Strategies for Addressing the Worker Shortage: Lessons from New Zealand
In recent years, Australia has been facing a persistent worker shortage crisis, with job vacancies reaching over 388,000 and one in five businesses struggling to find the workers they need. This situation not only hampers business growth and investment but also leads to significant losses in wages and tax revenue. While governments have often resorted to migration as a solution, it is clear that this approach alone is not enough. However, there is a neighboring country that offers valuable lessons on how to address this issue effectively – New Zealand.
New research conducted by the Institute of Public Affairs highlights the stark difference between Australia and New Zealand when it comes to job vacancies and recovery from the COVID-related downturn. While both countries experienced a spike in job vacancies between 2019 and 2021, New Zealand managed to recover much more effectively compared to Australia. In 2023, job vacancies in New Zealand were only 5.4 percent above pre-pandemic levels, whereas Australia remained 77 percent above the 2019 figures.
The key factor that sets New Zealand apart from Australia is its higher labor force participation rate. Throughout the period from 2019 to 2023, New Zealand consistently maintained a labor force participation rate that was four to five percentage points higher than Australia’s. This difference can largely be attributed to the participation of pensioners in the workforce. In New Zealand, one in four pensioners chooses to work, while in Australia, this number is only three percent.
The reason behind this stark contrast lies in the differences in tax rates and red tape barriers for pensioners and veterans who wish to work. In New Zealand, these individuals are only taxed on their combined pension and employment income, resulting in an effective marginal tax rate as low as 10.5 percent. On the other hand, Australian pensioners and veterans face an effective marginal tax rate of 69 percent if they choose to work more than a day and a half on minimum wage due to reductions in their pension income.
To address the worker shortage crisis, the Australian government has taken some steps, such as increasing the annual threshold at which the pension begins to be reduced. However, these measures are not sufficient to tackle the issue effectively. A recent survey conducted by National Seniors revealed that 20 percent of pensioners would rejoin the workforce if tax and red tape barriers were removed. This presents a win-win-win situation for the government – solving the worker shortage crisis, allowing pensioners and veterans to experience the dignity of work, and generating additional tax income for critical infrastructure projects.
In conclusion, Australia can learn valuable lessons from New Zealand in addressing the persistent worker shortage crisis. By adopting the New Zealand model of lower effective tax rates and fewer red tape barriers for pensioners and veterans, Australia can boost labor force participation, fill job vacancies, and generate additional tax revenue for essential infrastructure projects. It is time for the government to take action and implement these necessary changes to ensure a prosperous future for businesses, workers, and the nation as a whole.
(Note: The views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.)
