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Biddle and Burgess

Youth Unemployment and Contemporary Labour Market Policy in Australia Doug Biddle and John Burgess University of Newcastle, NSW This paper details and evaluates recent Australian government initiatives with respect to youth unemployment. The nature and characteristics of the youth labour market in Australia are outlined. The Australian youth labour market is then compared to youth labour markets in other OECD economies. Current initiatives by the Australian government in the areas of youth unemployment and training/education are outlined. These policy initiatives are then evaluated. Within the context of a broad supply side agenda, founded upon fiscal austerity and industrial relations reforms, the youth policy initiatives are unlikely to make any contribution towards a substantial diminution in youth unemployment rates. Introduction Youth are one group in the Australian labour market who possess all the classic characteristics of disadvantage (Norris, 1996, 251; Whitfield and Ross, 1996, 156). These characteristics include relatively: high unemployment rates, low pay, high turnover rates, low skill, high incidence of non-standard employment and non-career path positions. These features tend to be accumulative and reinforcing, making it difficult for many youth in the labour market to escape from a cycle of unemployment, low pay and employment insecurity. At the same time youth participation rates in post-secondary education are increasing. For many of these participants, especially those in full-time education, their work arrangements are generally transitory and unrelated to their post education career path. In this paper we briefly outline the youth labour market in Australia, compare it with the OECD, detail and discuss the nature of youth disadvantage in the labour market and discuss the current federal government policy approach towards youth, especially in terms of addressing high youth unemployment rates. This policy approach is strongly supply side, with an emphasis on training, placement and attitude modification. In addition, the government has promoted its industrial relations reform packages as assisting in ameliorating the unemployment problem. From what is known about the youth labour market, and especially youth unemployment, the prospects for success appear extremely limited. Indeed, some of the recent policy initiatives (increase in HECS, tightening up on Austudy allowances, increasing age dependency for Austudy, reduced income repayment threshold for HECS, reduced labour market program expenditure) are likely to exacerbate the youth unemployment problem. The youth labour market in Australia For the purposes of this analysis we define youth as that group aged between 15 and 24 years. It is within this age group that the entry point into the labour market is located. It is a very heterogeneous group in terms of its labour market characteristics, with many of these characteristics being directly aged dependent. In table one some standard labour force characteristics are set out. Table 1: Youth labour market characteristics by age: Australia, 1997 Age

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Participation Rate % 30.7

Employment to Population Rate % 21.5

Unemployment Rate % 28.8

Part-time Employment Share 0.95

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16 17 18 19 20

44.3 48.6 67.4 75.5 76.3

35.3 40.9 53.3 63.4 73.8

20.2 15.7 20.6 15.1 15.1

0.83 0.67 0.50 0.45 0.37

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21 22 23 24 National Average

79.9 80.2 81.2 81.4 62.2

73.0 75.2 74.9 76.0 57.0

17.2 14.3 12.2 10.8 8.4

0.32 0.27 0.22 0.18 0.25

Source: ABS, The Labour Force (Catalogue 6203.0), August 1997.

From table one, labour force participation rates and employment to population ratios are directly related to age, while unemployment rates and part-time employment share are inversely related to age. Wooden (1996) has detailed other characteristics of the youth labour market relative to the prime aged group, these include: high rates of casualisation, high rates of employment turnover and a low average duration of unemployment. Flatau and Simpson (1996) demonstrate a relatively low incidence of training for youth, especially for younger age groups and those in part-time employment. Through time the salient characteristics of the youth labour market in Australia include the following (Wooden, 1996; Flatau and Simpson, 1996): increasing rates of participation in education, falling rates of labour force participation, very cyclical unemployment and labour force participation rates, high rates of unemployment, increasing part-time and casual employment shares, falling full-time employment across all age groups and occupations and employment concentration in a few industries eg retail, cafes. However, the heterogeneity of the youth labour market is emphasised by Wooden (1996) and Flatau and Simpson (1996). There are clear differences by age and gender, between those in full-time employment and part-time employment, between those in education and those not in education, and between those in high school and those in tertiary institutions. For those in full-time education the unemployment problem is trivial, part-time and/or casual employment is likely to constitute a transitional arrangement. For those outside of education, unemployment is recurring and there is a greater likelihood of being trapped in involuntary part-time and/or casual employment, with little training, limited career prospects and low pay (NBEET, 1992). Youth unemployment has been a persistent problem in Australia. It is the youth labour market that is very sensitive to recession and recovery. In periods of recession youth find they lack the skills, credentials or experience for the fewer job vacancies, and when the economy recovers, while job vacancies increase, so do does youth labour force participation rates (Clark and Summers, 1982). For August 1997 the 15-19 year unemployment rate was 19.3 per cent, the 20-24 year rate was 13.8 per cent, together these two age groups accounted for 37 per cent of total unemployment. Excluding youth from the labour force would see the unemployment rate in Australia fall from 8.5 to 6.6%. Australia and the average OECD experience in the youth labour market For virtually all OECD countries (the exception is Germany) youth unemployment rates have exceeded average unemployment rates. The OECD (1996) survey of youth labour markets outlined a puzzling set of circumstances which suggest that relative youth unemployment rates should be declining. Youth labour force participation rates have declined and the size of the youth cohort group in the population has also declined. On the supply side the story is one of a relative decline of youth in the labour market. Also, of those in employment a growing share of youth is in part-time employment. Youth employment tends to be concentrated in a few sectors: retail/wholesale and accommodation/cafes. These are the very sectors, and the type of employment arrangement for which employment shares are increasing. In conjunction with a

