Finance Work Echoes of the 1990s recession in these youth jobs figures

Echoes of the 1990s recession in these youth jobs figures

Youth unemployment and underemployment
The percentage of 15-24 year olds who are either unemployed or underemployed continues to climb. Photo: Getty
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More than 650,000 young Australians are struggling to find a job or failing to get the amount of hours they need each week — a crisis worse than the aftershocks of the 1990s recession.

What captured most attention in Thursday’s latest jobs figures was an unexpected increase in the overall unemployment rate, from 5.6 to 5.7 per cent for the month of November.

The jobless rate hasn’t been that high since July. Total hours worked over the month also decreased to 1.663 billion hours (a fall of 10.4 million), which is a symptom of worsening underemployment.

Lurking beneath those headline figures was a sign that things may be getting especially difficult for young Australians.

The dire statistic: the percentage of 15-24 year olds who are either unemployed or underemployed. Australia’s statistics bureau calls this combined measure ‘underutilisation’, and has calculated it for every quarter going back to 1978.

According to this measure, the number of ‘underutilised’ young people at this time of year is at a near all-time high, worse even than the fallout of the 1990s recession.

Dr Lucas Walsh, a youth unemployment expert at Monash University, said it is crucial to look at both measures.

“While unemployment is obviously an issue of concern, there are significant numbers of young people who want to work more but they can’t,” Dr Walsh told The New Daily.

There is some good news. This end-of-year figure is slightly better than in 2015.

kfc worker
The measure includes 15-19 year old students seeking part-time employment, but the real concern is the 20-24 year olds. Photo: Getty

It should be remembered that many ‘unemployed’ youths are full-time students, either at school or university. They may struggle to find a part-time job, perhaps at a fast food restaurant, but are probably able to fall back on their parents.

Also, youth underutilisation generally peaks over summer, when young people are out of school and trying to enter the labour market. Still, it was not this bad in the summer of 1993.

Dr Walsh blamed the trend on the fallout from the global crisis of 2008; the fact that federal funding has been “stripped away” from welfare and other support measures; and a broken TAFE system.

“Whenever there are fluctuations economically, they have a disproportionate and immediate effect on young people, so we saw this most visibly during the global financial crisis,” he said.

“Economic downturns also have a long tail, meaning young people who become disengaged during those periods take a long time to become reengaged.”

The bottom 20 per cent are worst hit

The poor jobs data rounded out a dismal year for the economy, following negative GDP growth, record-low wage growth, stubbornly low inflation and fears of property market contractions in major cities.

Confirming Dr Walsh’s concerns was new research from the Reserve Bank, which found that bottom-income earners (including presumably many young adults) are the worst affected by economic downturns, precisely because they are most at risk of falling into un- and underemployment.

1216-probability-entering-unemploymentThe study measured which quintile (20 per cent) of earners was most sensitive to fluctuations in economic growth, based on data collected by Melbourne University’s HILDA survey.

The wages (main source of income) of the bottom 20 per cent rises the most in strong economic conditions and falls the most in poor conditions, which is probably because of “transitions into and out of employment”, the study found.

Unlike the two quintiles above them, low-wage earners seem to “receive less of a buffer against aggregate shocks through government payments”, causing them to suffer worse than the middle class.

The top 20 per cent are the second-worst affected by downturns, due to fluctuations in return to capital investments, the RBA study found.

“The effect on bottom-income earners appears to be stronger than that on top-income earners, suggesting that income inequality declines when economic conditions are strong.”

How to escape the crisis

Another piece of RBA research, released on Thursday, revealed that: being female with dependent children; having a long-term health condition; not completing high school; and being a migrant from a non-English-speaking background are all factors that increase the risk of losing a job.

Economist Ha-Joon Chang has a controversial view: more education in itself does not make a country richer. Photo: Getty

Currently employed people, university graduates, and men with dependent children were the most likely to remain employed, the study found.

Based on this RBA research, it would seem that going to university remains a good way of getting and keeping a job.

Monash University’s Dr Walsh also called on the government to invest more in youth welfare and bolster the vocational education system.

A more controversial suggestion comes from South Korean economist Ha-Joon Chang, who in a 2010 book argued that support for industry creates far more economic growth, and thus jobs, than pumping more money into education.

Instead of increased education spending and a push for more uni degrees, Dr Chang recommended:

  • protective trade tariffs for “infant industries”;
  • a financial system that provides the “patient capital” necessary for companies to grow long-term;
  • generous bankruptcy laws to protect risk-takers;
  • a strong welfare state to protect workers.

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