Monday, September 12, 2016


Melbourne, Monday, September 12, 2016

Last week I got an email from Peter, a 23-year-old who’s been unemployed and on the dole for the past six months. As required by Centrelink, he applied for 20 jobs a month, from which he got just three interviews and no job offers. “I’m finding it hard to get work”, he says, “because I’d like to work in a computer shop . . . but it’s either ‘you don’t have enough experience’ or ‘you don’t have the qualifications’. Really annoys me. It’s not that I want to be a bludger, I’d gladly take part-time and earn some small money . . . or full-time work if I could.”

Something funny has been going on in the labour market since the global financial crisis in 2008. Funny peculiar, I mean; it’s not exactly amusing. Until then, the overall rate of unemployment had been falling steadily since an uptick after the introduction of the GST in mid-2000. After the financial crisis, unemployment jumped, but then fell back reasonably quickly as we realised we’d escaped being caught up in the Great Recession as the other advanced economies had been - and pretty much still are.

But then our economy went for some years growing at below-trend rates and the overall unemployment rate began creeping up. Only since early last year has the economy been growing a bit faster and has overall unemployment fallen from a peak of 6.2 per cent to its present 5.7 per cent, which does seem to be a plateau.

The peculiar thing is that the youth unemployment rate - for those aged 15 to 24 - has followed roughly similar trends, but in a more exaggerated way. That’s particularly true since the GFC.  When overall unemployment jumped after the crisis, youth unemployment jumped by a lot more. It didn’t fall back as far after the crisis subsided, and it rose faster when the economy’s growth was inadequate. When growth picked up more recently, youth unemployment did fall back faster than overall unemployment, but now while the overall rate seems to have plateaued, the youth rate is actually rising.

So, while the overall rate fell to a low of 4.1 per cent before the GFC, the rate for youth’s lowest point was 8.7 per cent. And today, while the overall rate seems to have plateaued at 5.7 per cent, the youth rate is up at 13 per cent - which is a widening of the gap between the two of about 60 per cent. It’s also well over a quarter of a million young people (276k).

I want to give you my explanation for that widening gap, but first let me describe some other dimension of the youth unemployment problem. There is quite a bit of variation between regions and within states. Using the most recent figures, for January, and rounding to whole numbers, NSW’s worst regions are the Hunter Valley (22 per cent) and the Mid-North Coast (20 per cent). Victoria’s are Melbourne West and Geelong, both on 18 per cent.

Turning to long-term unemployment, nearly 17 per cent of those youths unemployed at present have been so for more than a year, meaning there are about 45,000 Australians who’ve been looking for work without success for a year or more. Here, too, the improving trend before the GFC has since reversed.

And in line with the worsening in youth unemployment has been a rise in youth under-employment - people with part-time jobs who’d prefer longer hours - including, no doubt, plenty who’d prefer a full-time job. The most recent figures, for May, show the youth under-employment rate is nearly 20 per cent. That’s more than a third of a million young people (360k).

So why is it that, even though we congratulated ourselves in 2009 for having escaped the Great Recession, we’ve seen this worsening in youth unemployment? Well, the first point I’d make is one retiring Reserve Bank governor Glenn Stevens has often made. The fact is we didn’t escape recession at that time. We did have a recession - when sensibly measured as a period of falling growth and sharply rising unemployment - but exceptionally deft economic management ensured it was a shallow and brief recession. It wasn’t anything like the severe recessions we experienced in the early 90s and, before that, the early 80s.

But one of the ways employers contributed to the shallowness of that post-GFC recession was by minimising layoffs and using other, seemingly gentler ways to reduce their payrolls. There was, for a time, a lot of resort to four-day weeks and, for much longer, what’s euphemistically known as “natural attrition” - not replacing people who leave, and skimping on, or skipping entirely, the annual entry-level intake.

In the years since then when, until recently, growth hasn’t been all that strong, particularly in the “non-mining” part of the economy, many employers have persisted with low levels of recruitment at the entry level.

The trick, of course, is that this solution suits the interests of older, established workers, but does so by shucking off most the burden of adjustment onto young people, particularly that year’s crop of education leavers. How much concern for their welfare? Not a lot.

We do hear a lot about the trouble some older people find in regaining employment should they lose their jobs. It’s a genuine problem and one we should care about.

But the unemployment problems of the old seem to attract a lot more public attention - and sympathy - than the similar problems of the young.

Research by the Brotherhood using the HILDA survey - finds those aged 55-and-over account for just 8 per cent of the unemployed, whereas those aged under 25 make up more than 40 per cent.

So unemployment is concentrated among the young. And, as Stephane and his OECD colleagues have reminded us, the sad truth is it’s concentrated among the less educated and less skilled.

In the modern technologically-driven workforce, there are many fewer jobs for people who quit school early and for those who don’t acquire post-school trade or tertiary qualifications. What unskilled jobs remain tend to be casual and occupied by uni students or young mothers.

In 2008, according to the Brotherhood’s figures, 45 per cent of the unemployed had failed to complete year 12, with another 20 per cent having gone no further than year 12. That’s almost two-thirds.

Governments can’t be blamed for the employment practices of businesses, but they can be held accountable for their punitive treatment of the young unemployed - even if they are reflecting the adult world’s lack of sympathy for youthful job seekers. Oldies seem convinced that the young’s only problem is that they don’t want to work and so need to be starved back to the grindstone.

The dole has been allowed to fall way below the age pension so that it’s now less than $280 a week for a single adult. The “youth allowance” is even lower. Now the government wants to deny the $4.40 a week “energy allowance” to new entrants, as a cost-cutting measure.

Why young voters cop this crappy deal so meekly I don’t know.