Economy

Job figures show youth still struggling

 There was heartening news this week that employment in Australia is rising, with figures on Thursday showing the biggest surge in job creation in two years. But with more people re-entering the job hunt, the overall jobless rate remained at 6 per cent.

Youth unemployment tends to suffer disproportionately during an economic downturn and swing back hard once times have picked up, so it is to be hoped that the trend in this week’s figures holds. The jobless rate for 15- to 24-year-olds has been on a downward slide since 2008, and the pundits are perplexed. The twin issues of rising youth unemployment and falling participation rates have been vexing observers across the spectrum and the Brotherhood of St Laurence, which has been warning of a crisis point among this age group.

First, the numbers. Since 2008, the jobless rate for those aged 15-24 has been rising, from 9 per cent in January 2008, to 12.4 per cent in January 2014, according to figures released by the Australian Bureau of Statistics. And as disheartened job seekers drop out of the hunt, the participation rate has been falling too – by 1.25 per cent since 2011.

 “The participation rate of 15 to 24-year-olds was pretty high before the GFC [global financial crisis] – at about 71 per cent – and has declined pretty steeply,” Brotherhood of St Laurence executive director Tony Nicholson says.

 However, as of this week, Australia’s overall participation rate has improved a fraction, and now sits at 64.8 per cent. While it is too early to draw conclusions or paint a trend, this is good news after two years of falling participation rates (the number of people seeking or in work) reversed a three-decade upward trend, as more women and more older workers stayed in or returned to work.

Compared with global numbers, Australia’s youth jobless rates are still significantly healthier: the OECD average is 15.5 per cent, and in the US it is 16.3 per cent, while in Europe it was averaging 24 per cent last year. It is the local figures, however, that have alarmed Nicholson, who is meeting federal government ministers next week to address “policy failure” in this area, citing not only the high jobless rate but also high numbers of underemployment. “In 2008, there were 92,000 under-employed (in the 15-24 age group), and by the end of 2013 it was 155,000.”

Jeff Borland, economics professor at the University of Melbourne, points out that: “The big thing that has changed is a massive collapse in full-time work for 15- to 19-year-olds who are not attending full-time education. In August 2008, there were 231,800 full-time jobs and by January 2014 this was down to 146,000.”

So what is going on? Much has been written about the so-called “jobless recovery”. Borland cites Okun’s law, which suggests that a country needs gross domestic product of above 3.2 per cent for unemployment to fall – above Australia’s anaemic growth rates of the past few years. Further, youth unemployment swings disproportionately: they are normally the first jobs to go during a downturn.

So cyclical factors play a significant part in youth unemployment, but Borland adds: “There does seem to be something more structural at play.” Young people tend to return to education during downturns, which increases their employability, and Borland says that some part of the fall in youth participation rates can be put down to this return to school. In August 2013, 76.5 per cent of 15- to 19-year-olds were in full-time education, compared with 72.5 per cent in August 2008, he says.

“[But] the brotherhood are right to worry. We know there are scarring effects from your initial labour market experience. If you begin your work life at a time of high unemployment, not only is it more difficult for you to get your first job, but your chances of being employed later in life are also negatively affected.”

Or as Nicholson says: going without work “is much riskier now than it was a few decades ago. In the modern economy the employer places a premium on skills and experience”.

So while economists dig deeper to identify what structural elements may be at play driving youth joblessness, the Brotherhood has been trialling a youth transitions program it would like to see the federal government embrace nationally. Nicholson identifies policy problems in this area: “The policy failure is a failure to recognise a changing economy and the premium placed on education. A lot of our policy on transition from school to work is lagging, and based around what life was like 30 years ago.”

He is keen for the government to enact a strategy around transitioning young, non-tertiary-educated youth into the workforce. Since 2010, the Brotherhood has been working in partnership with business in Melbourne’s growth corridor suburbs of Melton, Craigieburn and Laverton to help unemployed youths develop employability skills by placing them in one- to three-month internships in business. The program also includes vocational advice, planning and coaching, and claims a 70 per cent success rate with the nearly 200 young adults who have taken part.

Without action to address youth unemployment, Nicholson fears the system will continue to fail the unemployed and underemployed youth.

As part of its campaign to address joblessness, the Brotherhood last month released a list of unemployment hot spots around Australia, which showed a 21 per cent youth unemployment rate in west and north-west Tasmania, 20.5 per cent in Cairns, 19.7 per cent in North Adelaide, 17.5 per cent in Hume in outer Melbourne, 17.3 per cent in Mandurah, Perth, and 16.8 per cent in Parramatta, New South Wales.

On a less gloomy note, Borland observes that youth employment picks up more aggressively than other sectors once the economy lifts – something experts were tentatively more confident of after better-than-expected growth figures earlier this month, and more bullish again after Thursday’s jobs growth news. 

This article was first published in the print edition of The Saturday Paper on Mar 15, 2014 as "Young bearing the brunt of jobs squeeze". Subscribe here.

Kirsty Simpson
is The Saturday Paper’s business editor.

Continue reading your one free article for the week