Monday, September 12, 2016

Our youth jobs report card: what's up with you people?

It's surprising how many of our politicians, economists and business people fail to see that our preference for looking after high-achieving young people and not worrying too much about the stragglers is a recipe for much more than social injustice and unfulfilled lives.

The earlier we identify and help kids at risk of doing poorly in education, training and employment, the more we help the community as well as the kids.

It's a social and economic investment. Neglect it and we lose much more later, as people spend more of their life on benefits and add little to the productivity of our workforce.

On the face of it, a report card on our performance, Investing in Youth: Australia – to be released by the Organisation for Economic Co-operation and Development at a forum hosted by the Brotherhood of St Laurence in Melbourne on Monday – gives us a pass.

Our education system "performs well overall, and school completion rates have been rising in recent years".

The labour market situation of youth in Australia is "quite favourable by international standards". Our youth unemployment rate is [a bit] "below the OECD average".

But this is not so terrific when you remember that "Australia was hit much less heavily by the Great Recession than most other countries".

"After continuous decline in youth unemployment rates since the early 1990s, rates have started rising again, while youth employment has fallen."

But the report focuses not on youth unemployment, but on NEETs – the share of youth (people aged 15 to 29) who are "not in employment, education or training". And, at 11.8 per cent, the share of NEETs was higher in 2015 than it was before the global financial crisis in 2008.

That's well over half a million young Australians out of education and work. About a third of those are looking for work, but the other two-thirds aren't.

The first factor driving the high proportion of NEETs is low educational attainment. Quelle surprise.

Youth with, at best, a year 10 certificate, account for more than a third of the NEETs. And their risk of being in that state is three times as high as for those with tertiary education.

Worse, "many NEETs lack foundational skills (numeracy and literacy) and non-cognitive skills, which are important prerequisites for labour market success," the report finds.

But there's hope if we bother helping. "Recent research demonstrates, however, that non-cognitive skills, like cognitive skills, remain malleable for young people through special interventions."

Get this: the risk of being NEET is 50 per cent higher for women, and women account for 60 per cent of all NEETs.

So the biggest single explanation of why so many NEETs aren't looking for work is that many of them are young mothers with a child below the age of four. And don't assume they're all sole parents on welfare.

The report adds that NEET rates are substantially higher among Indigenous youth, who represent 3 per cent of the youth population, but 10 per cent of all NEETs.

And the likelihood of being NEET is substantially higher for youth with disabilities.

In case you're tempted by visions of all those lazy loafers out surfing, or with their feet up watching daytime television, the report says NEETs "tend to exhibit higher rates of psychological stress and lower levels of life satisfaction" than other youth.

In its own ever-so-polite way, the report notes our less-than-stellar performance. The completion rate for vocational and educational training certificates and apprenticeships "remains low by international standards".

That's one way to acknowledge the awful stuff-up we've made of VET.

Australia has a wonderful, very flexible, market-based network of employment service providers that "cover, however, only about 60 per cent of NEETs, leaving around 200,000 youth unserviced". Oh.

"Young jobseekers' participation in training programs increased over the last years, but this trend came to a halt with the recent expansion of Work for the Dole", we're told.

"Given strong evidence on positive employment effects of training, including for disadvantaged jobseekers, Australia should continue promoting training program participation as an effective way of moving young jobseekers into stable employment."

Translation: what's up with you people?

The report praises our Youth Connections program and its effectiveness in improving educational attainment for youth at risk of dropping out of school – before noting it was phased out in 2014.

"The recent tightening of eligibility criteria for unemployment benefits may create additional incentives to actively look for work, but it also bears the risk of pushing the most disadvantaged youth into inactivity and possibly poverty," we're told.

Translation: you mean Aussie bastards.
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Saturday, September 10, 2016

Economy steams on for another quarter

Just about everyone who doesn't look at the numbers - which is most people - is convinced the economy is "slowing", suggesting disaster may be just around the corner.

How do they know it's slowing? Because almost all the economic news is bad. They don't notice that most of the bad news comes from somewhere else - Britain, Europe, Japan, China, even the US.

