The following is an excerpt of Per Capita’s research report “Coming of Age in a Crisis: Young Workers, Covid-19 and the Youth Guarantee”, which was published on 18 June 2020.
Australian labour force data for May shows that, for the first time since the Great Depression, almost two in three young workers do not have enough work to meet their needs.
With nation-wide unemployment rising by almost 4% and underemployment increasing by almost 5% since the onset of the COVID-19 pandemic, the impact on young workers has been particularly dire. More than 290,000 people between the age of 15 and 24 have dropped out of the labour market entirely.
Not only have they lost what work they had, they have given up looking for a job entirely. Well before this crisis took hold, employment conditions for young people in Australia were grim. Young workers are by far the most likely to suffer from insecure work, with low wages and unstable hours.
While, to some extent, the transition from school to work has long been defined by insecurity, young people today remain in insecure and underpaid work much longer than did their parents and grandparents, and the problem has intensified significantly in the decade since the Global Financial Crisis.
More than half of workers aged 15-24 are now employed through casual contracts, while in 2018 almost 40% of workers aged 25-34 were in a casual, fixed term or part-time job. This has a pernicious effect on their ability to build careers and establish the economic security that is needed to achieve the standard of living Australians have come to expect over generations.
At the same time, many young people are saddled with debt for their education, the repayment of which is no longer linked to the income premiums afforded by higher qualifications.
The COVID-19 pandemic and the recession that has followed in its wake have smashed what little job security there was for young people in Australia. Industries hit the hardest by the economic shut-down, such as food services, hospitality, retail and the arts, are big employers of young Australians, who make up almost half of the workforce in these low-income industries.
It is more than a quarter of a century since young Australians have been faced with a recession as they enter the workforce. Previous experience has shown that trying to establish a foothold in the economy during an economic downturn can cause scarring effects that reduce incomes and living standards for life.
As Australia is faced with the worst labour market conditions in almost a century, it is critical that the futures of our young people are not compromised by inadequate or counter-productive policy responses.
Per Capita’s paper argues for a bold new approach to tackling youth unemployment and insecure work. Policy reform in the areas of employment services, education and training, active labour market programs, social procurement, apprenticeships and graduate employment programs, and private sector training levies are needed to address what has become a wicked problem for young workers in Australia.
We must think beyond providing entry-level, minimum wage jobs to cut youth unemployment numbers, and implement a comprehensive suite of policies to create a genuine Youth Guarantee, under which young Australians are supported to achieve their full potential, and to realise the promise of Australia that has been afforded to previous generations.
The Youth Guarantee as a policy option for Australia
A Youth Guarantee is characterised by four key pillars that distinguish it from other types of youth labour market intervention. These are:
- Publicly funded post-secondary education and training systems;
- Study and training allowances that provide a living wage;
- Increased demand for entry level positions; and
- Employment services that direct young workers towards skills shortages.
These four pillars provide a basis upon which to design policy that ensures every young person under the age of 25, and every recently graduated person under the age of 30, is offered either a place in employment, education or training no later than three months after registering as unemployed.
Among the lessons that Australian policy makers can learn from the approach of other countries that have implemented a Youth Guarantee is the potential to make youth labour markets more resistant to recession. By investing in debt-free, competence-based skills training, combined with on-the-job experience and financial support, the Australian government could reduce the long-term unemployment rate of young people coming out of the current crisis, and address the longer-term systemic underutilisation of young workers that has characterised the Australian labour market since the GFC.
Political will is needed to engage in these significant reforms, with buy-in not just from policy makers, but from trade unions, business leaders and community groups. While the theoretical Youth Guarantee approach provides some insights into how a future Australian system might be structured, there is also some local evidence to support the validity of these reforms.
The Victorian Government is strongly investing in Vocational Education and Training (VET) as a key pillar of its policy agenda. Although there has been little academic analysis of the outcome of that investment as yet, initial reports are positive. In January 2019 over 3,000 Victorians had enrolled in ‘Free TAFE’ priority courses since they were announced.
Similarly, the Victorian Government’s Youth Employment Scheme has been popular. This innovative policy offers a credible hand-up by giving long term unemployed young people a year-long traineeship in the Victorian public service. This affords participants the opportunity to earn money and learn both hard and soft skills.
The early success of these programs in Victoria indicate that a Youth Guarantee could be implemented more widely in Australia, stabilising the youth labour market and increasing security for young workers in the post-crisis economy.
You can read the full Per Capita Discussion Paper “Coming of Age in a Crisis: Young Workers, Covid-19 and the Youth Guarantee” (June 2020) here.