. I suspect that it's only a matter of time before public secondary school enrollments start rising, giving the rising real costs of private education at a time when so many Australians have stagnant or declining incomes.

A related story, Young people are heavily underrepresented in the public service, latest figures show, suggests that the number of Commonwealth public servants under 25 has now dropped to 2.5% of the total number of Commonwealth public servants. Not unexpectedly, it's is also taking longer to be promoted. Conversely, the number (and pay) of contractors appears to be rising.

Workforce aging has been a feature  of the public sector for some time, as has the rise of the contractor. A contractor can be fired more easily, while cut backs create gaps that need to filled since work must get out the door.

The aging of the workforce is more complicated. Its partly a feature of the end of mandatory retirement rules, together with the end or substantial reduction of entry level recruitment. The difficult is that at some point in the future, perhaps five to ten years, the public sector workforce is going to start walking over a lemming style cliff. Then where will the new workers come from?

VR or voluntary redundancy creates a further problem. Rules have been introduced to stop VR recycling (I have a friend who has has taken no less than three NSW VR packages!), but that actually doesn't stop it, just defers it until the end of the mandatory rules. Then the loss of knowledge and skills kicks in. Managers have to grab people to do their jobs.

Is the private sector different? No, although the effects are perhaps less pronounced. I say perhaps, for I am not sure.

I and my economist friends talk about externalities. Externalities are costs of benefits that extend beyond the individual organisation. I could wish that more attention were paid to externalities in a labour market context

I am not worried about my daughters in all this, although I am worried about younger graduates who are struggling just to get a job. Both my girls are able and in work. To my mind, they are sitting pretty. They will be there with experience when the next explosion in recruitment comes.    .      



2 tanners said...

As someone who took a package in the most recent round, I have three observations:

1. The packages were most attractive to older public servants who had skills, corporate knowledge and experience. The next criterion of acceptances were from those with less experience but the confidence that their skill and ability would soon them in a new job. Perhaps not the echelons you would choose to lose first?

2. Externalities can be positive or negative. Small businesses in Canberra are going to go the wall. As you'd know, Jim, this will not trouble most Federal politicians who despise the place. But too much dissatisfaction could see the loss of the traditional Liberal seat of Canberra as well as the "bellwether" seat of Eden-Monaro (right next door) and possibly even the ACT's second senate seat. I see no real sign of consideration of externalities in economic policy for the last 10 years.

3. Even before the election, there was considerable dissatisfaction in senior ranks at the rapidity of rises amongst junior officers, who arrived at EL1 levels after 4 years or less with no real management skills or deep policy experience. Those highly influential officers might be very satisfied to keep the brakes on and only hire at low levels for as long as possible.

Jim Belshaw said...

2T, your comment in 1 fits with my observations of VR responses in NSW.

For older public servants, VR can provide a useful paid transit into employment, meaning loss of the contribution to the workforce. In other cases, they will simply come back in due course. The embargo on re-employment in NSW is related to the nature of the pay-out. In one case, for example, the period is 45 weeks. That gives you a good paid break!

Externalities can indeed work both ways. Mind you, Canberra has been through this type of thing before. Each bust sets up the next boom!

Interesting comment in 3. Coming back into the public sector after such a long gap, I was really struck by the skewed structures, as well as the absence of real management experience even among senior staff.

Evan said...

A decade ago I was finishing a Uni degree. I was speaking with an academic and said, "There are no jobs in academia!"

He said, "But most of the people in this department will be retiring in the next 10 years!"

I think that they will probably be replaced by casuals and contractors though.

Jim Belshaw said...

Hi, Evan. People hung on plus more contractors and casuals!

Interesting, though. There has to be a point at which meeting immediate need is overcome by longer term needs, but when?

Evan said...

Yes, when indeed?

It is possible for people to die convinced they were right. Or for societies or sub-cultures to collapse while people are assuring each other that everything is just fine.

Jim Belshaw said...

Depressing but true, Evan. In a new comment on an old post, Peter Glenn talked about human arrogance, the belief that we can control things.

This is arguably tangential, but the things that we are talking about do lie within control. For that reason, there is something of a self-correcting tendency with time.

Evan said...

I saw that comment.

I do think there are things within our control.

I do think making small steps and watching for unintended consequences makes sense too.

Jim Belshaw said...

Amen, Evan.