why Australia’s Covid jobs crisis could last years

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Photograph: William West/AFP/Getty Images

It is almost 30 years since Australia last slid into recession, a now distant time when no one had heard of the internet and the Property Council had just appointed a young researcher called Scott Morrison.

The then treasurer, Paul Keating, famously said it was the “recession we had to have”, but the slump prompted structural reforms and the economic scars were quickly healed as Australia rode the Chinese tiger to unprecedented prosperity.

Fast-forward three decades and the path out of recession does not look so simple with unemployment climbing to more than 1 million. One expert says “nobody is safe” from redundancy.

The combination of a recession and the coronavirus lockdown laid over the top poses a profound economic challenge for the future labour market.

Low-hanging fruit such as productivity improvements and the transition to a service-based, global-facing economy have been plucked from the tree. The Reserve Bank was able to slash interest rates to stimulate growth back in 1991-92, but this time around borrowing costs are already at a record low and households are among the most indebted in the world.

© Photograph: William West/AFP/Getty Images
The entire shutdown of thriving sectors gives this economic crisis a particularly vicious edge, with hospitality and entertainment workers the first to bear the brunt.

Related: Australians need government support to get out of this recession. Winding it back is not an option | Greg Jericho

The entire shutdown of once thriving sectors in a matter of days gives this economic crisis a particularly vicious edge, with consumer-facing workers in the hospitality, entertainment and hotel industries the first to bear the brunt.

Jobs that once looked future-proof were the next to go as the contagion spread throughout the economy. Qantas has gone from making record profits two years ago to its worst ever loss and thousands of redundancies last month. Its rival, Virgin Australia, collapsed altogether.

Jim Stanford, the director of the Centre for Future Work, says “nobody is safe” and warns that we could end up in a widespread slump that could last several years.

“Companies laid off workers because they can’t see customers coming back, such as Qantas and universities,” he says. “There will be more of that as we go along and as the government pulls back employee support such as jobkeeper.”

Economists and consultants believe the double whammy of the current crisis will rapidly accelerate structural changes in the labour market that were already under way.

Peter Wheeler, a partner in people and organisation at consultancy PwC, says challenges facing workers such as productivity, technology and gaps in skills already existed before the pandemic brought on the recession.

“Covid and the recession has accelerated these things,” he says. “So while the change might have taken five years before, it is now happening in a matter of months.”

Prof Jeff Borland, Truby Williams professor of economics at the University of Melbourne, agrees and says history shows the recession will “bunch together destructive forces” and spell bad news for some sectors.

“During past recessions, manufacturing was very vulnerable as many jobs could be automated. It accounted for more than 20% of the workforce in the 70s but now represents just 7%.

“I don’t see any reason why we won’t see this occurring again. Jobs that involve tasks that can be codified will slowly disappear such as machine operators or clerical jobs,” he says.

The hollowing out of middle-income jobs is also a threat, Borland says, as the crisis speeds up what he calls “job polarisation” whereby the middle decline as low-skilled jobs and high-skilled jobs increase.

Manufacturing is not the only sector that has declined in the last 30 years. Back then, 21% of the working population was employed in the retail and wholesale sector, according to the Australian Bureau of Statistics, compared with 13% in 2019. Agriculture has also halved from 5.5% to 2.6%.

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Economists are warning that history shows this recession will spell bad news for some sectors. Photograph: Asanka Ratnayake/Getty Images

Construction, which expanded to employ 13% of the workforce by 2019 (15% of all men) from 9%, is in the doldrums thanks to a slump in building approvals, but is likely to benefit as governments throw money at infrastructure schemes to keep people in work.

Stanford argues that only massive government intervention to support industry and create jobs in infrastructure projects and other programs could avert the disaster facing workers in many sectors who may never return to their jobs.

“The public sector will expand in the coming years,” he says. “Government is the only actor with sufficient resources and authority to make things happen. It has incredible resources as we have seen and can roll things out super-quick. We’ve seen why we need strong government to protect people and the economy.”

Another clear growth area that experts agree on is healthcare as the pandemic reshapes community priorities and the way we all live and work.

Liam Harrison, a healthcare analyst at market research firm IBISworld, says the rollout of contact tracing to counter Covid-19 could be here to stay as it becomes more financially viable in future to track regular flu outbreaks. The need for more so-called telehealth, where contact between doctors and patients is minimised, will leave healthcare technology companies well placed to benefit and create jobs.

“Demand is way up,” he says.

Related: Remote working is not going away: who wins and loses when workers stay home?

As well as increased health spending across the board to deal with the pandemic and an ageing population, the aged care royal commission is likely to lead directly to higher staffing and more regulation in homes.

Last year, a report by the consultancy McKinsey on the future of work in America identified the changes on the horizon in an analysis that can also be applied to some extent to the Australian economy.

It said that while employment in office support and food service may decline, “healthcare, STEM occupations, creative and arts management, and business services” would see strong growth.

The prediction about the arts industry now looks terribly wrong to the thousands of people left unemployed by Covid-19, but it illustrates a point by PwC’s Wheeler that we never really know everything about the jobs of the future, just that they will exist.

Key transferrable skills such as digital literacy, data analytics, cybersecurity, robotics and AI will be crucial for young people to develop. But he also argues that soft skills such as emotional intelligence, critical thinking, problem solving, collaboration and creativity will also be crucial to the future of work.

“New jobs will arise,” he says.

“We don’t know the jobs of the future. We never did. But we know young people will have multiple careers and jobs and experience lifelong learning. Learning on the job will be more important than ever.”

Gallery: Lost your job? These industries need workers (Espresso)