Youth unemployment

Discussion in 'Markets & Economies' started by bordsilver, May 26, 2014.

  1. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    With the proposed changes in the latest Budget regarding access to Newstart for the under 30's I thought it is valuable to add a thread discussing the obvious issue - Youth unemployment.

    First, the data (Sourced from: ABS Labour Force Survey, 1966-1977; Labour Force, Australia, 1978-2000 (ABS cat. no. 6203.0 and 6204.0).

    [​IMG]

    As can be seen unemployment in younger age groups has always been higher than older workers. This is to be expected simply because the youth have the least amount of training and skills compared to other workers. Prior to the 1970's however, youth unemployment was still very low being below 5%. Since then it has grown to be consistently 2-3 times average unemployment in other age groups with the rate as at April-2014 being 17.7 per cent compared to the Australian average of just under 6.0 per cent.

    This fact is widely known, but it is rarely highlighted that it was not always this way. The implications of it are never discussed. But the inescapable conclusion of the very high unemployment levels, for young men and women in the 15-19 age group, relative to other sections of the work-force is that the price of their labour, relative to other labour, or to labour replacing capital equipment, is far too high. It is the inevitable failure of the regulators to get the relative prices right which causes unemployment. (One reason for the inevitability of failure is that these relative prices are subject to constant change.)

    In order to understand more fully some of the mysteries of unemployment and the misery of those in states of unemployment or poverty, it is necessary to look beyond the labour market barriers to frequent employment, and to understand the incentives to participate in the welfare system. Australia, in the 1970s, saw dramatic increases in the incentives for youth and adults not to work, the result of both contrived increases in wages and increases in welfare benefits, which had the effect of both reducing the number of job offers to less skilled people and increasing the benefits they received in the event that they did not work.

    In the United Kingdom and New Zealand the incentives not to work also increased dramatically around this time. The victims of artificially imposed wages were not those with high skills, good connections or those at the top end of the tertiary education system, since they were typically earning far more than any minimum wages imposed from Nauru House. The victims were, rather, the young, the less skilled, the aboriginal stockmen, the women attempting to rejoin the workforce after long periods out of work due to family obligations, and others who simply did not conform to the standards expected by employers obliged to pay high minimum wages.

    In earlier times, so long as the minimum wages were modest, as indeed they were for much of the 20th Century in most countries, there was little by way of an unemployment problem, since those wage minima were largely irrelevant. But as union muscle increased, as the group setting wages increased their claims as to what constituted a 'fair wage', and as the welfare industry succeeded in negotiating very generous welfare, compensation and other terms and conditions associated with not working, so unemployment in the western world exploded.

    The price for labour in the 15-19 age group is, of course, not a market price. It is a price set by regulation and through bodies which have statutory authority concerning entry into all manner of occupations. Boards which control rates of pay and conditions of work for young people who want to become gardeners, boiler makers, builders etc. In many cases if you want to enter a profession you must first become an apprentice. The price is not just a dollar value, although that is undeniably important. The price also includes intangibles such as the difficulties and frustrations of terminating an employment relationship if things do not work out.

    All of the proposals for government remedies for youth unemployment are designed either to lower the effective price, or to raise the quality, of the young job-seeker, without acknowledging the source of the problem.

    The fact is that young people have been priced out of the job market by regulators of all shapes and sizes, but notably the arbitral tribunals, acting under pressure from trade unions. Once that fact permeates the public consciousness, then dramatic political and institutional consequences follow.

    I contended last week that, although the proposed welfare changes are admirable, before they can be properly implemented there needs to be substantial change in the ease of starting up businesses and hiring and firing people. Many youth (and other unskilled people) have had the bottom rungs of the employment ladder forcibly removed from them. Put the rungs back and the unemployment problem will solve itself. The welfare and the unemployment problems grew together. They should be unwound together.
     
  2. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    Big A.D. and reno - feel free to argue that there aren't many barriers to starting up new businesses and hiring and firing people in Australia. I'd love for it to be true ;)
     
  3. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    What a load of garbage!

    The reason youth unemployment is higher than the average is statistical not actual.

    If the natural percentage of the total unemployable is say 5%, i.e. lack of skills, intelligence, desire to work etc., it is much the same with youth if you take into account TAFE and universities as work. If you take 50% out of a subset, that 5% unemployable translates then as 10%.

    This is the main multiplier of youth unemployment. The other factors are just window dressing.

    There, I've spoken.
     
  4. hawkeye

    hawkeye New Member Silver Stacker

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    The job market as it currently stands is just insane. It's entirely designed to benefit established workers at the expense of new entrants. Society eating it's young.

    It's also where you get the unpaid intern phenomenon. People work for free just to get their foot in the door rather than actually being paid a wage.

