Youth woes are structural

Much has been made of lacklustre employment levels for our youth. Last month, for example, then Telstra chairwoman Catherine Livingstone labelled youth unemployment levels (currently 13%) 'a tragedy.'

A particularly alarming graph comparing employment growth among 15 to 24 year-olds to the broader labour force shows that employment growth was similar for both young and old during the mid-2000s, but changed after the Global Financial Crisis (GFC). Since 2008, youth employment has contracted 7% while growing almost 10% over the rest of the labour force.

Cumulative employment growth (Index, May 2004 = 100)

While these trends are concerning, the graph is misleading.

Employment among youths departed from that of the rest of the labour force as early as the 1980s, and the gap has grown wider over the following decades. The mining boom of the 2000s is the exception, where youth employment grew lock-step with the rest of the labour force.

In a way, the mining boom has helped to mask some of the underlying problems affecting young workers, problems that predate the GFC.

Cumulative employment growth (Index, Feb 1978 = 100)

There are cyclical as well as structural problems.

Some cyclical unemployment is expected, particularly among young workers. Employment growth among youths should rise and fall along with the adult workforce, however young workers are often harder hit during recessions and slower to recover when the economy bounces back. Economic growth has been soft since the GFC, and this has not helped our youth.

But there are also structural factors at play, and now that economic growth has slowed, these issues are becoming more pronounced.

Among these structural changes are the effects of mechanisation and information technology. These advances have made substantial improvements to living standards while eliminating many low-skilled, labour intensive jobs on which many young workers relied.

The contraction of the manufacturing sector (relative to other areas of the economy) since the 1980s has also meant that aside from the services sector (in particular retail trade and hospitality), there are simply fewer entry level jobs to go around.

The structural problems affecting our youth have become more important, and will only continue as technological advances make more jobs obsolete. However, as the 2000s demonstrated, young people are best placed to find good jobs when the economy is growing strongly.

Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies.