THE ECONOMlC RECORD, VOL. 69. NO. 206. SEPT. 1993.253-58

A Probit Analysis of Aboriginal Employment Prospects in New South Wales*

RUSSELL ROSS Department of Economics

University of Sy+, NewSouth Wales

Using datafrom the 1986-87 Survey of Working Age Aborigines in New South Wales, this paper presents the results of a probit analysis to determine rhe characteristics which differentiate ehployed Aborigines from Aborigines not in employment The results of the probit analysir show the importance of the acquisition of human capital to the employment success of Aborigines at least in New South Walex Increments in level of education, prevwus participation in formal labour market programs, and prcvwur employment a- perience all have significant. positive impacts on the likelihood oj individual Aborigines being in employment

I Introduction The plight of Aborigines in the formal labour

market has received considerable attention in recent years from policy makers, policy imple- mentors, the media and various other commen- tators. Most of this attention has focused on the very high unemployment levels of Aborigines. This emphasis on unemployment has been reflected in academic research since the early 1980s. much of which has been descriptive rather than analyt- ical; see Altman and Nieuwenhuysen (1979). Castle et al. (1983), Castle and Hagan (1984), Cousins and Nieuwenhuysen( 1983),Miller(1989), Ross (1987a. 1987b, 1988), Treadgold (19881, Tesfaghiorghis ( 199 I), Tesfaghiorghis and Gray (1991), and the collection of papers in Altman (1991). The true extent of the labour market degradation of Aborigines in the 1980s is now becoming well documented. However, little atten- tion has been directed towards understanding the economic and other processes underlying the labour market position of Aborigines. Such an

* The assistance of Marina Paxman and Toni Payne is gratefully acknowledged I am also grateful to Jon Altman, Bruce Chapman, Bob Gregory, Margaret Patterson, Ross Williams and two anonymous referees for their comments on various drafts of this paper.

253

0 The Economic Society of Australia. ISSN 00 13-0249.

understanding is vital if the mistakes of the past are not to be repeated and the goals of employment and economic equity are to be achieved.

Table 1 summarizes the labour market position of Aborigines using evidence from the I986 Census of Population and Housing, and contrasts their labour market position with that for the total Australian working age population. The top half of Table 1 presents labour force participation rates, employment rates and unemployment rates for Australia, disaggregated by locality types. As the data upon which the main analysis of the paper are based is exclusive to New South Wales, the comparative statistics for New South Wales are presented in the bottom half of Table 1.

It is clear from Table 1 that the labour market position of Aborigines nationwide is bleak. Abor- igines have lower participation rates and even lower employment rates than for the total popu- lation and as a consequence, they face unem- ployment rates which are multiples of the national unemployment rates. The picture for New South Wales is broadly similar. However, there are several important differences. Although Aboriginal partici- pation rates in New South Wales are very similar to those shown in the top half of the Table, the pattern of Aboriginal employment and unem- ployment in New South Wales is quite different,

254 THE ECONOMIC RECORD SEPTEMBER

TABLE 1

Cornpornrive Labour Force Statistics Australia and New South Wales 1986; Aborigines and Tom1 Working Age Population (per cent)

Male Female A T A T

~ ~~~~~~ ~~~~~ ~~

Australia Labour Force Participation Rate

Major Urban 74.6 83.9 44.6 57.9 Other Urban 69.2 84.0 37.7 52.2 All Rural 63.9 85.0 33.2 56.0

Major Urban 5 1.3 77.0 32.4 52.8 Other Urban 41.6 75.7 23.7 46.2 All Rural 41.4 76.9 20.9 50.6

Employment Rare

Unemployment Rate Major Urban 31.2 8.3 27.3 8.8 Other Urban 39.9 9.9 37.2 11.5 All Rural 35.1 9.6 37.0 9.5

New South Wales Labour Force Participation Rate

Major Urban 71.6 84.2 47. I 57.5 Orher Urban 69.9 82.4 36.7 5 1.0 All Rural 67.3 84.0 33.9 54.5

Major Urban 54.6 76.7 34.4 52. I Other Urban 36.3 73.3 19.9 44.5 All Run1 32.2 73.9 17.7 48.3

