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Yawning gap: Comparing SA public and private sector jobs growth

Analysis

In contrast to the rest of the country, South Australia’s public sector employment is growing at rapid rate while private sector jobs are shrinking. Economist Richard Blandy crunches the numbers.

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We may have a general feeling that jobs in the public sector have been doing much better than in the private sector in South Australia, but maybe that is true for the Australian economy as a whole.

Wrong.

According to the latest ABS Labour Force data, which allows us to compare what happened to jobs between November 2014 and November 2015, while public sector jobs increased by 1.8 per cent in Australia as a whole, they increased by a staggering 13.8 per cent – more than 14,000 jobs – in South Australia.

At the same time, private sector jobs increased by 3.2 per cent in Australia as a whole, but fell by 0.5 per cent – nearly 4000 jobs –  in South Australia. While in Australia as a whole private sector jobs increased by more than public sector jobs, the only thing that kept the South Australian job market going was the massive expansion in public sector jobs. How long can this keep going?

In New South Wales, private sector jobs increased by 6.5 per cent while public sector jobs fell by 6.3 per cent. In Victoria, private sector jobs increased by 3.3 per cent while public sector jobs increased by 1.8 per cent. In Tasmania, private sector jobs increased by 1.9 per cent, while public sector jobs fell by 11.2 per cent (nearly 4000 jobs).

The composition of job changes between the public and private sectors in New South Wales and Tasmania were the complete reverse of what happened in South Australia. The governments in those states took a knife to public sector numbers, while the South Australian Government expanded them greatly.

A further interesting feature of these data is that the expansion in public sector jobs in South Australia was overwhelmingly in part-time jobs – which saw a dizzying expansion by more than 50 per cent, or about 13,000 jobs. In Australia as a whole, the expansion of part-time jobs in the public sector was less than 4 per cent. In New South Wales, part-time jobs in the public sector actually fell by nearly 16 per cent, or 20,000 jobs.

Further, the cut in private sector jobs in South Australia was all in full-time jobs (about 10,000 job losses over the year), offset by a rise in private sector part-time jobs (about 6500).

The Australian Bureau of Statistics produces widely-cited monthly employment and unemployment data, but it also produces a quarterly, so-called volume measure of unemployment (and underemployment). The unemployment measure is the number of hours sought by unemployed persons divided by the number of potential hours in the labour force.

In November 2015, for Australia as a whole, this unemployment rate was 4.4 per cent, i.e., 4.4 per cent more hours would have been supplied if unemployment had been zero (taking into account part-time and full-time preferences). In November 2014, this number was 4.8 per cent. Hence, unemployed hours went down in Australia as a whole by about 8 per cent between November 2014 and November 2015.

In South Australia, in November 2015, the percentage of unsupplied hours by unemployed people was 5.4 per cent – a full percentage point greater than in Australia as a whole. Further, in November 2014, this number was 5.2 per cent. Hence, unemployed hours went up in South Australia by about 8 per cent between November 2014 and November 2015. Nearly all of this increase was concentrated on males.

What sectors are doing well in South Australia in terms of producing output (value added)? These figures are released annually by the Australian Bureau of Statistics each November. It is useful to look at these value-added (output) data over a five year period in order to identify trends, rather than some erratic annual variation.

Between 2010 and 2015, the South Australian economy as a whole grew very slowly – by only 1.4 per cent p.a. To keep unemployment down, the economy would have to grow at more than twice that rate.

The three fastest growing sectors were rental, hiring and real estate services (9.6 per cent p.a. annual average increase), mining (8.7 per cent p.a.), and public administration (3.5 per cent p.a.).

Other sectors that grew faster than the South Australian economy as a whole (but less than 3 per cent p.a.) included wholesale trade, transport, postal and warehousing, financial and insurance services, professional, scientific and technical services, education and training, health care and social assistance, arts and recreation services, and other services.

Sectors that grew, but less rapidly than the South Australian economy as a whole, were construction, retail trade, accommodation and food services, and information media and telecommunications.

Sectors that shrank absolutely were manufacturing, electricity, gas, water and waste services, agriculture, forestry and fishing, and administrative and support services.

What is one to make of this economic peck order of industry sectors according to their past rates of growth? Not much, in terms of where our economic winners might lie. Are we to bet our economic socks on selling real estate, mining and public administration? I don’t think so.

The next two groups cover virtually the whole economy. Even the sectors that shrank (like manufacturing) can produce global winners (like Redarc and Australian Clutch Services), while agriculture, forestry and fishing include things we are very good at.

Only economic planners get mesmerised by the fortunes of particular economic sectors. These are handy abstractions for rationalising government support activities. Far better to help 1000 flowers to bloom, whatever variety they may be, and let competition winnow out the real winners, around whom the economy can then coalesce with suppliers, users, support services, competitors, exporters, importers, R&D activities, and so on.

We need more start-ups in every sector, not a sector-picking government.

Richard Blandy is an Adjunct Professor in the Business School at the University of South Australia and a weekly contributor to InDaily.

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