    The entire point of lower paid jobs is so that you can build up your skills and experience thereby making yourself more valuable to employers and able to command higher rates. But today, it's all about allowing people to do the minimum required and encouraging mediocrity. The economy suffers as a result in reduced efficiency. It's offset somewhat by increasing automation but it basically works to devalue workers as a whole by discouraging them from improving. The whole process seems to feed on itself as the less productive people become more insecure and as a result want more pressure applied on employers by the government which then exacerbates the problems further.

    Unintended consequences. It all starts by trying to use force to solve problems. And you end up with increasing insecurity amongst workers and employers looking overseas for more efficiency. Which further exacerbates the insecurity.

    It's just like a self-feeding process. The snake eating it's tail.
     
  5. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    I acknowledge that there could be some statistical effect but if being in full time education is the cause of the difference between 1966 and 1986 then you'd expect the participation rate to have changed significantly.

    [​IMG]


    Which it didn't. It was fairly constant at ~70% over the whole time frame.
     
  6. sammysilver

    sammysilver Well-Known Member Silver Stacker

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    I believe that in the 30 odd years from 1986, fulltime education from year 10 to year 12 , plus TAFE and University has increased significantly.
     
  7. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    And those regulations exist in recognition that it is easy to exploit a 15 year old worker due to their lack of experience - not just in their job, but in life generally - and that anyone performing work for pay should be treated with a minimum amount of respect and dignity.

    It also means the employer can reasonably expect the kid to actually earn their money as they get more proficient at their work, which is why the minimum wage scales from $6.03/hour for a 15 year old to $16.37 for a 21 year old. If you want to pay someone pocket money rates of six bucks an hour, you get a kid with no experience but you have to train them yourself. If you don't train them, you'll need to pay them more as they get older, so you may as well train them and get your money's worth. Or rather, the employer gets penalized for not training their younger workers and this protects young people from getting dead-end jobs with dodgy employers who only want a permanent supply of slave labour that isn't able to do anything else.

    But anyway...

    Although the overall percentages go up and down, the unemployment ratio of under 24s to other age groups jumps in around 1975 and remains pretty constant from thereon. That's about the same time that the Fraser government started cutting government services, one of the areas being apprenticeships in government owned enterprises. Until that point, many young people had a fall-back option of getting a job with state owned service provider (telecoms, railways, energy, roads, etc). When the economic rationalist movement gained popularity in political circles, the secondary role of these organizations as training and employment centers was seen as a hindrance on their efficiency, which came to be measured against a private sector benchmark.

    The result was much more efficient enterprises, many of which were sold off, but also that many young people who would otherwise have training and jobs didn't get them. Of course we'd call those organizations "bloated", but they helped keep a lot of people off the dole.

    It would seem that you can either have a bloated public sector and little youth unemployment or you can have a lean public sector and high youth unemployment.

    Also, it's worth remembering that we had national service up until 1973. That took a lot of young males out of circulation in the labour force for 18-24 months at a time and nobody really expected women to have jobs back then so they didn't matter as much in the unemployment figures.
     
  8. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    That should show up in the participation rates. Maybe the proportion of teenagers becoming full time mothers fully offset this (which also coincides with the fertility rate ages moving). At 70% participation it is hard to see how the math for the unemployment rates can move so much due to staying in school (but this could be become clear if we do the actual math).

    Either way the primary contention is that there are a significant number of young people who are structurally unemployed due to the cost of their unskilled (or unreliable) labour being too high.
     
  9. bordsilver

    bordsilver Well-Known Member Silver Stacker

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    National service. That's an interesting thought. On the face of it, it sounds like it could have been a significant factor. However, I believe the labour force statistics are all based on civilian population hence that shouldn't actually affect the graphs at all.

    RE Women working/not working is captured in the participation rate.

    Edit: I looked up the ABS definitions and yes, the statistics are all for civilian population only. Everyone else should either be not participating in the workforce (ie students, full time mums, carers, and those incapable of working) or participating (and employed or unemployed).
     
  10. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    FYI, this chart picks up where the previous one left off:

    [​IMG]
    Source: openeconomics.com.au
     
  11. SpacePete

    SpacePete Well-Known Member Silver Stacker

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    Many of the younger generation will never get a permanent job. The incentives to automate or offshore jobs are just too great.

    The poor work ethic and attitude of entitlement of so many Australians are further incentives to find alternatives to employing locals.
     
  12. Shaddam IV

    Shaddam IV Well-Known Member Silver Stacker

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    Try employing someone in their early 20's and watch them check their smart phone 15 times in any given hour and you soon start wondering why businesses are giving up.
     
  13. hawkeye

    hawkeye New Member Silver Stacker

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    You know, I remember looking for part time jobs at this age. OK, granted they were part time jobs, but I knew when I was being offered a raw deal. I think you are underestimating people of this age and their ability to calculate. Not only that but I also knew whether a job was worth doing for the experience or not regardless of what I was being offered for it. If it didn't pay good and had nothing else to offer I looked for something else.

