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Supply and demand in the Australian labour market

The Commonwealth Government policy to scale back temporary skilled migration, and adopt a tougher approach to citizenship, is likely to have a supply-side impact on the Australian labour market as Daniel Edwards explains.

Australia’s skilled labour needs depend on both domestic and international graduates. So what is the evidence on the changing balance of skills from domestic and migrant sources in recent years, and what are the labour market outcomes of persons who obtained their qualifications domestically compared with those of skilled migrants?

Analysis by the Australian Council for Educational Research reported in Australia’s Degree-Qualified Workforce: Contributions of the Australian higher education system and overseas migration reveals that the Australian higher education system contributes significantly to Australia’s degree-qualified population – accounting for 77 per cent of the 4.5 million people in Australia with a bachelor degree or higher, and contributes 79 per cent of the degree-qualified population in full-time employment. While this is a significant contribution, it also highlights that the role of skilled migration is integral to a balance in our labour market – more than one in five of all degree-qualified people in Australia are migrants.

The data also show that even though we have witnessed large growth in higher education in recent times, skilled migrants are arriving at a faster rate than growth in domestic university completions. Between 2011 and 2015 skilled migration numbers grew by 32 per cent, compared with a 27 per cent increase in people born overseas who completed their degree in Australia, and a 21 per cent increase in people born and qualified in Australia.

While this growth is helping to fuel the Australian economy, two key issues remain. The demand for skills is not quite keeping up with supply. A tightening of Australia’s skilled labour market in recent years has negatively affected both skilled migrants and domestic graduates with the proportion of skilled persons in full-time work falling from around 75 per cent in 2011 to 72 per cent by 2015. And skilled migrants experience poorer employment outcomes than domestic graduates.

Data from the Australian Bureau of Statistics reveal that, in 2015:

  • The labour force participation rates of skilled migrants (80 per cent) were considerably lower than for people with an Australian degree (89 per cent).
  • The proportion of the degree-qualified workforce employed in full-time professional occupations was higher for Australian born and educated people (79 per cent), and people born overseas who completed their degree in Australia (71 per cent) than it was for skilled migrants (68 per cent).
  • The unemployment rate among the degree-qualified workforce was higher for skilled migrants (5.5 per cent) than it was for people born overseas who completed their degree in Australia (4.2 per cent), and people born and educated in Australia (2.4 per cent).

There are nuances to these national figures when examined by industry sector and field that are important for contextualising this data further. However, the information in the report is useful in highlighting the important balancing role of both the Australian higher education system and skilled migration to the development of a strong and innovative economy for Australia. Both sides of this supply contribution need to be considered together by policymakers and industry leaders when exploring implications for the Australian economy. â– 

Dr Daniel Edwards is a co-author of Australia’s Degree-Qualified Workforce: Contributions of the Australian higher education system and overseas migration in the Joining the Dots series. Joining the Dots is a resource developed by ACER for those with an interest in Australian higher education. Details available at


About the author

Dr Daniel Edwards is the Research Director of ACER's Tertiary Education research program. 

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