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Influences on Indigenous Labour Market Outcomes
Abstract
This staff working paper (by Savvas, Boulton, and Jepson) examines factors that potentially influence Indigenous labour market outcomes (LMOs). It uses regression analysis, and builds on the simple model that was presented in the ‘Overcoming Indigenous Disadvantage: Key Indicators (OID) 2011,’ by including additional variables. The analysis uses the 2008 National Aboriginal and Torres Strait Islander Social Survey (NATSISS), a rich source of information on the characteristics of Indigenous people, including data on LMOs and many factors that might contribute to them. The analysis does not make comparisons with non-Indigenous Australians.Empirical analysis can be used to test and quantify relationships that have been developed in theory. For example, policy makers might be interested in those factors that have the greatest association with Indigenous people’s decisions to participate in the labour market and their success in obtaining a job. The purpose of this analysis is to quantify those associations. The aim is to add variables that represent social and cultural factors to the basic model in the 2011 OID Report to obtain insight into the effects of unobserved personal characteristics, and whether the way Indigenous people engage with their community and culture affects their LMOs. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.
... There are indeed several barriers that impact Indigenous employment more acutely than that of the broader population. Such obstacles include lower levels of education, higher rates of incarceration and interactions with the criminal justice system, poorer health outcomes, and poorer access to a local labour market for those living in more remote areas (Shepherd et al 2020;Gray et al 2012;Savvas et al 2011), many of which are targets within the Closing the Gap framework, highlighting the interacting nature of these structural disadvantages (Commonwealth of Australia 2022). It should be noted, however, that these barriers are not a consequence of Indigeneity but a plethora of social problems that are associated with Australia's policy history and its interactions with the Indigenous population (see e.g., Altman 2000;Kidd 2007;Moreton-Robinson 2015;Miley and Read 2018). ...
Indigenous-owned businesses in Australia are strong employers of Indigenous people, maintaining rates of Indigenous employment that are not seen across the breadth of the Australian economy. Despite an increasing focus from governments and private organisations to improve rates of Indigenous employment, there is limited evidence to suggest that substantial improvements are being made. Despite acknowledgement from government of the crucial role played by Indigenous employers in creating Indigenous employment, there has been little focus on what may be learned from the Indigenous business sector in informing public and private Indigenous workplace and recruitment policies. Given the significantly strong levels of Indigenous employment in Indigenous-owned businesses, it is important to interrogate the extent to which this employment differs from that in non-Indigenous businesses and the potential explanations for such divergence. Using data from Supply Nation (2,291 Indigenous-owned businesses) and a survey of 680 non-Indigenous businesses, this paper finds that Indigenous businesses employ Indigenous people at a rate 12 times higher than non-Indigenous businesses. Regression analyses and Oaxaca–Blinder decompositions reveal that these divergent employment outcomes cannot be explained by the broad characteristics of the two sectors (such as industry, location, or profit status). These findings help confirm that the unique workplace practices of Indigenous businesses may explain their strong Indigenous employment and, therefore, provide the template for all Australian businesses to be better employers of Indigenous people.
... Labour market outcomes reflect the interaction of labour supply and demand and the efficiency of the market (Savvas et al, 2011). They also generally reflect the aggregate performance of the economy, that is, they mirror aggregate economic activities. ...
Aboriginal Australians experience disadvantage relative to other Australians across multiple socioeconomic indicators. Whilst Aboriginal disadvantage occurs across the nation, its characteristics may differ between locations. This article presents the first econometric analysis of Aboriginal disadvantage in major cities of New South Wales. The analysis is based on a multiple indicator framework devised by the Productivity Commission, populated with data from the National Aboriginal and Torres Strait Islander Social Survey of 2002. The results demonstrate the key drivers and interdependence of various indicators of Aboriginal disadvantage. This supports holistic approaches to improving Aboriginal welfare, rather than focusing on individual policy areas in isolation.
