Young Australians are not giving up on work, despite high unemployment

The unemployment figures released last week by the Bureau of Statistics showed that youth unemployment at 20% is now as high as it has been since June 1997. However, as bad as that figure is, the causes of the high rate are quite surprising.

They suggest that young people are responding to the weak employment situation not by giving up, but by continuing to look for work and continuing with their education while doing so. Without any compulsion by government, youth are either earning or learning in greater numbers than ever before.

The youth unemployment rate invariably rises or falls faster than the overall number of unemployed. Since 1978, the unemployment rate for 15 to 19-year-olds rises or falls on average each year by around one percentage point more than the total:

And yet over the past 12 months, while the total unemployment rate has risen 0.4 percentage points from 5.9% to 6.3%, the youth unemployment rate has skyrocketed 3.5 percentage points from 16.5% to 20%.

The difference in speed of the increase between the two rates is now second only to the eight-month period at the start of the 1990 recession, when young workers were laid off by the truckload and youth unemployment soared to a record high of 25% by the middle of 1992.

So an abnormally fast rising youth unemployment rate is certainly cause for concern. This concern is heightened when we consider that while the annual employment for 20 to 24-year-olds has improved in the past 12 months, for 15 to 19-year-olds it has stayed dismally negative:

The falling employment is most clearly observed among full-time youth workers. Male full-time employment fell 4.7% in the past 12 months, while female full-time work collapsed by 13.6%. Part-time work remains flat. At least it is not falling, but there is nothing to get very excited about:

And yet, when we look at the youth labour force figures there is actually some small degree of optimism because the percentage of youth in the labour force – either working or trying to get work – has actually increased in the past year.

When we say that youth unemployment is 20%, of course that doesn’t mean 20% of all youth are unemployed – just that 20% of 15 to 19 years in the labour force are unemployed.

Only 54% of 15 to 19-year-olds are in the workforce, the rest either are studying and not bothering to look for work, or are neither studying nor looking for work. This latter group is one that does not fit into the picture of the current line of thinking – where the government (and the ALP for that matter) would have you believe a youth must either be “earning or learning”.

The 2014 budget also suggested that job seekers under 30 applying for Newstart or Youth Allowance, who have not been previously employed, would face a six-month waiting period of no income support, depending on their work history.

This measure has been unable to pass the Senate and the new social services minister, Scott Morrison, seems to have sensibly dumped that policy. Using such sticks to try and force youth to either get a job or stay in education are really just measures designed to look tough on bludgers rather than an effective employment policy.

The data shows there are more youth than ever before either in the labour force or in education, and history also shows that the key to getting more youth employed is the same as all other age groups – stronger economic growth.

In December, just a record low 3.99% of 15 to 19-year-olds were not in either the labour force or in education; and a record high 92.6% who were either working or learning or doing both:

And it is here that we start to see why the youth unemployment rate has soared in the past year and why it is not such a bad thing. Many youth both work and attend education places of some kind – whether high school, or TAFE, university or another tertiary institution.

Back in 1992 when youth unemployment hit 25%, just 17.7% of youth were both working and attending education; now that figure is up to 27.6%. By contrast, back then 24.5% of youth were only working, compared with 16.2% of youth now:

Interestingly, after a decade where the levels of 15 to 19-year-olds only working, or both working and learning remained quite stable, after the GFC the proportion who were only working collapsed.

And if we look closer at each category of youth either in or out of the labour market an unusual change occurred over the past year.

As the number of youth in employment fell over the past 12 months, not surprisingly the proportion of youth working fell, but surprisingly the proportion of youth who were unemployed, but not in education also fell.

Throughout 2011 to midway through 2013, around 45% of youth unemployed were not in education, and yet over the past 12 months the number of youth unemployed who also aren’t in education has actually fallen by around 16%. In that same time the number of unemployed youth who are in education has risen 11%.

This has led to the participation rate of youth actually rising in the past 12 months from 52.7% to 54% – in stark contrast with the total participation rate which has stayed flat.

Thus youth, rather than viewing the weak job market and giving up on job hunting, are continuing to try, but are more than ever before staying in (or returning to) education while doing so. This allows them to continue building up their skills which will help them get work when the economy picks up:

Usually when the economy is weak we see an increase in the number of people giving up on looking for work – but that is not happening at the moment with the youth.

Despite the weak employment growth the participation rate of youth is increasing. Furthermore, while they’re trying to get work, more and more of them are either staying in or returning to education. The youth are already earning and learning – and doing so without the government needing to force them to.