Major Urban 29.7 9.0 27.0 9.5

Employment Rate

Unemploymeni Rate

Other Urban 4x.z 11 .1 45.7 12.7 All Rural 52. I 12.1 47.7 11.4

Notes A - Aboriginal Population; Major Urban: Other Urban: All Rural: rest of Australia

T - Total Population population in e x e s of 100 OOO population between I0 OOO and I 0 0 OOO

Source: Ross (1990). Tables I to 3; and I986 ABS Census Microfiche.

especially away from the major urban areas of Sydney, Newcastle and Wollongong. For example, whereas the employment rates for both Aboriginal men and women in the major urban areas are higher (albeit fractionally so) than for other urban areas in Australia, employment rates are substantially lower elsewhere in New South Wales compared to the comparable figures for the rest of Australia. As a consequence, Aboriginal unemployment rates away from the Sydney-Newcastle-Wollongong areas are higher than elsewhere in Australia by around ten to 15 percentage points for males and eight to ten percentage p in t s for females.'

I Readers interested in a fuller description of the labour marker position of Aborigines in the other States/ Territories are referred to R w ( 1990).

Further, many who are in employment are in low paid or low tenure jobs*, and reliance on social security payments among Aboriginal communities continues to be widespread. Using data from the 1986-87 Survey of Working Age Aborigines in New Sourh Waks3. a probit analysis was undertaken to determine the characteristics which differentiate employed Aborigines from Aborigines not in employ men 1.

I1 Empirical Analysis The data base, the 1986-87 Survey of Working

Age Aborigines in New South Wales, is described * See Ross (1988. pp. 37-38), and Treadgold (1988,

Table 8, p 60 I). ' For a description of this data set, x e Ross (1987a) or ( 1987b).

1993 ABORIGINAL EMPLOYMENT PROSPECTS IN NEW SOUTH WALES 255

TABLE 2 SMIpL Mwrr of Variables llsed in the Robit A ~ I y s i s

Variable Females Males Total Employed Total Employed Total Employed Total

Sample size EMPLYD (% employed) UNEMP (% unemployed) MALE (% male) MARRY (% married) SEPETC (% separated, divorced, widowed) AGE (in years) 15-20 (% of sample) 2 1-30 (% of sample) 3 1-40 (46 of sample) 4 1-50 (% of sample) 5 I and over (9% of sample) unknown

SCH (yean of formal education completed)’ EXPE (work experience in full-time

quivalent years) LMPS (% who had been in a labour market

program at any time in the past) OTHY (all income other than earnings and

social security benefits, S1p.a.) Land Council Region (5% of sample) CAMPBELLTOWN WESTERN NORTH WEST WIRADJURI FAR SOUTH COAST

45 100 0 0 50.00 10.87

17.39 30.44 19.57 6.05 0 26.09 9.54

5.39

6.52

9.39

19.58 2 1.73 21.73 26.09 10.87

322 14.60 21.90 0 35.24 22.86

22.86 36.83 14.29 5.7 1 2.85 17.46 8.65

2.02

3.17

55.53

10.16 21.27 25.7 I 20.95 21.90

61 100 0

100 53.73 4.48

14.93 35.82 23.89 10.45 1.48 13.43 8.66

7.40

14.93

4.69

10.44 26.87 26.87 11.94 23.88

355 19.09 55.27

100 43.02 855

24.79 35.04 16.81 - 7.4 1 ‘3.4 I 12.54 8.38

3.48

5.13

3.47

4.56 27.35 27.92 13.39 26.78

I12 100 0 59.82 52.23 7.05

15.92 33.66 22.15 8.68 0.89 18.52 9.0 I

6.59

I155

6.57

14.1 1 24.80 24.80 17.63 18.65

677 17.13 39.00 52.44 39.43 15.21

24.07 35.30 15.81 6.65 3.40 14.77 8.50

2.79

4.28

27.77

7.09 24.08 27.18 16.99 24.67

Note: a Eleven individuals did not repon their level of schooling. They have been excluded from tk calculation of the mean levels of

schooling shown here. Their information is included in all other lines.

in full elsewhere; see Ross (1987a, 1987b). It contains detailed information on 677 Aborigines collected using a cluster sample sampling design. The data are drawn from five distinct geographic regions; v i z the far South Coast, the far West, the North West, the inland South, and the South-West region of Sydney. These regions correspond to five Aboriginal Land Council regions; Far South Coast, Western. North West, Wiradjuri, and Western Met- ropolitan, respectively. The total working age population of these five regions comprised 48 per cent of the adult Aboriginal population of New South Wales at the time of the 1986 Census.