A concern when estimating the effect of health on labour supply is that health might be endogenous, and in particular that people might use poor health to justify non-participation. This would result in the effect of health being overestimated if health were treated as exogenous. The paper employs a simultaneous equation model to explore the relationship between health and labour force status, allowing for the endogeneity of health. In addition, the paper takes advantage of panel data to control for unobserved heterogeneity so that more efficient estimation results can be obtained than using cross-sectional data. The results confirm the finding in the literature that health has a positive and significant effect on labour force participation for both males and females. As for the reverse effect, it is found that labour force participation has a negative effect on male health but a positive effect on female health, implying that the justification hypothesis is rejected for males but not for females. The exogeneity hypothesis on the health variable is rejected for both samples based on a joint test.
Improving cognitive skills of young children has been suggested as a possible strategy for equalising opportunities across racial groups. Using data on four and five year olds in the Longitudinal Survey of Australian Children, we focus on two cognitive tests: the Peabody Picture Vocabulary Test, and the 'Who Am I?' test. We estimate the test score gap between Indigenous and non-Indigenous children to be about 0.3-0.4 standard deviations, suggesting that the typical Indigenous five year old has a similar test score to the typical non-Indigenous four year old. Between one-third and two-thirds of the Indigenous/non-Indigenous test score gap appears to be due to socio-economic differences, such as income and parental education. We review the literature on test score differences in Australia, and observe that our estimated gaps are lower than most of those found in the literature. This implies that the test score gap between Indigenous and non-Indigenous children may widen during school years, a finding that has implications for policies aimed at improving educational opportunities for Indigenous children.
A concern when estimating the effect of health on labour supply is that health might be endogenous, and in particular that people might use poor health to justify non-participation. This would result in the effect of health being overestimated if health were treated as exogenous. The paper employs a simultaneous equation model to explore the relationship between health and labour force status, allowing for the endogeneity of health. In addition, the paper takes advantage of panel data to control for unobserved heterogeneity so that more efficient estimation results can be obtained than using cross-sectional data. The results confirm the finding in the literature that health has a positive and significant effect on labour force participation for both males and females. As for the reverse effect, it is found that labour force participation has a negative effect on male health but a positive effect on female health, implying that the justification hypothesis is rejected for males but not for females. The exogeneity hypothesis on the health variable is rejected for both samples based on a joint test.
Disparities in health status between Aboriginal and Torres Strait Islander peoples and the total Australian population have been documented in a fragmentary manner using disparate health outcome measures.
We applied the burden of disease approach to national population health datasets and Indigenous-specific epidemiological studies. The main outcome measure is the Indigenous health gap, i.e. the difference between current rates of Disability-Adjusted Life Years (DALYs) by age, sex and cause for Indigenous Australians and DALY rates if the same level of mortality and disability as in the total Australian population had applied.
The Indigenous health gap accounted for 59% of the total burden of disease for Indigenous Australians in 2003 indicating a very large potential for health gain. Non-communicable diseases explained 70% of the health gap. Tobacco (17%), high body mass (16%), physical inactivity (12%), high blood cholesterol (7%) and alcohol (4%) were the main risk factors contributing to the health gap. While the 26% of Indigenous Australians residing in remote areas experienced a disproportionate amount of the health gap (40%) compared with non-remote areas, the majority of the health gap affects residents of non-remote areas.
Comprehensive information on the burden of disease for Indigenous Australians is essential for informed health priority setting. This assessment has identified large health gaps which translate into opportunities for large health gains. It provides the empirical base to determine a more equitable and efficient funding of Indigenous health in Australia. The methods are replicable and would benefit priority setting in other countries with great disparities in health experienced by Indigenous peoples or other disadvantaged population groups.
In a recent article, Zhang and Hoffman discuss the use of discrete choice logit models in sociological research. In the present article, the authors estimate a multinomial logit model of U.K. Magistrates Courts sentencing using a data set collected by the National Association for the Care and Resettlement of Offenders (NACRO) and test the independence of irrelevant alternatives (IIA) property using six tests. Conducting the tests with the appropriate large sample critical values, the authors find that the acceptance or rejection of IIA depends both on which test and which variant of a given test is used. The authors then use simulation techniques to assess the size and power performance of the tests. The empirical example is revisited with the inferences performed using empirical critical values obtained by simulation, and the resultant inferences are compared. The results show that empirical workers should exercise caution when testing for IIA.