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general decline in the relative wages of youth the demand side factors favour the relative growth in youth employment. Yet relatively high unemployment rates for youth persist.

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Table 2: The Australian and OECD youth labour markets 1994 Characteristic 15-19 years 20-24 years Male Female Male Female Participation Rate % Australia 53.3 54.4 86.5 76.0 OECD 36.4 31.6 73.9 63.9 Empl to Pop Ratio % Australia 43.1 42.7 73.2 66.8 OECD 30.0 25.7 61.9 53.7 Unemployment Rate % Australia 19.2 21.5 15.4 12.1 OECD 19.3 22.8 16.7 16.9 Incidence of Long Term Unemployment % Australia 15.8 20.4 32.5 39.0 OECD 25.6 23.3 34.2 35.6 Source: OECD (1996, ch.4)

Table 2 presents comparisons between the Australian and the average OECD youth labour market characteristics. What stands out is the much higher participation rates and employment to population ratios in Australia. Australia ranks in the top 3 in the 15-19 years and in the 2024 age groups across the OECD. For the 15-19 years group there is a direct correlation between youth unemployment rates and adult unemployment rates across the OECD. In terms of trends what stands out for Australia is the relatively much slower decline in activity rates as compared to the OECD average. Higher rates of participation in education were not associated with an equivalent decline in labour force participation rates. Australia maintains a high rate of youth labour force participation, principally through part-time employment From these supply and demand developments we would expect the relative youth unemployment problem to be diminishing. What then is the problem? In fact there are four problems. Full-time youth jobs have gradually declined. Those youth who desire full-time employment are finding it more difficult, not easier to find work. Second, those without education qualifications find it difficult to fill full-time jobs and find themselves in a cycle of insecure jobs and unemployment. Third, in some countries (eg Australia) activity rates are being sustained since there are difficulties for youth to participate in full-time education without supplementary income. Finally, labour market conditions remain flat, and high unemployment rates continue, this means that youth are finding it difficult to get jobs in the absence of net job generation. Current federal government policies: nature, model and philosophy The Coalition Youth Policy (1996, 5) announced that “a Howard governments’ first priority must be to reduce youth unemployment and consequently, provide real and meaningful job opportunities for young Australians.” The method by which they hoped to achieve reduced youth unemployment involved a three pronged attack including (1) a strategy to create more ‘real’ jobs (2) the provision of labour market programs to young unemployed people and (3) modernising the apprenticeship and traineeship system. Creating more real jobs The Government acknowledges the requirement of sustained economic growth in order to create more jobs and aims to maintain a sustainable high growth policy for the Australian economy. The government suggested that the most effective policy in relation to creating employment was to help small business. Steps outlined by the Government to help small business included changes to taxation laws and unfair dismissal legislation. Other strategies considered necessary to create jobs included: reforms to the industrial relations system; 474

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continuing the agenda of microeconomic and labour market reform and boosting Australia’s national savings (Pathways to Real Jobs, 1996).

