Youth Unemployment: Understanding Why Young People Are Hit the Hardest

Syllabus Topic

HSC Topic Three - Economic Issues

Unemployment

• main groups affected by unemployment

INTRODUCTION

Youth unemployment is a critical economic issue that disproportionately affects young people entering the workforce. This group often faces higher unemployment rates due to their lack of experience, volatile entry-level job markets, and challenges in securing long-term employment. As a result, youth experience significant financial and social hardships, limiting their economic participation and growth. Analyzing the effects of unemployment on youth reveals the deeper, long-term disadvantages they face and highlights the importance of addressing this issue to promote a more inclusive and resilient economy.

YOUTH UNEMPLOYMENT

Trends in Youth Unemployment:

• Youth unemployment rate (August 2024): The youth unemployment rate stands at 9.8%, up from 9.4% in January 2024, highlighting a steady rise in youth unemployment throughout the year. This rate remains significantly higher than the national unemployment rate of 4.1%.

• High employment volatility: Young workers are often the first to lose jobs during economic downturns due to their lack of experience. The "last-in, first-out" principle applies, where newer, less experienced employees are more vulnerable to layoffs. As Seek economist Matt Cowgill puts it, “When it comes to employment, it’s last-in, first-out. The people that get thrown on the scrap heap are—usually—the newest workers who don’t have years of experience behind them.”

• Job market during COVID-19 recovery: During the strong labour market recovery post-COVID, there was a notable boom in entry-level jobs, offering more opportunities for young, inexperienced workers to enter the workforce.

• Increased job turnover (August 2024): There was a net decline in employment with 463,000 people leaving jobs and 458,000 entering employment, revealing ongoing instability in the job market. This constant churn disproportionately affects younger workers who may struggle to maintain stable employment.
  
   
• Rising youth unemployment persistence (Purple Line Trend): Data from recent months shows an increase in the number of young people who remain unemployed month-to-month. The "purple line" in labour market data tracks the percentage of unemployed youth who continue to be unemployed the following month. During the COVID-19 recovery, this figure was relatively low, indicating quicker job placements. However, in recent months, this trend has reversed, and more youth are staying unemployed for longer periods, signaling tougher job market conditions for school leavers and less experienced workers.

• Lower retention rates for early school leavers: Youth who leave school before completing Year 12, particularly from government schools, are at greater risk of long-term unemployment and face lower earning potential compared to those who finish school or attend university. Research shows that early school leavers earn significantly less, with dropouts making around $47,000 annually, compared to $54,000 for Year 12 graduates and $77,000 for university graduates. There is also a rising trend in greater rates of students dropping out, with school retention in 2023 falling below 85% for girls compared to a high rate in 2019, only 75% for boys, and an average of under 80% staying in school.

• Global youth unemployment: The global youth unemployment rate fell to 13% in 2023, marking the lowest level in 15 years. The International Labour Organisation (ILO) projects this decline to continue, with youth unemployment expected to fall to 12.8% by 2026. While this is a positive trend, the youth unemployment rate still remains much higher than the adult unemployment rate, reflecting the ongoing challenges young people face in securing stable work.

Why Youth are Affected the Most:

• Lack of experience: Youth, especially those entering the workforce for the first time or dropping out of school, often lack the skills and experience that employers seek, making them more vulnerable to unemployment in a volatile job market.

• Education gap and long-term impact: Early school leavers face a significant disadvantage in terms of earnings and career progression. Dropping out of school not only increases the immediate risk of unemployment but also affects long-term income potential.

• Economic volatility: Youth employment tends to be highly sensitive to economic changes, leading to greater job instability. Young workers, particularly those in casual or part-time roles, are more likely to be laid off during economic downturns, making it harder for them to secure long-term, stable positions.

• Sector differences in retention: Students from government schools have higher dropout rates compared to those in independent schools, leading to greater unemployment risks. Independent schools have seen improvements in Year 12 retention rates, widening the gap between these sectors, with government school students facing greater challenges in securing jobs.

SOURCES

ABS: Labour Force Australia August 2024

ABS: Labour Force Australia January 2024

Forbes Advisor: Is Australia Creating A Lost Generation Of Unemployed Youth?

The Guardian: Australian school attendance and retention rates in long-term decline, report shows

Human Resources Director: Global youth unemployment hits 15-year low: ILO

Monash University: Youth barometer paints a bleak picture of young Australians in 2024