Employment—Measuring and improving outcomes for young Australians

Dr Matthew Thomas, Social Policy and Penny Vandenbroek, Statistics and Mapping

Key issue
Labour market conditions have generally improved for young people in Australia since the Global Financial Crisis (GFC). However, the recovery has been uneven across labour market regions and age groups.
The Government’s main response to youth unemployment is the provision of active labour market programs. Evidence for the effectiveness of these programs is not positive where it comes to disadvantaged young people. Some of the targeted programs introduced in the last two federal budgets have a better prospect of improving participants’ long-term employment outcomes.

Youth employment in Australia

The labour market for young people aged 15 to 24 years deteriorated substantially after the onset of the GFC and has only recently shown signs of recovery.

However, this recovery has not been uniformly experienced. Rates of youth participation in the labour market, education and training vary across the country, with some labour market regions remaining relatively depressed. Rates of recovery in youth participation have also varied by age.

Figure 1 shows the regions with the strongest positive growth in youth employment (aged 15–24 years), based on the share of population that was employed.

Figure 1: Growth in youth employment, 2008 and 2015 comparison

Growth in youth employment, 2008 and 2015 comparison

Generally in the youth population, a large portion of people are neither working nor actively looking for work (i.e. unemployed), as they are students. Young people opting out of, or exiting the labour force, is an issue of concern, particularly when they do not go on to undertake some form of training or other productive activity.

Figure 2 shows the regions that experienced the largest growth in young people who were disengaged from the labour force since 2008.

Figure 2: Young people not in the labour force, 2008 and 2015 comparison

The regions that experienced the largest growth in young people who were disengaged from the labour force since 2008.

Measuring youth engagement

The Not in Education, Employment or Training (NEET) rate offers a way of analysing those young people who are disengaged, by expressing them as a proportion of the general working age population (in the same age group). Labour market statistician Karinne Logez suggests this type of indicator can provide ‘insight into how well economies manage the transition between school and work—better than the youth unemployment rate’.

Figure 3 shows a divergence in NEET rates for two youth cohorts following the GFC.

Figure 3: Level of engagement in work, study or training (NEET rate)

The ‘fully active’ measure is similar to the NEET rate, but focuses on the positive interactions young people are having with either work or study. This measure represents young people who are in full-time education or in full-time work, as a proportion of the civilian population (in the same age group).

Figure 4 shows the youngest age group has had an increase in the fully active rate since the GFC, in contrast to those aged 20 to 24 years, who have seen a decline.

Figure 4: Level of full-time youth participation (in work or study)

Reasons for youth unemployment

In developed countries, young people tend to bear the brunt of economic downturn, suffering greater job losses and higher unemployment rates than adults. This is for two main reasons.

Firstly, young people often have little or no labour market experience, and frequently lack relevant skills. Secondly, businesses face higher costs of investment and lower costs of termination when employing young workers.

Combined, these factors contribute to some young people having a precarious relationship to the labour market. They move between joblessness, training and working, and are more likely to enter temporary and insecure employment. In the worst cases, young unemployed people experience ‘scarring’ effects—that is, they suffer from negative labour market experiences in the future as a result of having been unemployed.

Active labour market programs

Australia has adopted a number of policy responses to youth unemployment over recent years. These include things like encouraging and assisting young people to stay in school beyond the age of 16 and tightening the conditions for eligibility for income support. However, assistance to unemployed youth through active labour market programs (ALMPs) is the most common policy response.

Essentially, ALMPs seek to increase the employment participation of people receiving income support from government, or at risk of becoming unemployed. In Australia, ALMPs take three main forms, namely job search; work experience; and formal training and education. These programs are mostly run by contracted employment service providers through the jobactive system.

There is a large body of international evidence on the effectiveness of ALMPs, and labour market expert Professor Jeff Borland has recently compiled a summary of the Australian evidence.

This evidence—which relates to unemployed people in general—is mixed where it comes to employment outcomes. There are differences in the results, both positive and negative, across and within different ALMP types. The evidence is similarly varied where it comes to the effectiveness of ALMPs for young people. One notable exception is public sector job creation programs, such as Work for the Dole, the evidence for which is almost universally negative.

What we do know, based on systematic evaluations of the evidence, is that young people tend to benefit less from ALMP participation than adults. Further, while ALMPs work reasonably well for people who are job-ready, they have a limited impact on outcomes for the most disadvantaged jobseekers.

These findings raise questions: what sorts of intervention, or combination of interventions, do help young people gain employment? And, in particular, what forms of assistance can deliver results for young people from disadvantaged backgrounds (for example early school leavers, young mothers, people with disability, non-English speakers and Indigenous Australians)?

What policy responses work for young people?

While the overall evidence for the effectiveness of ALMPs for disadvantaged young people is not positive, the Organisation for Economic Cooperation and Development (OECD) and the International Labour Organisation (ILO) have identified the key characteristics of those programs that are most likely to achieve successful labour market outcomes for disadvantaged youth.

The most successful programs directly target disadvantaged young job seekers, providing a comprehensive package of support services, such as literacy and remedial education; vocational and job-readiness training; job search assistance and career guidance and counselling; and social support and workplace training.

Borland et al. have recently identified evidence-based elements of best-practice employment programs for jobseekers with high levels of disadvantage. They argue that ‘an employment program for jobseekers with high levels of disadvantage should substantially address their deficiencies in job readiness and skills and provide a pathway to employment via work experience’. They emphasise that such programs are most likely to be feasible where they involve collaboration between service providers and employers at a local level.

Programs like these can pay dividends in terms of medium- and long-term employment outcomes. However, such programs are costly and not necessarily highly rated by ALMP evaluations that focus primarily on short-term employment outcomes.

Recent government initiatives

As a part of the 2015–16 and 2016–17 federal budgets, the Government introduced a number of youth employment measures that approximate best-practice criteria. The Government has also reduced the emphasis placed on participation in Work for the Dole. This strategy to tackle youth unemployment can be seen as being broadly consistent with both evidence-based and investment approaches to social welfare. However, evidence for the effectiveness of the Government’s proposed four-week waiting period for income support for under 25 year olds is questionable.

It is also not clear that the Government’s central proposal to address youth unemployment—through the Youth Jobs PaTH program—will gain sufficient support from employers, or provide adequate assistance to job seekers to produce meaningful results. Much will depend on the level of economic activity over coming years, the boosting of which is the best means to ensure increased levels of youth employment.