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Providing labour market programs The second part of the Governments model involves providing targeted labour market programs to young unemployed people. The coalition’s pre election employment and training policy statement Pathways to Real Jobs (1996, 13) stated that “Active labour market programs have an important role to play in helping those who have been demoralised by unemployment or who are trapped by lack of skills and other factors from competing effectively for available jobs.” It acknowledges that “Appropriately targeted labour market programs can improve the effective supply of labour, reducing skill and capacity bottlenecks which could otherwise constrain economic growth” (Pathways to Real Jobs, 1996, 14). Despite these promises, the government has greatly reduced active labour market programs not only for youth but also over all other categories of assistance. In the 1996 budget $1.8b. was taken out of labour market programs over four years and the 1997 budget papers show that another $72m. will be cut (House of Representatives Standing Committee on Employment, Education, and Training 1997 p.106). The only remaining forms of labour market assistance specifically related to youth are: Job Placement Employment and Training (JPET); Green Corps and Work for the Dole. JPET is a program designed to assist students and unemployed youth (with priority given to those aged 15 to 19) who are homeless or at risk of becoming homeless, who are /or have been wards of the state, are refuges, or have been in the juvenile justice system (Budget 96Questions and Answers). Green Corps, heralded as the new 41.6 million youth training and environment program provides opportunities for 17–20 year olds to obtain accredited core module training in fields such as environmental audit skills, land conservation and restoration, first aid, and occupational health and safety, as well as appropriate training required to complete specific designated projects (DEETYA 1996). However, in a media release, DEETYA (1997a) admitted that “Green Corps is not a labour market program. It is a real job – paid at the relevant training wage – working on the environmental restoration Australia needs.” Also, Green Corps does not target the unemployed or disadvantaged. Budget 96, Questions and Answers, p.4 states that “All Australians between the age of 17-20 will be eligible for a Green Corps Placement. There is no requirement to be registered with the CES or to be unemployed, and selection will be by an agreed set of criteria including a commitment to improving the environment.” Work for the dole arrangements were introduced into parliament in 1997. The legislation altered the Social Security Act 1991 by the following key amendments to: remove provisions preventing a person from being required to Work for the Dole, establish a maximum number of hours of work for the dole per fortnight and allow participants to receive an extra $10 a week to cover extra costs. After 5 months the Bill was passed without changes and the amendments paved the way for the Government to pilot up to 178 Work for the Dole projects throughout Australia for as many as 10,434 participants over a period of 12 months. After this time the pilots will be reviewed and if successful the government will look at expanding the scheme even further (DEETYA 1997b). The Work for the Dole scheme appears to have some of the attributes of previous youth labour market programs though there are also contrasting differences. Features of the scheme include targeting unemployed youth between 18 and 24 years who have been unemployed for at least 6 months, however, there is scope for the inclusion of older participants in some projects. In fact up to 20% of participants could come from outside this age bracket. The programs run for a maximum of 6 months yet participants will be required to work a maximum of two and a half six-hour days each week. Other 6 months programs required participants to work 5 days a week. It is anticipated that most participants will be volunteers, however some people will have to work for their dole involuntarily.

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Modernising the apprenticeship and traineeship system The third component of the Australian Governments approach to reducing youth unemployment involves modernising the apprenticeship and traineeship system. The Modern Australian Apprenticeship and Traineeship System (MAATS) has been introduced to provide ‘real’ employment and training opportunities for the young people of Australia. Funding of $206 million, largely redirected from the labour market program budget, will be provided over four years for MAATS. The system is designed to be more flexible to industry and individual needs, and to assist employers to provide jobs that include a mix of work and training that suits the employer and the trainee. Moving traineeships and apprenticeships beyond traditional occupations to new industries to take advantage of growth and employment potential will expand training opportunities for Australia’s youth. In particular, MATTS will focus on new traineeship and apprenticeship opportunities in small and medium sized businesses in emerging technology, information and service industries (Australia’s Young People: Shaping the Future p.5). Evaluation of the policy approach The policy towards youth recognises their labour market disadvantage and also recognises the need for targeted assistance. However, it must be placed in the context of a supply side approach to macroeconomic policy and a fiscal austerity program that achieved large budget savings in labour market programs and in tertiary education funding. It is from those expenditure areas that directly assist youth in the labour market that budget savings have been achieved. How many more real youth jobs have been created? Table 3 sets out the government’s record with respect to job generation. While total employment has expanded, youth employment has declined. Moreover, the worrying trend of the decline in full-time (real?) jobs for youth continues. While overall labour force participation rates increased, those for youth declined. Table 3: Job generation: April 1996 to September 1997, Australia (000) All FT All PT 15-19 FT 15-19 PT 20-24 FT 20-24PT April 96 6230 2047 231 72 798 238 Sept 97 6320 2206 213 64 712 246 Change 90 159 - 18 -8 -88 +8 Source: ABS, The Labour Force. Catalogue 62023.0.

