Adjustment in the Market for Skills in Australia over the Business Cycle

Australia is in unique position to investigate the effects of the business cycle on the market for skilled labour. While experiencing a full cycle, Australia has also enjoyed two decades of positive economic growth, from the recession in the early 1990s to the economic boom of 2006. While the 1990s recession
focused attention on the unemployment problem, the boom concentrated attention on skill shortages in Australia and their role in preventing the economy from reaching its full potential level of output and putting pressure on inflation. Forces other than economic growth and the business cycle, such as structural change and technological change, have also had considerable influence increasing the demand for skilled labour over recent times. Here we examine the extent to which the market for skilled labour has adjusted to changed economic conditions. This includes changes in the supply and demand of skilled labour, and the role of earnings and rates of return to tertiary education and training. This analysis has policy relevance with respect to skilled migration, inequality, education and training as well as contributing to knowledge of the labour market impacts of the business cycle.