Young Aussies lose out in COVID-19

As businesses and individuals deal with the fallout of the COVID-19 pandemic one thing is becoming clearer – young people are more likely to be impacted in both the immediate future and long-term.

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Based on an Australian Bureau of Statistics (ABS) business survey, more than a third of businesses reported temporarily reducing staff work hours due to COVID-19 in six key industries: hospitality, education, health, retail, arts and recreation, and administrative and support services.

"Young people will face many barriers to entering (or re-entering) the labour market and gaining full-time employment as the labour market recovers from COVID-19.”

Three of these industries - hospitality, retail, and arts and recreation - have the highest proportions of young people in their workforces. Nearly half - 45 per cent - of young workers are employed in these three industries, compared with 27 per cent of all other age groups.

Young people are more likely to work casually (ie without paid leave entitlements) than any other age group. More than half - 54 per cent - of young people are employed on a casual basis compared with 18 per cent for all other age groups. On top of that, an estimated 26 per cent of young workers are both employed on a casual basis and have been with their current employer fewer than 12 months – making them ineligible for the JobKeeper payment. This compares with just 6.5 per cent for all other age groups.

The Grattan Institute estimates 15–19 year olds are the most likely to lose work due to shutdowns of non-essential services and physical distancing, followed by 20–29 year olds.

New data from the ABS and Australian Tax Office (ATO) show between the week ending 14 March and the week ending 4 April, total employee wages paid fell 12.7 per cent to under 20s and 9.1 per cent to those in their 20s, reflecting both job cuts and loss of hours for those still working. Under 30s, along with over 70s, also suffered the largest percentage decline in jobs.

In the March quarter, there was a big jump in the number of people accessing Jobactive, the main employment services program for Australian job seekers receiving income support. The youth Jobactive caseload tends to rise in March quarters, by an average of 1.3 per cent quarter-on-quarter over the previous four years to 2018; but in March 2020, it increased by 24.6 per cent quarter-on-quarter. This was on par with the 23.2 per cent quarter-on-quarter rise for all other age groups.

GFC still stings

The shock to the labour market from COVID-19 is coming more than 11 years after the onset of the Global Financial Crisis yet the labour market for young people is more precarious going into the current shock than it was pre-GFC.

In August 2008, the youth unemployment rate was 8.8 per cent; in March 2020 it was 11.8 per cent, 3 percentage points higher (in trend terms). In contrast, at 5.2 per cent, the average unemployment rate for all ages is only 1 percentage point higher than pre-GFC.

In March 2020, the employment to population ratio was above where it was pre-GFC for all age groups 25 years and over. But the youth employment to population ratio was 60.2 per cent, 4.6 percentage points below where it was pre-GFC. It is particularly pronounced for youth not attending full-time education who would be most available for work.

Even for young people who do gain employment, part-time work is now more prevalent than before the GFC. Of youth not attending full-time education, 53 per cent are employed full-time (down from 65 per cent pre-GFC) and 25 per cent are employed part-time (up from 17 per cent pre-GFC).

This has contributed to an escalation in youth underemployment. For all young people, the underemployment rate was 11.1 per cent pre-GFC. In March 2020, it was 18.2 per cent, more than double the underemployment rate of any other age group.

Being left behind

The youth long-term unemployment rate has tripled since the GFC and now sits at 2.3 per cent, well above the second-highest rate of 1.4 per cent for 55–64 year olds. Australia is likely to see long-term unemployment rise significantly as a consequence of the COVID-19 pandemic.

The Reserve Bank of Australia (RBA) says during periods of longer unemployment, people’s skills and productivity deteriorate and they become seen as being less employable, reducing the probability they will be hired in the future.

For young people, this means they miss out on building skills and experience during the crucial early stages of their careers. Research published in The Economist shows “workers who start looking for a job during a recession earn significantly less than their timelier counterparts”.

Along with the impacts on employment, income and wealth, there can be other long-lasting social effects, including reduced life expectancy and a higher likelihood of relationship breakdowns.

Young people will face many barriers to entering (or re-entering) the labour market and gaining full-time employment as the labour market recovers from COVID-19.

Jeff Borland, Professor of Economics at the University of Melbourne, suggests older workers will crowd out young people in the labour market as they “delay retirement to rebuild their superannuation balances”.

Lending a hand

There are some federal and state government policies focused on supporting youth during COVID-19.

The federal government’s $A1.3 billion Supporting Apprentices and Trainees measure provides a wage subsidy of 50 per cent of apprentices’ or trainees’ wage paid between 1 January 2020 to 30 September 2020 for eligible businesses. Employers will be reimbursed up to a maximum of $A21,000 per eligible apprentice or trainee ($A7,000 per quarter). The subsidy is transferrable between businesses and support will also be provided to the National Apprentice Employment Network. The South Australian Government announced a $A16 million VET Market Continuity Package and the Tasmanian Government introduced a youth employment payroll tax rebate scheme from 1 April 2020.

But ANZ Research doesn’t think these measures will be a big enough cushion for the blow to young people in the labour force, particularly given a quarter of young workers may be ineligible for the JobKeeper payment.

Based on the GFC experience, young people will feel both the immediate and longer-term impacts of the downturn more keenly than any other age group. Substantial, targeted and ongoing support will be needed.

Connecting young job-seekers to employers and tailoring education and training to ensure young people’s skills meet the needs of local, regional and national industries will be critical to the recovery of the youth labour market.

Catherine Birch is Senior Economist at ANZ

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.

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