Green Corps is not a labour market program, however it has several similarities to the previous Government’s Landcare and Environmental Action Program (LEAP). One major difference is that Green Corps participants gain accredited training, but they receive similar wages and complete similar projects. However, Green Corps will take on only 3500 people (10% of the places in LEAP) and its budget is $26 million less than the budget allocated to LEAP and promised before the election (Cameron). Furthermore, the LEAP program was targeted at the long-term unemployed youth between 17 and 20, but now, all 17 to 20 year olds will be eligible whether they are unemployed or not. This means that youth in most need of assistance are no longer necessarily being targeted. The rationale behind the Work for the Dole scheme in relation to youth unemployment is one of “breaking the unemployment cycle”. Participants (even if they are forced or coerced to participate) are expected to benefit from their experience. It is expected that most participants would be volunteers wishing to receive these benefits but the target group characterised by the cycle of despair, low self esteem and work ethic are relatively less likely to volunteer and are more likely to be coerced into participating. Furthermore working for two or two and a half days a week for similar remuneration as that received when not participating is not likely to be appealing to many and may not significantly improve one’s work ethic. The expenditure on 477

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and placements in the program are minimal. It has been described purely as a political gesture to appease commonly held prejudices about unemployed youth (Grattan, 1997). The piloted schemes by some chance are predominantly located in Coalition held regional seats. Regions with high rates of youth unemployment that are Labor held have missed out on the new pilot programs (McGeogh, 1997). A central theme of the above mentioned strategies is one of creating real jobs. It is not clear what ‘real’ jobs are – if they are jobs that provide training, employment security and a career path, then virtually no youth jobs would qualify as real jobs. Work for the Dole schemes do not create real jobs, provide participants with marketable skills or reduce unemployment. The majority of people participating in these programs will have relatively low educational standards, and the possibility that they already associate with a circle of unemployed people. What these people need is to improve their skill levels and to associate with people who have jobs to maximise their chance of hearing about possible employment, and being available if a job becomes available (Leech, 1997, 1). The possibility of compulsory participation also prevents these people from gaining accredited qualifications in areas of personal interest. Modernising the apprenticeship and traineeship system has merit. It is true that the traditional apprenticeship system remains a significant mode of entry level employment for young people, and the principle source of skilled manual workers in Australia, albeit there is decline in this sector. As traineeships are fundamentally similar to apprenticeships, it makes sense to build on a successful system. The fact that MAATS will modify and simplify the system and make it more flexible with training driven by business interests, and by expanding apprenticeships into new and emerging industries, should help to sell the system. The predecessor to MAATS, the Australian Traineeship System (ATS), introduced by the previous Government in 1985, did not live up to expectations. It purely didn’t sell. The problem with MATS is that it is effectively a later version of ATS. The proposed modifications are surely a good idea, however as Stromback (1996, 9) argues “it does not solve the problem which the ATS never managed to overcome; to gain a widespread acceptance as a effective entry level training system in non-manufacturing industries. The overall program smacks of rhetoric and gimmickry. Small business is hardly the answer given the high rate of turnover, high rates of part-time/casual employment and low rates of training for the sector (Burgess, 1992). Labour market programs have been cut, Austudy access has been limited and the Federal government has been reducing net expenditure on tertiary education (Budget 1996/97). There is a credibility gap associated with less generous student allowances and higher HECS repayments while at the same time expressing concern for youth unemployment. Industrial relations reforms are hardly going to generate youth employment given that youth already have low rates of unionisation, high rates of casualisation and high levels of inter-temporal flexibility re working arrangements (Wooden, 1996). A credible program for reducing youth unemployment? The Government maintains that it aims to maintain a sustainable high growth policy for the Australian economy. The House of Representatives Standing Committee on Employment, Education, and Training acknowledges that job creation is necessary but feel that recent economic growth has not resulted in any substantial job creation for youth. They concluded, (1997, 120) “The most significant factor influencing the employment of young people is the availability of jobs. The benefits of economic growth have not transferred into jobs for young people. Many entry level positions have disappeared”. Without sustained job creation relatively high unemployment rates will persist. The surest way to address youth unemployment is through higher rates of growth; in a tighter labour market employers will hire and train youth, and many of the cyclical and structural problems can be addressed simultaneously (Clark and Summers, 1982). 478