This report refutes the widespread notion that women are increasingly likely to stop working when they have kids.
The term 'trans-generational welfare dependence' refers to a cycle of sustained income support dependence across two or more generations within families. Until recently very little has been known about the extent of this phenomenon. Interest in the topic has commonly been generated by the occasional media story which 'confirms' the existence of a problem by identifying one or two families with multiple family members across generations receiving income support. Anecdotal evi-dence and conjecture have therefore typically defined the parameters of debate. Views on the issue are divergent. Some people argue that such cases are the exception rather than the rule and con-sider it unfair to blame the victims of poor labour markets, economic restructuring or family breakdown for their cir-cumstances. Others believe firmly in a culture of welfare dependence, arguing that parents either transmit undesirable attitudes about education, employment and income support to their children, or at least fail to transmit positive attitudes. Peter Travers (1998: 117) summarised this view of welfare dependence as incorporating 'the notion of a cycle whereby dependence, poverty, and generally feckless behaviour are perpetuated from one generation to the next'. Wherever the truth lies, there are important issues for pol-icy makers and governments to address. We know that some families in Australia appear particularly prone to joblessness and consequently tend to rely heavily on income support. But we do not know how many of these families there are, whether the problem is increasing, or what differentiates fam-ilies who are long-term poor and income support dependent from those who are not, including families with low incomes from work. And if we can establish that the children of income support recipients are more likely to experience unemployment, lone parenthood or other difficulties as adults, we still do not know what factors might reduce or (inadvertently) increase these risks. In the Department of Family and Community Services we have started a long-term research project to attempt to answer some of these questions. Our intention is simple – to help inform, design and deliver policies and programs which improve the life chances of children from disadvan-taged families. In this chapter we provide an overview of some of the existing literature on this issue and outline early findings from our research. At this stage we have limited our focus to the financial (rather than psychological) aspects of depen-dence; that is, the extent of reliance on the income support system for individual or family income.
Gary S. Becker, the 1992 recipient of the Nobel Prize for Economic Science and Professor of Economics at the University of Chicago, spoke to business and community leaders as guest lecturer in the Federal Reserve Bank of Richmond's Economic Lecture Series. This article is excerpted from The Economics of Crime: Prevention, Enforcement, and Punishment, which outlined his premise that people decide whether to commit a crime by a comparison of the benefits and costs.
The Productivity Commission Staff Working Paper, 'Effects of Health and Education on Labour Force Participation' (by Patrick Laplagne, Maurice Glover and Anthony Shomos) was released in May 2007. The paper explores alternative methodologies to obtain estimates of the labour force participation effects of the health and education variables targeted by the National Reform Agenda. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.
This Productivity Commission staff working paper was released in October 201'3 Literacy and numeracy skills are key components of human capital, which is an important driver of economic growth. This paper utilises data from a 2006 survey on the literacy and numeracy skills of the Australian adult population. Models were used to estimate the effect of improved literacy and numeracy skills on the probability of labour force participation and on wages. Results confirm previous research in the human capital literature – that improving literacy and numeracy skills has a positive, statistically significant effect on labour market outcomes. Improving educational attainment was also estimated to have a positive, statistically significant effect on labour force participation and on wages. However, once literacy and numeracy skills were controlled for, the effect of increasing educational attainment on labour force participation and on wages was reduced. Some of the benefit occurs because more highly educated people tend to have higher literacy and numeracy skills. Literacy and numeracy skills are developed through education, but they can also be enhanced in other ways. Understanding the factors that influence literacy and numeracy skills is important and could be further explored with the data used in this paper.
