Unemployment rates for June are in, and they stayed steady at 5.2% for the nation. Not too much to be worried about, right? Well, not necessarily, as there’s a lot going on behind the numbers.
Let me start by breaking down a few key terms:
Unemployment: The total number of people in the labour market who are unemployed. That is, looking for work and can’t find it from the total number of people in the labour market. As above, this is currently at 5.2% of the labour force.
Underemployment: The total number of people in the labour market that are working but would like more hours of work. For example, people who are working 30 hours per week but would like full-time work, around 38 hours per week.
Underutilisation: The combined un and under employment rates.
Youth unemployment: The total number of 15-24 year-olds in the labour market who are unemployed. This is young people actively looking for a job who can’t find them from the total number of 15-24 year-olds in the labour market. Currently 12% of young people in the labour market are unemployed.
It’s easy to think that we shouldn’t be too worried about unemployment when it’s sitting at 5.2%, it’s in the vicinity of 4.5% that economists refer to as ‘full employment’. Economists reference ‘full employment’ to mean when talking about a stable level of unemployment. This is because there will always be a certain number of people who have given up looking for work, who are between jobs or whose skills are temporarily not needed.
Despite this low rate of unemployment generally, youth un and underemployment has been stubbornly high over the past decade since the Global Financial Crisis, hovering around the 11% mark for the past year. In terms of underemployment the results are just as grim—more than twice as many young part-time workers are looking for more work compared with other age brackets.
Young people are amongst those most at risk of being left behind in the changing world of work as their attachment to the labour market is often in its infancy. This is evidenced by the increasing time it’s taking young people to get to full-time work, currently take young people 2.6 years on average, compared to one year in the 1980s.
High levels of youth un and underemployment comparative to the national unemployment figures can mean something else is amiss in the system. There is a mismatch between the skills that young people are being equipped with, and the skills being demanded by employers.
Deloitte’s recent report The path to prosperity: Why the future of work is human, along with FYA’s New Work Order series highlights the skills needed to succeed in a changing economy. While technical or job specific skills remain crucial, it is skills like communication and teamwork that are on the rise in the new world of work. Not only are these enterprise skills vital to succeed in the future, but FYA’s New Work Reality report highlighted that they can help a young person get to work faster. In fact, enterprise skills (problem-solving, communication and teamwork) can help a young person get to work on average 17 months faster.
Other factors that can help speed up a young person’s transition to full-time work are:
- 5,000 hours of relevant paid employment, helping a young person get to work on average 12 months faster
- Paid employment in in-demand areas of work such as health, professional services or information technology, helping a young person get to work on average five months faster and;
- An optimistic mindset and confidence in their career path, helping a young person get to work on average two months faster
But getting to work is not just a problem for young people, in fact, high youth unemployment is everyone’s problem. The disproportionately high rate of youth unemployment presents an opportunity cost of $4.5 billion to the economy. Adding to this challenge is an ageing population meaning older Australians are leaving the workforce in larger numbers than young people can replace them. Currently Australia has 4.5 workers per retiree; by 2030 this will reduce to 3.5 workers per retiree, meaning reduced tax revenues and additional pressures on quality of life and standard of living.
In this context, our economy will struggle to keep pace with the rising cost of an ageing population if young people continue to face challenges in the labour market. We need to work with young people and arm them with the skills and mindset required to seize job opportunities, for all our sakes.