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The recognition of the principle that active labour market programs have an important role to play, and can improve the effective supply of labour, reducing skill and capacity bottlenecks, is also sound. Even with the availability of jobs many unemployed people still require direct assistance and support in locating these positions and in readying themselves to take up such positions. If anything, youth require more extensive and expensive labour market services, not fewer and cheaper labour market services (Fay, 1996, 32). It has been discouraging therefore to observe the almost abolition of labour market programs under the current Government. The House of Representatives Standing Committee on Employment, Education, and Training 1997 p.121 also concluded, “Cuts to education, training and labour market programs are not justified and should be reversed. Active, and often expensive, case management is required to assist those disadvantaged youth, especially those seeking full-time employment without year 12 qualifications. Education and training remains imperative. Policies to promote participation in postsecondary education are important. However, current policies, especially with respect to tertiary education, appear to discourage participation. More generous support policies may assist in reducing activity rates for those in full-time education. The 20-24 years group face the prospect of tighter and less generous study allowances and increased fees for tertiary education.

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Conclusions The Australian Government’s three tiered approach recognises the fact that the problem of youth unemployment will not be an easy one to solve. The need to create more jobs in order to help rectify the situation bears a great deal of merit, but, are the policies put forward the appropriate ones to achieve this end? The current supply side approach has failed to deliver any substantial reduction in unemployment rates while youth employment has actually declined. Active labour market programs have an important role to play in assisting disadvantaged job seekers to locate vacancies and to prepare them for work. Structural and technological changes to the labour market mean that education and training are becoming more important in the preparation of people for work. However, cuts in labour market programs and in study allowances, together with increased tertiary education fees are unlikely to facilitate training and education. References Budget 96 - Questions and Answers, http//www.deet.gov.au/budget96/qanda/q&a2.htm#6 Burgess, J. (1992), Further Evidence on Small Business Employment and Industrial Relations. Labour Economics & Productivity, 4, 2, 130-49. Cameron, M., Green Corps: less than it seems, http://www.peg.apc.org/~stan/259/259p11b.htm Clark, K. and Summers, L. (1982), The Dynamics of Youth Unemployment. In R. Freeman and D. Wise eds. The Youth Labour Market. University of Chicago Press, Chicago, 199-230. Coalition Youth Policy http://www.liberal.org.au/ARCHIVES/YOUTH/youth.htm Commonwealth of Australia (1996), Budget Statements 1996-97. Canberra. Commonwealth of Australia (1997), Budget Strategy and Outlook, 1997-98. AGPS, Canberra. DEETYA (1996), Green Corps: Young Australians Working for the Environment, http://www.deet.gov.au/minwn/vanstone/v70_20_8.htm DEETYA (1997a) Green Corps Project Begins in Sydney. http://www.deet.gov.au/minwn/abbott/am100697.htm DEETYA (1997b), Work for the Dole Legislation, http://www.deet.gov.au/minwn/kemp/k10_19397.htm Fay, R. (1996), Enhancing the Effectiveness of Active Labour Market Policies: Labour Market and Social Policy Occasional Papers no. 18, OECD, Paris. Flatau, P. and Simpson, M.(1996), Part-time Youth Employment and Training. Labour Economics and Productivity, 8, 2, 131-162. Grattan, M. (1997), Work With No Job. Australian Financial Review, Feb 11. House of Representatives Standing Committee on Employment, Education and Training (1997), Youth Employment: A Working Solution., Canberra. Leech, M. (1997), Work for the Dole – Does it Work? Uniya Focus No 6, May McGeogh, P. (1997), Dole Projects Timed to Perfection. Sydney Morning Herald, November 10. National Board of Education, Employment and Training (1992), Disadvantaged Jobseekers. Report no. 18. AGPS, Canberra. Norris, K. (1996), The Economics of Australian Labour Markets. Longman, Melb. OECD (1996), Employment Outlook. Paris. Pathways to real Jobs: The Federal Coalition’s Employment and Training Policy (1996), Authorised and printed by A Robb, Melbourne. Stromback, T. (1996), The Modern Australian Apprenticeship and Traineeship System (MAATS, Centre for Labour Market Research. Curtin University of Technology Perth, WA, 1996. Whitfield, K. and Ross, R. (1996), The Australian Labour Market. Harper, Syd. Wooden, M. (1996), The Youth Labour Market: Characteristics and Trends. Australian Bulletin of Labour, 22, 2, 137-160.

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