Table 2 presents descriptive statistics for the variables used in this analysis. Most variables are self-explanatory, although several require com- ment. The impact of education on employment is measured by a variable reflecting the number of years of formal education. It is defined as either the actual number of years of formal education or the minimum number of years of schooling

required to obtain the highest educational quali- fication held, whichever is the greatest. Typically, the former measure was used for those individuals who completed high school while the latter meas- ure was used when the person had very little formal school education but had acquired educational qualifications at some stage later in their life.

The data set contains three measures of labour market experience, each of which is self-enumer- ated. First, the number of full-time equivalent years of total experience. Second, the number of months worked in the previous three years, and third, the number of weeks employed in the 12 months immediately prior to the survey. It is the first of these measures that has been used in the present analysis.

The data from the Western Metropolitan region were all collected in Campbelltown. For the Far South Coast, the data were collected in Bateman’s Bay, Moruya, Narooma, and Wallaga Lake Re- serve. The data from the Western region came from

256 THE ECONOMIC RECORD SEPTEMBER

Broken Hill. Wilcannia, Wentworth and Menindee. Data from the North-West were collected in Bourke, Brewamna, and Walgett. Finally, the data from the Wiradjuri region were collected from Wagga Wagga and a list of 15 small towns.

A probit analysis of this data was carried out and is described more fully in Ross ( 1990). Briefly, analytical techniques such as probit analysis are used to determine the impact of particular indi- vidual characteristics (such as education, marital status, age, etc.) on the probability that specific individuals are in paid employment. By confining attention to the factors which determine successful employment outcomes, i.e. the factors which differ- entiate employed Aborigines from non-employed Aborigines, the distinction between the two labour force states. 'unemployment' and 'not in the labour force', is of secondary importance, and it is not given any weight in the present analysis. In any event, the distinction between 'unemployment' and 'not in the labour force' is, in the context of the Aboriginal population, rather blurred by the wide- spread incidence of hidden unemployment among this population. The estimated coefficients from the probit analysis of the employment probability function are presented in Table 3, which includes the estimated marginal impact of each variable on the employment probabilities, evaluated at the sub-sample means for females and males.4

The evidence presented in Table 3 gives a very clear picture of the determinants of employment. The most successful Aborigines are those with the highest educational backgrounds, and the best job skills. Irrespective of the level of discrimination against Aborigines per se, there appears to be no systematic discrimination between males as com- pared with females.

The probit coefficients presented in Table 3 indicate that the strongest determinants of em- ployment status are the level of education, previous (but recent) work experience, and labour market program experience. There is also a regional factor in employment success. All four country regions have lower employment probabilities than the reference region (Campbelltown), although there does not appear to be a significant difference amongst the four regions; i.e. each region's probit coefficient is negative and significantly different from zero, but the hypothesis that the four regional coefficients are not significantly different from each other cannot be rejected at the 5 per cent

The theoretical model underpinning this analysis is presented in full in Ross ( 1990).

level of significance. The age coefficients indicate that the age-

employment profile has an inverted-U shape. The coefficients on AGE15-20 and AGE21-30 are statistically insignificantly different from that for the age reference group (i.e. persons aged 5 1 to 64). This indicates that persons at either end of the working age range have, other things being equal, an equal probability of being employed. The estimated coefficients on the other two age groups (AGE31-40 and AGE41-50) are positive and significant; albeit at the 10 per cent level of sig- nificance. The hypothesis that the two coefficients are not the same cannot be rejected at normal levels of confidence. This indicates that persons in these age groups are the most likely to be in employment and further that individuals in either age group have the same likelihood of being employed.