    Even if you are desperate and have to take a crappy job (and there are plenty around regardless of minimum wage) there is no reason why you can't look for something better at the same time.

    That sounds scientific. /sarc Where the f**k do they get these numbers from? They sound completely arbitrary to me. In fact they are obviously arbitrary since different jobs have different values attached to them.

    Here's an idea. Don't infantilise teenagers. Don't make them think they can't look after themselves. Don't make them think that getting a pay rise means whingeing to the government. And don't make it more difficult than it has to be for them to enter the workforce. People know when they are getting a raw deal. What we need to do is provide opportunity. The opportunity to attain experience and the opportunity to shift to something better hen needed.

    Scaring away businesses and putting barriers in front of people who want to work and gain experience is not the way to go.

    EDIT: it's because of all this stuff over decades now that Australia is basically becoming a country where you have to be rich (or at least upper middle class) in order to have a decent living standard in comparison to the past when it was a land of opportunity. Kids know this. They know the system is f**king them over. They look at property prices and the whole thing is just a huge mountain to climb and for what? It's no surprise that many just say "why bother?" Australia has been killing itself with all this shit. The mining boom is glossing it over but when that's over it will all become apparent to everyone. Australia, the dumb country, playground of the rich.
     
  14. Big A.D.

    Big A.D. Well-Known Member Silver Stacker

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    According to the current government, you're not a real adult until you're 24.

    Until then, you get Dole Junior a.k.a. Youth Allowance.

    You can vote, be charged with a crime, own a firearm, purchase pornography, alcohol and tobacco, enter into contracts, join the armed forces, get married and divorced, rent or buy a house, have a full time job and for all other outward appearances be considered an adult.

    But you're not.

    You're Yoof and if bad luck happens to come your way, you're not as deserving as someone born a few years earlier than you were.
     
  15. renovator

    renovator Well-Known Member

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    Its no better here in asia either.... zombies. What does amaze me in a country where theres a lot of poverty is even the poor have mobile phones stuck to their hand/head :mad:
     
  16. renovator

    renovator Well-Known Member

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    Theres no point you will make up fictitious barriers in your head anyway . Thats where most of the barriers are .Of course theres barriers but none to stop you doing it . Theres tens of thousands of businesses operating under the same rules already .If they had the same mindset they would all close .

    Nothing is easy ...do your best with the rules applicable, as i said tens of thouisands do already & they had to start from scratch like everybody else . Thems the rules ..live with it ,get over it & get the job done
     
  17. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Part of my role in the business we own is to do the mundane - stack tables, wash floors, hose the outside dining area, mow the lawn, clean the toilet, wash windows etc. This frees my wife to do her Chef stuff. A 15 yo could do parts of my job, a down syndrome adult could do the rest of it, excluding my other roles it requires absolutely no skills base. But we won't employ a 15yo nor a Downsie because it is an extra expense. It is cheaper for me to do it twice as fast than employ some some kid who would take twice as long or some adult who would be getting paid more than I do.

    I'd pay the bloke across the road no more than $5 an hour to do it. But I can't so he remains unemployed and receives his $500 every 2 weeks as well as rental assistance.

    Edit to add: I'd employ someone at $2/hour, even if they ended up mowing the toilet and washing the lawn half the time if it meant they could find meaningful work.
     
  18. Shaddam IV

    Shaddam IV Well-Known Member Silver Stacker

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  19. renovator

    renovator Well-Known Member

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    Thats about what i pay here in asia (above the average& award)& i might add about all they are worth most of the time .Funnily enough i just talked to my foreman & he told me he was the only one of 6 that turned up for work today . I decided to look at my wages book & discovered that between the 6 guys & 66 days of work theres 80 absent days ..... 80!! & they wonder why its a third world country :( I will say 40 of them were at easter (holy week here ) only supposed to be one public holiday ....they had the entire week off to get pissed & party

    I have to laugh at your mowing the toilet &washing the lawn thats what its actually like here with the language barrier :lol: I shit you not after giving very simple instructions & them agreeing i come back & its arse about face .
    luckily the exchange rate overcomes the redoing of it .

    Im coming home soon frustrated at the work ethics & red tape getting my projects off the ground & finished .Oz isnt such a bad place afterall . Asia is a good place to retire ....i wish i was old enough to retire :p:
     
  20. fosinator

    fosinator Member

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    This last fruit picking season there were a lot of Tongans flying over, doing the work and flyng home with money...with money they earned.Good on them I say.I just dont understand why unemployed locals dont do it.Probably for the same reason one of my mates quit his job last week....He didnt want to do that job lol
     

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