The rapidly growing care economy now employs 15% of working Australians and its recent growth has lowered measures of the nation's productivity, new research by the e61 Institute has found.
With the NDIS and population ageing increasing demand for care, the sector has grown dramatically since 2010 when it took up 10% of the workforce.
While new migrants filled 20% of these jobs, this was actually a lower share than in other fast-growing industries. Instead, the vast majority of new jobs were filled by workers switching from other industries such as hospitality, retail and manufacturing.
In part, this reflects that retail and hospitality are high 'churn' industries, that many Australians use as a first rung on the job ladder. Fast growth in the care economy looks to have captured many of the subsequent second steps on the job ladder.
The study found that there has been virtually no measured labour productivity growth in the care economy for 20 years. Because its measured productivity is low, the growth of the sector has reduced overall productivity by 0.2 per cent each year since 2019.
"The reallocation of labour to the care economy is a massive generational shift. It is now such a large part of the economy and set to grow further," said e61 Institute Research Manager Ewan Rankin.
"For the past 20 years we have failed to generate labour productivity growth in the care sector, but there is ample potential to do better over the next 20.
"When people hear 'improve productivity' they tend to think about harsh programs of cuts and slashing staff, but that's unlikely to be an approach that will work in this sector at this time.
"Boosting productivity in the care sector could instead come from adjusting funding models to pay for outcomes rather than quantity, a greater focus on preventative care, and technology adoption in areas like administration and diagnostics."
The research also found that since 2010, wages in the care sector have grown faster than all other industries except utilities and energy - increasing 50 per cent compared with the industry average of 46 per cent. But job vacancies are still much higher than in other industries, spiking to more than 60,000 over the past four years.
"Governments and the Fair Work Commission need to manage the high level of job vacancies in the industry," said Mr Rankin.
"Maintaining relatively strong wages growth in the care economy for a time is likely to be supporting the necessary reallocation of workers to the sector.
"Governments should also consider whether non-compete clauses, occupational licensing or other factors are restricting the desirable level of labour mobility."