• Human capital theory supports the view that people with higher levels of education and lower incidences of chronic illness should have higher labour productivity.• Hourly wages can be used as an indicator of labour productivity. While wages are likely to be a reasonable indicator of the effects of education on labour productivity, statistical issues and the way that labour markets function in practice mean that using wages as an indicator could lead to results that under- or overstate the negative effects of ill health on labour productivity.• In this paper, higher levels of education are estimated to be associated with significantly higher wages. Compared to a person with a year 11 education or less, on average:– a man with a year 12 education earns around 13 per cent more, and a woman earns around 10 per cent more– a man with a diploma or certificate earns around 14 per cent more, and a woman earns around 11 per cent more– a university education adds around 40 per cent to men’s and women’s earnings.• People in the workforce who suffer from chronic illnesses are estimated to earn slightly less than their healthy counterparts (between 1.0 per cent and 5.4 per cent less for a range of conditions).– It is possible that these results understate the impact of ill health on productivity, because of the impact that one person’s illness can have on other employees.– It is also possible that ‘endogeneity bias’ and unobserved heterogeneity in the data lead to results that overstate the positive effects of education and good health on labour productivity.
Crime is a major activity in the US, with implications for poverty and the allocation of public and private resources. The economics of crime focuses on the effect of incentives on criminal behavior, the way decisions interact in a market setting; and the use of a benefit-cost framework to assess alternative strategies to reduce crime. This essay shows that most empirical evidence supports the role of incentives in the criminal decision: legitimate labor market experiences, sanctions including incarceration, and the risk of apprehension all influence decisions to engage in crime. By putting crime into a market setting, economic analysis highlights the difficulty of reducing crime through incapacitation: when the elasticity of supply to crime is high, one criminal replaces another in the market; and thus the importance of deterring crime by altering behavior. Most analyses show that “crime pays” in the sense of offering higher wages than legitimate work, presumably in part to offset the risk of apprehension. But some important facts about crime — long term trend increases and decreases; the geographic concentration of crime; the preponderance of men and the young in crime — seem to go beyond basic economic analysis.
Indigenous people are more likely to be discouraged from looking for work than other Australians. Data from the 1994 National Aboringinal and Torres Strait Islander Survey are used to analyse the factors that lead many indigenous people who want to work to not seek work, and hence remain outside the labour force. This article confirms the importance of labour supply factors (including family, cultural and social environmental factors), but also emphasises the interaction between the supply and demand side of the labour market. An important finding is that indigenous people want to work as much as other Australians. This means that policies aimed at increasing the demand for their services are crucial. Two examples of the latter are education and regional development policies. The article also argues that a broader definition of discouraged worker should be considered for all Australians.
It is well established that Indigenous Australians are heavily over-represented among Australia’s most disadvantaged citizens. An important component of this disadvantage is the limited and often unsuccessful engagement of Indigenous people with the labour market. To better understand this reality, the present paper explores the forces which influence the labour market status of Indigenous people. For this purpose, multinomial logit regression analysis is used to model labour force status as a function of factors relating to geography, demographic characteristics, education, health, culture, crime and housing issues. The analysis is conducted utilising the 2002 National Aboriginal and Torres Strait Islander Social Survey (NATSISS). Particular attention is given to geographic issues, revealing significant variations between the determinants of labour force status in non-remote and remote areas. The results also demonstrate the relevance of a wide range of factors in determining labour force status among Indigenous people, highlighting the complex array of issues which should be considered in attempts to increase employment.
The Productivity Commission Staff Working Paper, ‘Men not at Work - An Analysis of Men Outside the Workforce’ (by Ralph Lattimore), was released in January 2007. This paper analyses the characteristics of adult men outside the labour force in Australia. The paper finds that, in contrast to women, the rates at which men are disengaged from the labour force have increased fourfold over the past century, rising especially rapidly over the last 50 years. There are many drivers of this transformation of the Australian labour market. Some of it is due to - population ageing; younger men are spending longer in education; older men are enjoying a longer voluntary retirement; and men are now much more involved in domestic and childcare tasks — 30 per cent of those aged 35 to 44 years are not in the labour force for this reason. Many prime-aged males leave the labour market due to injury, ill-health, disability or premature ‘retirement’. About half the men aged 25 to 64 years who are outside the labour force receive the Disability Support Pension. Inactive men are more likely to be living alone, be poorly educated, and of indigenous or non-English speaking migrant background. A man aged 45 to 54 years living alone is about four times more likely to be outside the labour force than one who is married or who has a partner. The paper does not make any recommendations, but the research should assist policy development in areas central to getting more men into or back into the workforce. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.