These data cannot be used to test for any em- ployment discrimination against Aborigines. The estimated coefficients on the sex and marital status variables suggest that there is no systematic discrimination among Aborigines; the coefficients for both the sex and marital status variables are insignificantly different from those for the ref- erence group (i.e. females who have never been mamed). Although Aborigines who are separated, divorced or widowed have lower employment probabilities, it is likely that this reflects a supply- side effect, viz. the relatively easier access to social security payments for sole parents who are sep- arated or widowed.

The figures in the final two columns of Table 3 indicate the estimated marginal impact, in per- centage points, of a one unit change in the relevant explanatory variable on the probability of employ- ment evaluated at sub-sample means for females and males. The figures in these two columns indi- cate that a person who is separated (or divorced or widowed) has an employment probability some 17 to 20 percentage points lower than that for an otherwise identical person. Similarly, an extra year of schooling is estimated to increase the employment probability by 5 to 6 percentage points, cetem pariblcs. As the average years of schooling in this sample was only 8.5 years. this implies that an Aboriginal person who completes high school (i.e. has 13 years of schooling) will increase their employment prospects by some 25 to 26 percentage points.

I l l &ommic and Social Policy Implications The economic and social policy implications of

this analysis are clear. If the labour market position

1993 ABORIGINAL EMPLOYMENT PROSPECTS IN NEW SOUTH WALES 25 7

TABLE 3

,%mares of the Index of the hbabifiry of Employment

Marginal Impact on Employment Probability Variable Coefficient Standard Error Females Males Constant -2.7793 0.633c - - MALE 0.1 182 0.132 - - MARRY -0.0077 0.145 - - S E P R T -0.5 107 0.237' - 17.28 - 19.66 A GEIS-20 0.5667 0.547 - - AGE2 1-30 0.6758 0.534 - - AGE3 1-40 0.9403 0.529' 31.81 36.19 AGE4 1-50 0.8883 0.550e 30.05 34.19 AGE UNKNOWN 0.8542 0.537 - - OTHY/lOOO -0.02 13 0.186 - - SCHLb 0. I525 0 .039 5.16 5.87 SCHDUb 1.8317 0.552' - - EXPE 0.5597 0.095' 18.94 21.55 LMPS 0.8772 0.252' 29.68 33.76 WESTERN -0.4583 0.246e -15.51 - 17.64 NORTH WEST -05 I25 0.246' - 17.54 -19.95 WIRA DJURI -0.6191 0.25 I c -20.95 -23.83 FAR SOUTH COAST -0.5926 O.24gc -20.05 -22.8 I Notes: Reference group IS female, never manicd. aged 5 I to 64 and living in Campbelltown.

log likelihood ratio - -26 I .77. The sample proponion of employed people was 0. I7 13. Efron's adjusted Rr was 0. I628 and McFidden's adjusted was 0.1558.

evaluated at sub-wmple means for females and males separarely SCHL and SCHDU arc defined as follows; if schooling information missing ( x e note to Table 2 ) SCHL - 0. and SCHDU - I ; olhcnviw SCHL - SCH. and SCHDU - 0. significant at I per cent level of significance significanl at S per cent level of Significance significant at I0 per cent level of significance

of Aborigines is to be improved, considerably more resources will need to be directed towards im- proving opportunities for formal learning and the acquisition of job-related skills beyond those pro- vided in basic education. Aborigines are not re- maining in the education system anywhere near as long as other groups in society and so are disadvantaged in the competition for scarce em- ployment opportunities. In determining how these resources would best be allocated, a key question centres on the balance between skill acquisition through greater opportunities in the education system and skills acquisition through targeted lab- our market programs. However, there is no point in providing more resources to this end if there is a lack of employment opportunities. In this scenario all that would be achieved is a more educated pool of unemployed people.

Since the 1986-87 S w v q of Working Age Abor- igines in New Sourh Wales data were collected, there

have been several significant policy initiatives which are expected to improve the labour market position of Aboriginal people in New South Wales. The most important of these has been the imple- mentation of the Aboriginal Employment Devel- opment Policy (AEDP), introduced by the Federal government in response to recommendations of the Miller Report; Miller (1 985). The primary target of AEDP is the achievement, by the year 2000. of statistical equality between Aborigines and other Australians in terms of income distribution and employment status. As Altman and Sanders (199 1 ) note, the government argued that AEDP repre- sented 'a shift away from the welfare dependency approach of the past towards measures to enhance Aboriginal economic independence'.

