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The Australian National University

Institutional factors underpinning Indigenous labour force participation: The role of the CDEP scheme and education

Working Paper 14 / 2002


Labour force participation and attachment to the labour market is a key determinant of economic well being. It is surprising, therefore, how little analysis there is of Indigenous labour supply. In order to address this omission, data from the 1994 National Aboriginal and Torres Strait Islander Survey (NATSIS) and all the censuses 1981 and 1996 are used to highlight the role of the Community Development Employment Projects (CDEP) scheme in augmenting Indigenous labour supply.

From its humble beginnings in 1977, the CDEP scheme grew slowly at first, before expanding rapidly away from the original strongholds in remote Australia in the mid to late 1980s. Indeed, the scheme more than quadrupled in size between 1986 and 1991. A second, less obvious, internal expansion in the number of CDEP scheme jobs occurred as a result of the Spicer review in 1997. Despite this, the CDEP scheme still only provides a small proportion of Indigenous employment in major Australian cities.

Who is employed in the CDEP scheme?

The distinctive characteristics of CDEP workers as a group is driven by the fact that CDEP is a publicly funded employment program that is predominantly located in rural and remote areas. As a program designed in part to overcome labour market disadvantage and the lack of local employment options, the CDEP scheme is directed towards Indigenous people with poor employment prospects, especially low skilled workers, youth, and people who have difficulty in speaking English.

Indigenous underemployment and the CDEP scheme

Alongside the recent national growth in part-time employment, there has been an increase in the proportion of part-time employees who would prefer to work longer hours (the underemployed). Underemployment is particularly common among Indigenous employees, with 19.5 per cent of female workers and 25.3 per cent of male workers indicating they would prefer to work more hours. The extent of Indigenous underemployment is indicated by the fact that the Indigenous underemployed work about 11 hours less per week than Indigenous employees who are unconstrained in the number of hours they work. Not only do the underemployed have difficulty finding enough work, but they were also less likely to be working for continuous periods. These observations are consistent with the underemployed being more likely to be working in any available job—including casual or seasonal jobs—rather than being matched with their optimal job.

CDEP scheme workers are about twice as likely to be underemployed as other Indigenous workers, in both urban and non-urban settings. Nevertheless, many CDEP workers are happy with their part-time status of their employment.

The CDEP and participation rates: A NATSIS-based analysis

A recent Commonwealth Grants Commission Report into Indigenous Funding claimed that the CDEP scheme directly lifts the labour force participation rates in certain remote Aboriginal and Torres Strait Islander Commission (ATSIC) regions to well above the national Indigenous average, with correspondingly lower levels of unemployment. A multivariate analysis of 36 ATSIC regions indicates that the effect of CDEP on participation rates is not as simple as previously thought, with a significant interaction between CDEP and post-secondary qualifications.

The rise of the CDEP scheme and changes in Indigenous labour supply: A census-based analysis

A multivariate analysis of Indigenous and non-Indigenous participation rates in major urban, other urban and rural/remote areas was conducted for males and females in the four censuses between 1981 and 1996, with the following results.

  • The changes in Indigenous labour force participation rates are larger than could be explained by the changes in labour supply in the rest of the population. The main changes in Indigenous participation occur in areas where the CDEP scheme has expanded dramatically.
  • The numbers of people who stayed at school increased for both Indigenous and non-Indigenous populations between 1981 and 1996, with most of the change arising from a decline in the number who left school before 14 years of age.
  • Outside the major metropolitan areas, the effect of the growth of the CDEP scheme on Indigenous labour supply is prominent, especially in the education variables. The effect of early school leaving on participation has converged for the Indigenous and non-Indigenous populations—probably as a direct result of the CDEP scheme enhancing the engagement of previously excluded groups, such as those with low skill levels.

Concluding remarks

This analysis supports the hypothesis that the CDEP scheme enhances Indigenous labour force participation. The interaction between education and overall labour supply is one of the main factors underlying the significant increase in the Indigenous participation rates relative to those for other Australians. The CDEP scheme appears to overcome established barriers to Indigenous labour force participation by providing work managed by, and on behalf of, the local community.

A second order implication of the above analysis is that the CDEP scheme tends to hide a high level of underemployment among Indigenous Australians. However, while the CDEP scheme is reducing the incidence of exclusion from the labour force, it is limited in the extent to which this can be achieved by expanding the scheme. That is, the CDEP scheme does not, and probably cannot, provide the number of hours work desired by all participants. In order to achieve this, the CDEP scheme guidelines, rules and funding would need to be more flexible. For example, if CDEP schemes engaged in entrepreneurial activities that top-up funds, they would be able to employ more productive workers for longer hours.

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