b'APRIL 2021 APRIL 20212.2Decomposing the contribution of migrants The contribution of overseas migrants to the labour While migrants contribute to all aspects of life inforce becomes even more pronounced when weCONTRIBUTION TO NSW LABOUR FORCEAustralia, when the focused is narrowed to economictake into account the labour force participation rate growth there are two main channels through which theyof migrants and local residents. The focus on skilledThe contribution of overseas migration to the labour force is even more pronounced for NSW, further directly, immediately increase output; their supply ofworkers and students means that migrants have ahighlighting the importance of migration for NSWs supply side potential. On average, 80% of the net increase labour to the economy and (as a result of the focus onsubstantially higher participation rate than localin the working age population is a result of net overseas migration, when the impact of the loss in working skilled worker migration in Australia) their relatively highresidents. This is particularly true of skilled permanentage population to interstate migration is included in the calculation.levels of productivity. residents, who have a participation rate of 92%,We can see from the figure below that the economic cycles in NSW is inextricably linked to the migration 2.2.1Expansion of the labour force compared with around 66% for the entire populationtrends. Migrants, via increases to the population, raise demand for goods & services in the state. This fuels of working age. The same is true, to a lesser extent,growth in economic output and consequently labour demand, which is then partly met by supply from the Somewhat obviously, migrants who are of working ageof most migrant groupsonly humanitarian arrivalspool of overseas migrants.and active participants in the labour force increasehave a significantly lower participation rate than the the supply of labour in the economy. To disentanglepopulation average.how important migration is as a source of additionalFig 1. NOM contribution to Working Age Population (WAP), FY05-19, NSWlabour, we have decomposed migrant flows into i) the increase in the working age population (that is, we haveFig 9. Labour Force Participation Rate by Visa Type,Persons (thous.) y/y%stripped out migrant children and older people) andAustralia, 2019 140 4.0%ii) the participation rate of migrant groups, to captureAustralia 120 3.5%the proportion of working age migrants that are economically activity.Humanitarian 100 3.0%Figure 8 shows the incremental increase in the numberSkilled Permanent Visa 80 2.5%of people of working age and an estimated breakdownFamily 60 2.0%between net overseas migrants and from the domesticWorking Holiday 40economy, by year. As we can see, migrants have1.5%accounted for around 60% of additional increase inSkilled Temp Visa 20working age population in recent years. Student Visa 0 1.0%0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 -20 0.5%% -40 0.0%Fig 8. Net Overseas Migration contribution toSource: BIS Oxford Economics/ ABS, Characteristics of recent working age population migrants, Nov-19 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19Persons (thous.) Other (LHS) NOM (LHS) NOM (LHS)450400 Change in WAP (LHS) NSW GSP (RHS)350300 Source: BIS Oxford Economics/ABS250200150100500 The focus on skilled workers and students FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19Other NOM contribution Change in Working Age Pop means that migrants have a substantially Source: BIS Oxford Economics/ABS higher participation rate than local residents. This is particularly true of skilled permanent residents, who have a participation rate of 92%, compared with around 66% for the entire population of working age.14 15'