More builders without more migrants
Make it easier for older tradies to keep working if they want
Much has been written about the link between migration and housing in Australia. More migrants means more demand for housing, which pushes up rents and house prices. On the other hand, if we want more supply of housing then we need more builders, which is used to justify bringing in more migrant workers.
The skills shortage in Australia is real, but there are other solutions. One relatively simple proposal is to make it easier for retired Australian builders and construction workers to continue doing some part-time work if they want.
Of course, many retired tradies are not interested in going back to work. Some parts of construction can involve back-breaking work, and many people are happily enjoying their retirement. Fair enough. That said, there is a subset of retired tradies who would be happy to continue doing some sort of work, but are discouraged from doing so by our tax and transfer laws.
Under our current laws, people on the aged pension can earn up to ~$13,700 per year before they start to lose their pension, at which point their pension will decrease by 50c for each dollar earned. In addition, aged pensioners can only earn up to ~$4500 per year tax free, at which point they start paying the 15% tax rate. The net result is that older workers get very little benefit from doing extra work, and most of them make the understandable decision to drop out of the workforce.
It doesn’t need to be this way. There are a number of reforms that would help to boost the Australian workforce, give older Australians more choices, and cost the government little or nothing. These options include:
A proposal by National Seniors Australia (NSA) is to exempt all employment income from the pension income test. This idea has been adopted by One Nation.
A more moderate approach would be to allow pensioners to earn more before they start losing their pensions. The current cutoff of $13,700 could be increased to $50,000 per year, which would make it easier for pensioners to pick up part-time work without losing their pension. The Liberals have adopted a watered-down version of this policy ($21,500 cutoff), which should be strengthened.
An alternative approach would be to increase the effective pensioner tax-free threshold to $50,000 and/or reduce the pension withdrawal rate from 50% down to 20% over the same income range, which would allow pensioners to keep much more of what they earn.
Ideally this would apply to all workers, but as a starting point the government could restrict these rules to pensioners with specific skills. The NSA proposal suggested starting with care workers, but skilled building and construction workers would be another obvious place to start.
These ideas aren’t a panacea that would fully solve our skills shortage, but it is an achievable and sensible step in the right direction that benefits the country and older Australians while having negligible impact on the government’s budget. Let’s hope our politicians are paying attention.
P.S. Tonight on the “Death & Taxes” podcast Gene & John will unpack the latest economic and political news of the week. You can watch live on YouTube, X/Twitter & Facebook tonight at 8pm AEST.
Australia should be producing a lot more tradespeople than it does. Why are TAFE places (at least in NSW) on the decline? Australia increased university places for jobs that don't produce any wealth, but decreases practical skills and so we have shortage of houses and not enough quality assurance for strata highrise units which are failing at alarming rates.