Timely and decisive policy responses needed to stem rising youth unemployment

VECCI Chief Executive Mark Stone writes > OFFICIAL estimates suggest the national unemployment rate among 15-24 year olds is now 13.8 per cent and around 288,000 young people are now looking for work across Australia.

In Victoria, the youth unemployment rate is similar to the national average, although rates are higher in some regional areas.

The true picture of youth unemployment is likely to be much worse, when we consider that the official unemployment data excludes many youngsters who do not participate in the labour market at all.  A lack of employment opportunities and success in applying for positions can leave many job hunters demotivated to the point where they drop out of the job search market altogether. 

Once lower participation rates are taken into account, the real level of youth unemployment is likely to be at least one to two percentage points higher than the official estimates.

These are not just figures, they are real people.  As we know, there are major economic and social costs associated with having so many young people idle. 

Making matters worse is the fact that the consequences of youth unemployment can last for years.  Those who begin their careers without work are more likely to have lower wages and suffer joblessness again in later life. 

While undoubtedly a strong influence, not all youth unemployment can be explained by the current economic environment where consumer spending levels are well below what many employers require in order to justify taking on new workers.

Lack of qualifications can be a major barrier to youth employment.  In this case the candidate may be missing not only specialised skills and core competencies like literacy and numeracy, but more rudimentary ‘employability’ skills such as the ability to problem solve, initiative, self management and team work.

The tendency for young people to change jobs more frequently than their older counterparts also explains some youth unemployment, as they are classified as unemployed while searching for their next job.

High wages can also mute job prospects.  In Australia, the 3 per cent increase in the national minimum wage this year and the Fair Work Commission decision to increase award rates of pay for 20 year old retail workers may have been good news for existing job holders. However, as employers have to bear these higher costs, these decisions were arguably detrimental to new job seekers.

Realising that there are many influences on youth unemployment provides a guide as to where policy makers should focus their efforts.  VECCI’s Taking Care of Business 2014 State Election business agenda calls on both major parties to commit to a series of reforms that will help address youth unemployment in Victoria.

Among these is our recommendation to raise the payroll tax free threshold from $550,000 to $850,000.  This will lower business costs and create an incentive for employers to hire new staff, including youth.

We also want to see both sides of politics deliver the priority infrastructure projects Victoria needs to keep growing; maximising opportunities for apprentices and trainees.

Importantly, VECCI is calling for further reform of the education and training system. Reform is needed to support not only industries and workforces undergoing structural change, but the continued internationalisation and innovation characteristic of our high growth advanced manufacturing and service industries.

Recent State Government reforms to vocational education and training have sensibly sought to shift training funding towards specialised or skill shortage occupations. However as a consequence, funding for lower level qualifications that provide literacy, numeracy and work preparation skills for many young people has been reduced and both the workforce and employers have suffered.

VECCI’s recommended reforms alone will not solve youth unemployment, but they are needed as part of a coordinated response by state and federal governments to curb the prospect of a jobless generation.

*

The Victorian Employers' Chamber of Commerce and Industry (VECCI) is the peak body for employers in Victoria, informing and servicing more than 15,000 members, customers and clients around the state.

vecci.org.au