And people who warn that the economy is slowing always sound wiser and more knowing than people who say it seems to be going OK and will probably stay OK.

Of course, if you do look at the figures you find little sign the economy is slowing. Indeed, the national accounts we got from the Bureau of Statistics this week show that real gross domestic product grew by 3.3 per cent over the year to June.

Three months earlier, the figures tell us, real GDP grew by 3 per cent over the year to March. Before that we had growth of 2.8 per cent over the year to December and 2.6 per cent over the year to September 2015.

During all that time we've had people confidently telling us the economy is "slowing". What's more, within a week they'll have forgotten this week's good news from the national accounts - as they did all the other times - and be back telling us the economy is "slowing".

The good thing about the national accounts is you can always find something that's not looking too hot - provided you ignore all the things that are going OK.

This time you can say that, since the economy grew by 1 per cent in the March quarter, but by only 0.5 per cent in the June quarter, it must be "slowing".

But you have to be an amateur to believe the accounts can be taken so literally.

They're too subject to lumpiness (big transactions, such as the purchase of jumbo jets, which happen irregularly rather than smoothly from quarter to quarter), to error (such as a big transaction getting into the wrong quarter) and to frequent revision (there's a lot more statistical guesswork in the first estimate of growth during a quarter than people imagine, mainly because a lot of the figures needed are collected only yearly) for them to be treated as God's truth.

You could also say that growth in consumer spending of just 0.4 per cent in the quarter was surprisingly weak but, again, we shouldn't be too literal. Growth of 2.9 per cent over the year is pretty healthy.

Actually, if you're looking for something that really is "slowing" you'll find it not in the national accounts, but in the monthly job figures. They show that employment hasn't grown as strongly this year as it did in the last half of last year, meaning the rate of unemployment seems to have stopped falling and plateaued at 5.7 per cent.

This tells us there's been some instability in the normally fairly stable relationship between growth in the economy and growth in employment.

It would be more worrying if growth in the driver of that relationship - the economy - weren't holding up so well, and possibly increasing. This being so, employment should start behaving more normally in time.

The real growth in GDP over the year to June of 3.3 per cent was generated by, in descending order of contribution, growth in: the volume of exports of 9.6 per cent (with extra help from a 0.5 per cent fall in the volume of imports), consumer spending of 2.9 per cent, public consumption spending of 4.4 per cent, public infrastructure spending of 13.9 per cent, and home building of 8.3 per cent.

All of which was reduced by a negative contribution to growth of 2.2 percentage points from the 13.8 per cent fall in business investment spending, as the continuing fall in mining construction activity swamped still fairly flat growth in non-mining business investment.

If those figures make you think the public sector - federal, state and local - has been spending like crazy, don't be misled. Public sector spending is lumpy, and June quarter spending was overstated (and business investment spending correspondingly understated) by state governments buying prisons and other facilities previously built by the private sector.

Here's some indisputably good news: the productivity of labour in the market sector improved by 1.5 per cent during the quarter and by 2.9 per cent over the year.

There's an old rule that one quarter's figure doesn't equal the start of a new trend. Remembering this, there are some encouraging figures in the accounts we can hope will turn out to be improving trends.

The most significant is that, after deteriorating for nine quarters in a row, our terms of trade - export prices relative to import prices - improved by 2.3 per cent in the quarter.

This means stronger growth in real gross domestic income (real GDP adjusted for the terms of trade) of 1.9 per cent over the year. That is, the international purchasing power of the goods and services we produce wasn't cut back this quarter the way it has been.

When export prices fall far enough, nominal GDP grows more slowly than real GDP. This is a problem for the Treasurer because the taxes we pay are levied on our nominal income and spending.

But the improvement in the terms of trade helped nominal GDP to rise by 1.3 per cent in the quarter and 3.4 per cent over the year. This is the strongest result in more than two years.

The final good news is proof the economy is now well advanced in making the much ballyhooed transition from mining- to non-mining-led growth.

Over the year to June, the mining sector contributed about a quarter of the overall growth of 3.3 per cent, whereas the (much larger) non-mining sector contributed about three-quarters.
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