This article describes the user-written program margeff, which enables the fast estimation of (average) marginal effects. Besides describing the program, this article offers a new discussion of some problems that are related to computation of marginal effects. I will argue that (1) marginal effects computed at means are not good approximations of average marginal effects, computed as means of marginal effects evaluated at each observations, if some of the parameter estimates are large; (2) both average marginal effects and marginal effects computed at means might produce wrong estimates for dummies that are part of a set of indicator variables indicating different categories of a single underlying variable; and (3) the use of marginal effects computed at means is preferred if some of the regressors are mathematical transformations of other regressors. Copyright 2005 by StataCorp LP.
This paper aims to address a gap in our understanding of immigrant health issues by examining the determinants of excess weight--an important indicator of current and future health. The paper combines data drawn from recent large health surveys to identify how the weight of recent immigrants compares with that of native-born people, and how the likelihood of becoming overweight or obese changes with additional years in Canada. We find evidence that on average, immigrants are substantially less likely to be obese or overweight upon arrival in Canada. These measures converge slowly to native-born levels, but there is marked variation by the ethnicity of the immigrant. Since changes in weight will reflect choices with respect to diet and activity, the extent to which overweight and obesity rates change with years in Canada may reflect the extent to which immigrants interact with or are influenced by members of their ethnic group who reside in the same area. We find evidence that ethnic group social network effects exert a quantitatively important influence on the incidence of being overweight and obese for members of most ethnic minorities, tempering the process of adjustment to Canadian lifestyle norms that may be driving excess weight gain with additional years in Canada.
A significant cost for individuals who have contact with the criminal justice system is the potential effect on employment status. In this study the effect of arrest on the employment status of indigenous Australians is examined using data from the 1994 National Aboriginal and Torres Strait Islander Survey. Having been arrested is found to reduce the probability of employment. The size of the effect is estimated to be between 10% and 20% for males, between 7% and 17% for females. The effect also varies according to the reason for a person's most recent arrest. Differences in arrest rates between indigenous and non-indigenous Australians may explain about 15% of the difference in employment-population rates between those groups. Copyright 2000 by The London School of Economics and Political Science
The modern economic role of women emerged in four phases. The first three were evolutionary; the last was revolutionary. Phase I occurred from the late nineteenth century to the 1920s; Phase II was from 1930 to 1950; Phase III extended from 1950 to the late 1970s; and Phase IV, the "quiet revolution," began in the late 1970s and is still ongoing. Three aspects of women's choices distinguish the evolutionary from the revolutionary phases: horizon, identity, and decision-making. The evolutionary phases are apparent in time-series data on labor force participation. The revolutionary phase is discernible using time-series evidence on women's more predictable attachment to the workplace, greater identity with career, and better ability to make joint decisions with their spouses. Each of these series has a sharp break or inflection point signifying social and economic change. These changes, moreover, coincide by birth cohort or period. The relationship between the development of modern labor economics and the reality of women's changing economic role is explored. The paper concludes by assessing whether the revolution has stalled or is being reversed. Women who graduated college in the early 1980s did not "opt-out,"but recent cohorts are too young to evaluate.
The general principles of Bayesian data analysis imply that models for survey responses should be constructed conditional on all variables that affect the probability of inclusion and nonresponse, which are also the variables used in survey weighting and clustering. However, such models can quickly become very complicated, with potentially thousands of poststratification cells. It is then a challenge to develop general families of multilevel probability models that yield reasonable Bayesian inferences. We discuss in the context of several ongoing public health and social surveys. This work is currently open-ended, and we conclude with thoughts on how research could proceed to solve these problems.
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