Analysis on new research released this week by the OECD highlights the challenge for young people entering their working years, particularly in their transition from education.
While unemployment in Australia at just 5.6% is one of the lowest in the developed world, the number of Australian young people not in education, employment, or training (NEETs) has increased by 100,000 since the time prior to the Global Financial Crisis (2008), rising from 10.5% to 11.8% of all those aged 16 to 24 – comprising a total of 580,000 young people today.
The challenges affecting youth unemployment most often lie in a young person’s transition periods. It is normal for young people to spend some time out of education and work – in fact, 2 in 3 young people aged 16 to 24 will spend up to 3 months out of education and work – but the challenge becomes when this period of time becomes greater and the ‘relevance clock’ begins to tick. When 3 months eventuates into a year, or longer, this can lead to cycles of unemployment. Today, 1 in 5 young people aged 16 to 24 spend 12 months or more out of employment, education, or training, and it is these young people that will face the most significant challenges as they try to enter or re-enter the workforce.
The demographic realities play a significant risk factor in young people falling into a cycle of unemployment. 60% of NEETS are women, and while just 3% of young people are indigenous, this percentage rises to 10% among NEETs. There is also a strong correlation between low educational attainment and struggles in entering the workforce - 37% of students who leave school in Year 10 end up not being in education, employment, or training, compared with just 11% of those with a tertiary qualification.
240,000 YOUNG PEOPLE LOOKING FOR WORK
Young people out of work are often stereotyped as “slackers” but in fact 41% of NEETs (238,000) are actively looking for work but unable to find a job. Helping these young people find work needs to become a national priority and a focus needs to be given to their education to employment transition. Studies tell us that the key transition in a young person’s life is from learning to earning – from study to employment. If young people are not job ready, they should be directed to a course or traineeship that will help them get job-ready. Greater collaboration between actors (schools, VET providers, tertiary providers, employment services, childcare providers, and employers) is needed, along with a broader focus on not just higher education but vocational learning.
THE REMAINING 59% WHO ARE INACTIVE NEETS
Questions are then most often asked about inactive NEETs – the 40% of NEETs who say they would not like a job, and the 19% who would like a job but aren’t currently looking. What is it that has discouraged them or dissuaded them from entering the workforce?
Educationally, we are seeing a significant push towards tertiary educational attainment. A generation ago in 1986, more than half of all students left school in Year 10 with most going on to start work/vocational training. Today, 9 in 10 young people go on to complete Year 12, and the majority of these enter higher education. Nationally, however, 1 in 5 university students drop out in their first year of university, clearly not being ready for the task at hand or convinced of the choice they have made.
And while we are seeing an increase in university qualifications (our predictions estimate that 1 in 2 Gen Z will have a university qualification compared to 1 in 3 Gen Ys and 1 in 4 Gen Xs), we must keep in mind that everything is not just about higher education or STEM skills. It’s about developing a broad skills base that will continue to sustain Australia’s growing economic and demographic footprint.
CHALLENGES IN THE SKILLS SECTOR
While the VET sector has seen a 50% increase in students placed in apprenticeships since the early 2000s, the sector is also subject to significant inefficiencies. Traineeship and apprenticeship completion rates are low, qualifications are hard to navigate, some federal funding for programs has been withdrawn, and employment service providers geographically only target 60% of NEETs, leaving 200,000 youth un-serviced by employment services.
THE BENEFITS OF WORK ARE MORE THAN JUST ECONOMIC
In conversations with young people, it serves us to be reminded that jobs do more good for all of us than just money. They provide a young person with a sense of independence, self-esteem, and social connection, as well as the ability to learn and stay future-proofed. The longer that young people stay out of employment, the more they are to lose connection and become social disenfranchised, leading to greater problems.
THE CHALLENGE OF ENTRY WILL ONLY ACCELERATE
As we look ahead to the next 10-15 years of Australia’s job market, we estimate that 5.1 million of Australia’s jobs will become digitally disrupted. Today’s savvy school leaver is training themselves for jobs that don’t yet exist. The reality is that new jobs which will be created are more complex than the jobs they replace. If a young person is locked out of the workforce today, it is likely that they will face an even more difficult re-entry in years ahead as the skills required to fulfilk workforce demands increase.
THE CHALLENGE OF FINANCIAL INDEPENDENCE WILL ALSO ACCELERATE
Commonwealth funding will increasingly become tighter. The economy has natural limits, and supporting an ageing population base and those with disabilities is naturally a more pressing national priority than supporting those who can work but are choosing not to. It’s just a matter of time before government benefits to NEETs will dry up.
Having said that, it’s also important to remember that 25% of inactive NEETs and 41% of NEETs looking for work in fact have not received any government benefits to support them. For these young people, support has largely fallen back to the informal economy, with support provided by family members and friends.
THE EARNINGS CHALLENGE FOR TODAY’S EMERGING GENERATION
It is in fact more financially difficult to get ahead early in life than it once was. In the 1970s, for example, when many Baby Boomers graduated from university, the average graduate starting salary was equal to the average full time adult wage, while today the average graduate starting salary of $54,000 is $26,000 less than average full time annual earnings. Student debt is also higher than ever, with more than 1 in 3 (34%) registered debt agreements belonging to 25-34 year-olds, and the average university debt estimated to be around $28,000. Today’s young generations are actually beginning their earning years in more debt than we’ve seen before. Not to mention the multi-fold increase in the cost of housing – a generation ago the average Sydney house price was 5 times annual average earnings while today the average house price is 13 times the average annual full time earnings of $80,000.
KEEPING IT IN PERSPECTIVE
If young people can continue to accelerate their learning, they’ll have greater chances of success. Just 11% of bachelor-degree educated young people are still looking for full time work within 4 months of completing their course, and the strength of Australia’s economy is creating positive opportunities for innovation and entrepreneurship for young people to place their stamp on Australia's future.