One of the major features of AEDP is to dra- matically increase funding to the Community De- velopment Employment Projects (CDEP) scheme. CDEP, through which Aboriginal communities are

25 a THE ECONOMIC RECORD SEPTEMBER

able to replace unemployment benefits payments with funding for approved community employment schemes, has been in operation since 1977. How- ever, prior to AEDP. there was virtually no CDEP funding in New South Wales.3 Consequently, the advent of AEDP may well have a major impact on the labour market position of Aborigines in New South Wales.

It remains to be seen just how successful AEDP can. or will, be in New South Wales and in the rest of Australia. Evidence from the 199 1 Census of Population and Housing, when available, will provide the next insight into the progress of Aboriginal people towards the goal of employment equity. However, the evidence presented in this paper indicates that there is an enormous way to go before the AEDP goal is even approached. let alone actually reached.

REFERENCES Altman 1. C. (ed.) (199 I ) , Aboriginul Employment &Uj,

@ rhr Yeor 2OOO. Research Monograph No. 2. Centre for Aboriginal Economic Policy Research. Australian National University, C a n b e m (published for the Academy of Social Sciences in Australia). - and Nieuwenhuysen J . (1979). The konomic Stofus

of Ausrrulion Aborigines. Cambridge University Press, Cambridge, United Kingdom. - and Sanders W. (1991). 'Government Initiatives for

Aboriginal Employment: Equity, Equality and Policy Realism'. Chapter I in Altman (1991).

Castle R. and Hagan J . (1984). 'Aboriginal Unemploy- ment in Rural New South Wales 1883-1987-', Chap- ter 5 in R. Castle and J . Mangan (eds). Unemployment in the Eighties, Longman Cheshire, Melbourne.

' For an overview of CDEP. see Morony (1991). For an overview of the history of government policy initiatives on Aboriginal employment, see Altman and Saunders ( I99 I ).

Castle R.. Endres A,, Hagan J. and T. Maher (l983), Employment Opponunifies for Aborigines in New South W&, Report for the New South Wales Ministry of Aboriginal Affairs. July.

Cousins D. and Nieuwenhuysen J. (1983). Aboriginal Unemployment in Aumalip. irr extent und policies to reduce d, Monograph No. M71, Centre for Economic Development of Australia. May.

Miller M. (1985), Rcpon of Tiu Commim of &view of Aboriginal Employmen1 und Training Pmgmms, AGPS, Canberra.

Miller P. ( 1989). 'The Structure of Aboriginal and non- Aboriginal Youth Unemployment', Australion Economic Papers 28(5), 39-56.

Morony, R. (I99 I ) , 'The Community Development Employment Projects (CDEP) scheme', Chapter 8 in Altman ( I99 I).

Ross, R. T. (1987a). 7 7 ~ Labour Murkrr Podion of Aboriginul People in New South Wales, report presented to the NSW Ministry of Aboriginal Affairs and the NSW State Aboriginal Land Council. - (1987b). 'The Labour Market Position of Aboriginal

People in New South Wales'. Working Paper No. 99. Department of Economics. University of Sydney. - ( 1988). 'The Labour Market Position of Aboriginal People in Non-metropolitan New South Wales', Aurfrolian Bulierin of Lobour IS( I). 29-56. - (1990). 'A Probit Analysis of the Factors Influencing the Labour Market Success of Aborigines in New South Wales', Social Policy Research Centre Discussion Paper No. 27. University of New South Wales, Kensington.

Tesfaghiorghis, H. ( 199 I ). 'Geographic Variations in Economic Status of Aboriginal People'. CAEPR Dis- cussion Paper No. 3. Centre for Aboriginal Economic Policy Research. Australian National University. Canberra. - and Gray, A. ( I99 I ). 'The Demographic Structure

and Location of the Aboriginal Population: Em- ployment Implications', Chapter 4 in Altman (1991).

Treadgold. M. L. (1988). 'Intercensal Changes in Abor- iginal Incomes, 1976-1986'. AlLmolian BuUefin of Labour 144). 564-88.