No easy fix for youth unemployment

A recent report from the Brotherhood of St Lawrence points to a trebling of long-term youth unemployment since the global financial crisis. Executive director Tony Nicholson said he feared ''large numbers of long-term unemployed people [are] at risk of never getting a foothold in work, of never being able to pursue their aspirations or build a life for themselves''.
The youth unemployment rate, now 13.6 per cent, is twice the economy-wide rate, and the youth employment-to-population ratio has fallen by 10 per cent since 2008.
Getting our young back into work is not going to be easy. A combination of reforms to three areas – education policy, welfare arrangements and labour market settings – are needed to halt the rise of youth joblessness.
Nicholson's concerns on the impact of long-term joblessness are not hyperbole. Research from Gary Marks of the Melbourne Institute of Applied Economic and Social Research on the school-to-work transition suggests that an initial period of unemployment after leaving school can scar young workers' long-term job prospects, making it harder for youth to get into work. Conversely, experience signals to employers that the job seeker can cope with the expectations of work.
Work needs to be normalised as soon as young people leave school. Constant failure in the job market decreases self-esteem and reduces the motivation to look for work. Young people can also be susceptible to depression if repeated efforts at employment are unsuccessful.
This is why it is so important to get the policy settings right. Education policy is important, but more education and training is not the panacea for youth joblessness.
Evidence suggests that greater time spent in education and training leads to higher life-time incomes. For average and high-ability students, completing year 12 substantially improves their chances in the job market. But the same results do not apply for all students.
Non-academically inclined students are unlikely to benefit from an additional two years of schooling. They would be better served by entering the labour market and using those two years to gain work experience and practical skills.
Research shows nine of 10 school leavers find full-time jobs without doing training courses, while those who opt for further training or vocational education acquire little benefit.
Employers still find that a subset young people lack adequate literacy and numeracy and so-called soft skills – discipline, maturity and an appropriate attitude. Here the government can help with targeted programs to improve literacy and numeracy skills of these job seekers. In fact, these programs already exist. In the long term, however, the overall standard of education throughout secondary school needs to be lifted.
Educational initiatives should not become a substitute for work, and this is where the design of our welfare system is important.
Following the global financial crisis, the government altered the eligibility requirements for unemployment benefits. Recipients could stay on benefits without being required to look for work so long as they enrolled in some sort of education and training. Newstart recipients can enter into work experience after 12 months and hold on to their benefits, while early school leavers who later complete year 12 (or equivalent) can continue receiving income support.
These changes made it easier for unemployed youth to continue drawing welfare benefits without actively seeking a job. Knowing the long-term effects of an early stint of joblessness, these incentives need to change if our welfare and education system is to encourage work over welfare.
Work is the primary reason students leave school early. Therefore, those who do leave should be subject to the same job search requirements as adults on Newstart. Choosing to engage in further education or training should not be a substitute for a job.
Getting the youth back into work also means the labour market must provide enough jobs. Young workers look to low-skilled work to get a foothold in the job market. Reducing the cost of unskilled labour will increase demand for young workers, and make it easier to find work. Freezing the minimum wage would help to lower
Entry-level jobs are most often in retail and hospitality, and both sectors do a large amount of business during ''non-standard'' hours – week nights, weekends and public holidays. Removing the barrier of penalty rates will offer a significant number of jobs to young workers.
Australia's minimum wage is 54 per cent of the median wage and ranks fourth highest among Organisation for Economic Co-operation and Development countries. But that is not it. The award system then builds higher and higher minimum wages above this already high level. At this level many young workers are priced out of the labour market, particularly during late nights and weekends when penalty rates apply.
There are no easy fixes for youth unemployment. We are dealing with a complex problem that will need several strategies to tackle it. But there are several reforms government can pursue to arrest rising joblessness among our youth.

Alexander Philipatos is a policy analyst at The Centre for Independent Studies