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The Australian National University

Further investigations into Indigenous labour supply: what discourages discouraged workers?

Working Paper 2 / 1999

Abstract

Indigenous people are far more likely to be discouraged from looking for work than other Australians. Understanding the microeconomic determinants of what discourages particular workers has important implications for overcoming the labour force disadvantage faced by indigenous Australians. This paper focuses on the interaction between labour supply and demand, and particularly on examining the factors that lead to indigenous people who want to work not looking for work and therefore remaining outside the workforce. A discouraged worker is defined, for the purposes of this paper, as someone that wants to work but is not actively looking for a job. Data from the 1994 National Aboriginal and Torres Strait Islander Survey is used in the analysis.

The conventional economic models of labour supply are somewhat unsatisfying in that they only allow a limited role for social environmental factors. The contribution of this paper is two-fold. First it extends the range of factors examined in studies of indigenous labour supply to include cultural and social environmental factors. Second it focuses on what discourages indigenous discouraged workers.

Cultural factors are found to be particularly important in determining indigenous labour supply. However, they are by no means the only factors affecting labour supply. Indeed, age, educational attainment and family factors are found to be more important. None-the-less, the clear message is that work which attempts to explain indigenous labour force participation needs to take account of cultural factors.

Describing attachment to the labour force

Information is presented on attachment to the labour force for indigenous and non-indigenous Australians. In addition, data on the main reasons why indigenous discouraged workers are not looking for work are presented.

The Australian Bureau of Statistics definition of discouraged workers does not classify as discouraged workers those who state personal reasons as the reason for not looking for work. The predominance of personal reasons among both the indigenous and non-indigenous populations indicates how potentially sensitive the results of an analysis of indigenous labour force status based narrowly on the ABS definition may be.

  • Indigenous males are almost four times more likely than non-indigenous males to want to work but may not be actively looking for work (15.8 as opposed to 4.2 per cent). Indigenous females are almost three times more likely to be discouraged workers than non-indigenous females (29.3 as opposed to 10.0 per cent).
  • A higher proportion of young indigenous males (aged between 15 and 24 years) are discouraged workers than prime age indigenous males (aged between 25 and 44 years). The desire to work declines with age, especially after 45 years of age. There is a commensurate decrease in the proportion of indigenous people over 45 years old who are discouraged workers.
  • There are distinct gender patterns relating to discouraged indigenous workers’ reasons for not looking for work. Nearly one-half of discouraged females indicated that childcare and other family responsibilities were the major reason for not looking for work. Amongst male discouraged workers, around 40 per cent said that studying was the major reason for not looking for work. Lack of jobs was also an important reason given both by indigenous males and females.
  • Geographic breakdown indicates that in capital cities, childcare and studying are the main reasons for not actively looking for work. However, demand-side factors relating to the lack of suitable jobs, or indeed any jobs, dominates in rural and remote areas, with 28.2 per cent of discouraged workers nominating this as the main reason why they are not looking for work.
  • Lack of childcare is the primary reason given among the prime-aged group (49.6 per cent of discouraged workers aged between 25 and 44 years). In contrast, studying is the main reason given by indigenous youth (51.9 per cent). There are also reasonably large numbers of older indigenous persons (aged over 25 years) who are returning to study.
  • If the other reason and not stated categories are ignored, then the reasons given by indigenous discouraged workers aged 45 and over are dominated by demand-side factors (20.7 per cent).
  • Indigenous secondary students are two-and-a-half times as likely to be discouraged workers (33.9 per cent) as indigenous people not studying (11.6 per cent). Indigenous post-secondary students are approximately twice as likely to be discouraged workers (23.0 per cent) as compared to persons not studying.

Modelling labour force status and discouraged workers in indigenous populations

The determinants of indigenous labour force status are estimated using a multinomial logit model that includes economic, cultural and social environmental factors as explanatory variables. The labour force states modelled are non-Community Development Employment Projects (CDEP) scheme employment, CDEP employment, unemployment, discouraged worker and other not in the labour force (NILF), or rather, NILF excluding discouraged workers. Students are excluded from the analysis in this section in order to better align our definition of discouraged worker with that used by the International Labour Organisation. Prisoners are excluded from all calculations.

The effect of social environmental factors on labour supply is primarily through the presence of other adults who are either employed or unemployed. Both of these variables have a large impact on employment prospects.

Cultural factors are found to be particularly important in determining indigenous labour supply. The variables that capture access to traditional lifestyles, such as whether a respondent speaks an indigenous language or engages in hunting and gathering, are associated with significant reductions in labour supply and declines in the desire to work in the mainstream labour market. However, cultural factors are by no means the only factors affecting indigenous labour supply. Indeed, in quantitative terms, age, educational attainment and family factors are far more important. A summary of the effects of some of the other variables is presented below.

  • Having been arrested is associated with a significantly lower probability of non-CDEP employment and an increased probability of being unemployed, but has little impact upon the probability of being a discouraged worker or being in the other NILF category (that is, labour supply).
  • Compared to indigenous females in other urban areas, indigenous females in capital cities have lower participation rates because of an increase in the probability of being a discouraged worker. Females in rural areas also have lower participation rates, but this is because of a higher probability of being in the other NILF category rather than being a discouraged worker.
  • Male labour force participation rates do not differ much by geographic region of residence, presumably because the CDEP scheme provides work for most of those who want it in rural and remote areas, which offsets the greater non-CDEP scheme labour market opportunities in other urban and major urban areas.
  • Increases in the level of educational attainment beyond Year 9 are associated with higher non-CDEP employment rates for both males and females. There are corresponding decreases in the probability of being in CDEP employment and the other NILF category.
  • The effects of education on the probability of being unemployed differ between males and females, with an increase in educational attainment associated with a lower probability of being unemployed for males, whereas for females it is associated with an increased probability of being unemployed.

Concluding remarks

Labour market policies of successive governments have emphasised the importance of encouraging the economic independence of indigenous Australians through addressing education policy and labour market programs. This paper confirms the importance of labour supply factors but also emphasises the interaction between the supply and demand side of the labour market. Indigenous people want to work as much as other Australians, and policies aimed at increasing the demand for their labour are crucial. However, in addition to addressing demand, some attention needs to be paid to cultural and social factors. At the very least, this paper highlights the difficulty in increasing participation rates given the feedback between the concentration of unemployment in indigenous families and labour supply and employment prospects.

ISSN: 
1442 3871
ISBN: 
0 7315 4901 5

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