A Productivity Commission report just released found that “from 2008 to 2018, young people had more difficulty getting jobs in the occupations they aspired to.”
If they started in a less attractive occupation, the report concluded that it was even harder to climb the occupation ladder than it was before.
A staff working paper from the Productivity Commission: Climbing the jobs ladder slower: Young people in a weak labour market authored by Catherine de Fontenay, Bryn Lampe, Jessica Nugent and Patrick Jomini describes “labour market scarring that might have occurred over the period 2008 to 2018.” It looked specifically at “whether young people entering the labour market during and following the Global Financial Crisis had a harder transition into employment than those entering earlier, and whether that experience could have longer term impacts on the labour market outcomes for this cohort.”
As they point out, the data used pre-dates the COVID-19 recession, “but the paper’s findings are of heightened salience in our present circumstances.”
The nature of employment changed
Rather than increased unemployment, the labour market adjusted between 2008 and 2018 with full-time employment declining and part-time employment increasing among workers aged 15-34. There was also virtually zero wage growth. In addition, using occupational scores, which connect a person’s education with their earning potential, they found that those of recent graduates declined, particularly from 2010 onwards, although the declines were not uniform. Some young people were in very high scored occupations. However, as they point out, this begs the question about those in low scored occupations can work their way up to higher scored ones.
Unfortunately, they report that:
“We see no evidence of improved likelihood of transitioning to better outcomes, suggesting that poor initial outcomes are likely to have long-term effects on one’s occupation. If anything, when we examine young graduates between 2013 and 2015, people who found work in lower quartiles of the score distribution were more likely to remain in those quartiles.”
A weak labour market also adversely affects labour mobility, and occupational scores have also declined for sub-bachelor qualifications such as those offered by VET, the study found.
They conclude that:
“Movement down the jobs ladder has negative implications for the lifetime earnings of those young workers, and possibly for their work satisfaction. It also has implications for young people with low educational attainment, as they face competition from young people with more education.”
In turn, this may lead to longer term unemployment, or they may have to work at lower wages in part-time work. Whatever the outcome COVID-19 will not have helped the situation. As the Federal Shadow Treasurer Jim Chalmers suggested in a press conference on 16 July:
“this virus hasn’t just created from scratch an underemployment or insecurity issue in our economy, it has dramatically accelerated those challenges.”
One potential way out is through effective use of Job Trainer program, especially if this is directed at occupations in real areas of need and is accompanied by high quality careers advice and support. The program has been widely but not uniformly welcomed. The Prime Minister Scott Morrison noted that:
“This package will be essential as the economy rebuilds so that people looking for work can reskill and upskill for in-demand jobs, provide school leavers with a pathway into their careers, and ensure businesses are able to get the skilled workers they need.”
However, developing and making short courses of questionable value available will not be the answer. Careful targeting will be key, and some have also raised concerns in their media releases that this initiative may be rorted. Let’s hope not.