Lifelong learning and older workers

• People with higher levels of education qualifications tend to have high levels of engagement with the labour market. The relationship is particularly strong for women.
   
• Education levels of older cohorts will rise over coming decades as current, relatively well-educated cohorts age. Even with current education participation rates, this should lead to higher rates of engagement with the labour market among older groups, especially for women, than would otherwise be the case.
   
• This 'education effect' is even more important when working hours patterns are taken into account because the better qualified tend to work more hours (to a large extent because more are engaged in full-time employment).
   
• The education effect has been important in explaining the current working patterns. For males, the positive education effect has been against a long-term decline in labour force participation. For females, it has contributed to long-term increases.
   
• The education effect will partially offset the impact of the ageing of the population, but the demographic impact of the ageing population dominates. Factors other than education are also likely to impact on employment-to-population rates, and governments need to concentrate on work incentives and community attitudes as well as education and training, if they wish to increase the proportion of the population working.
   
• Lifelong learning has a role to play. Qualifications acquired later in life have as good, and in some cases, better, pay-off to employment-to-population rates for older age groups as do qualifications obtained at a young age.
   
• On the whole, the more qualifications the better, although the evidence on lower-level qualifications and incomplete qualifications improving employment rates is mixed.
   
• Older people who have undertaken training are more likely to retain their employment status relative to their employed peers not receiving training. So training appears to be helpful to maintaining employment. However, one explanation for this is that employers provide training to those they expect to retain as employees.

Introduction

The ageing of the Australian population and the consequent implications for the workforce have received considerable attention in recent time. In particular, the Australian Government has stressed that the ageing of the population is likely to adversely affect the economy and may compromise future living standards. The government argues that improved labour force participation and productivity will assist in alleviating these potential negative effects, and there is a widespread belief that education and training have key roles to play in this context.

This report uses a quantitative approach to examine the roles of education and training in affecting the participation of older people in the labour market. It uses current and past levels of education, as well as future projections to determine the impact that rising levels of education are having, and will have, on employment rates now and into the future. The report also examines the relationship between the timing of education and training and engagement with the labour market to determine the pay-off to undertaking education and training as an older person compared with undertaking education and training earlier in the lifecycle.

Findings

The relationship between educational level and engagement with the workforce is modelled. The measure of engagement used is the employment-to-population ratio (that is, the number of people employed per head of population). This captures both labour supply and demand factors. Findings indicate that the effect of education on employment-to-population rates is more pronounced for women than men (since it would appear that women undertake educational qualifications in order to re-enter the workforce after family responsibilities have diminished). However, for both males and females, it is evident that a higher level of education appears to have a favourable impact on employment-to-population rates. This impact tends to occur for the higher-level qualifications of certificate III and above. For females, it appears that this 'education effect' is amplified when working-hour patterns are taken into account, as the more educated tend to work longer hours.

Changes in employment rates between 1993 and 2003 are examined in order to assess the relative importance of education levels and sectoral changes. The changes in education levels between 1993 and 2003 indicate large increases in the shares of basic and university-level qualifications. The impact of this increase in qualifications on engagement with the workforce is examined, on an 'everything else being equal' basis. Results indicate that, historically, increasing education levels have been important in explaining current working patterns. Increased education levels, in a purely accounting sense, contributed 1.4 percentage points to the increase in the employment rate for men and 5.5 percentage points for women. Interestingly, when looking at the changes in terms of hours worked, the importance of the education effect increases for both males and females.

For males, the positive education effect has taken place within a context of long-term decline in labour force participation. For females, it has contributed to long-term increases in both labour force participation and employment-to-population rates. In summary, increasing education levels have played a role in increasing employment rates over the last ten years, especially for women. However, other factors are also important.

In the next section of the report the impact of changing educational levels on employment rates over the next 40 years is estimated. Three separate projections of educational levels are made, in which the acquisition of educational levels is based on the patterns occurring between 1993 and 1998, 1993 and 2003 and 1998 and 2003. The projections of educational qualifications for older people in 2043 suggest that the proportions of older people with low-level qualifications will decline significantly, and that many people will have both university and vocational education and training qualifications. Using the shift-share analysis adopted earlier in the report, the impact of the projected qualifications on employment-to-population rates and hours worked is calculated. The calculations suggest that there will be a positive education effect over the next 40 years, as better educated cohorts age (and continue to acquire qualifications, as has occurred historically). The education effect will partially offset the impact of the ageing of the population, but the demographic impact of the ageing population dominates. It also needs to be noted that the positive education effect implicitly assumes that the labour market will continue to change in a way that demands more educated workers.

In the final section of the report, the effect of the timing of education and training on employment rates is examined, as is the extent to which ongoing education and training improves employment outcomes. Results indicate that qualifications acquired later in life have as good, and in some cases, better, pay-off to employment-to-population rates for older age groups as do qualifications obtained at a young age. This is particularly the case for women. This suggests that education is an effective strategy for older individuals seeking employment.

As well as looking at the timing of qualifications, a series of variables on an individual's engagement with education and training is added to the models. As expected, gaining an additional qualification is positively associated with engagement with the labour market. However, the evidence on incomplete qualifications and future study intent improving employment rates is mixed.

Finally, the extent to which training might provide some insurance against becoming unemployed is examined. The analysis takes everyone who had a wage or salary job in the last 12 months, the number of training courses they completed and whether they are currently employed or not. Although standard errors are generally quite high, there is a positive association between current employment status and training.

Implications of the findings

On the whole, the report indicates that the more qualifications held the better are the employment outcomes. Such results are supportive of the current policy thrust which promotes the notion that high levels of education, lifelong learning and training are beneficial to maintaining and increasing employment rates. The analysis also suggests that education levels of older cohorts will rise over coming decades, as current, relatively well-educated cohorts age. Even with current education participation rates, this will lead to higher rates of engagement with the labour force among older groups, especially for women, than would otherwise have been the case.

Our projections indicate that the education effect will partially offset the impact of the ageing of the population. However, the demographic impact of the ageing population dominates. Factors other than education are also likely to impact on employment-to-population rates and governments need to concentrate on work incentives and community attitudes as well as on education and training if the proportion of the population working is to be increased. As indicated previously, there is also an implicit belief that the labour market will continue to shift in a direction conducive to more educated workers.

It appears that the push for lifelong learning is somewhat justified. As noted earlier, qualifications acquired later in life have as good, and in some cases, better, pay-off in employment-to-population rates for older age groups as do those obtained at a young age. However, care needs to be taken in extrapolating these findings to individuals who have not chosen to undertake qualifications later in life, because the observations made in this report reflect the personal characteristics of the individuals concerned and the attitude of employers to such individuals. Moreover, the acquisition of qualifications is not a 'treatment' visited on the individual but the outcome of decisions based on the expected costs and benefits of undertaking the qualification.

Findings also indicate that older people who have undertaken training are more likely to retain their employment status relative to their employed peers not receiving training. Thus training appears to be helpful to maintaining employment. However, one explanation for this is that employers invest in those they expect to retain as employees.

Incomplete qualifications and lower-level qualifications do not appear to impact on any group's employment rate, and our results do not suggest that more and more education and training will meet all the challenges that ageing populations face. Nevertheless, it will be somewhat reassuring to policy-makers that there is some evidence to support moves to promote education and training and lifelong learning. Of course, this report does not attempt to examine questions such as the level of resources allocated to entry-level education and training compared with 'lifelong' education and training, and who should pay.