Vulnerable Youth

The Australian labour market is very strong. The unemployment rate has declined to the lowest level in half a century and is expected to remain low for some time. This has benefited many young Australian workers, with the youth unemployment rate declining significantly.

However, scars from the COVID-19 recession may remain for young workers. Young workers always suffer more than older workers during recessions, but the COVID-19 economic shock was particularly bad. Many young people work in contact-intensive sectors, such as hospitality, arts and recreation services, which serve as important ports for labour market entry. With these sectors being partially closed, it was hard for young people to get a foot onto the first rung of the job ladder.

The labour market needs to remain very strong for a sustained period to allow more young people to benefit from the recovery. However, an economic slowdown driven by rising interest rates and international economic headwinds may weaken the labour market. This data visualisation tracks the key data that will show whether the labour market remains strong for young workers.

The recovery from the pandemic has been uneven for vulnerable groups

The labour market is in a strong recovery phase.
  • The Australian labour market remains in its strongest state in half a century, with the unemployment rate at historic lows and the
    employment-to-population ratio at record highs.
  • Aggregate labour market indicators can hide important trends among subgroups of the population – something that is especially important for understanding the experience of vulnerable groups.

The employment-to-population ratio is high and unemployment is low.

  • The employment-to-population ratio for young Australians aged between 15-24 years has increased to a record high. This improvement has been stronger than that of the 25-64 year old population.
  • Labour market outcomes for young people are more sensitive to economic downturns and recoveries, as shown by the sharp increase and rapid decline in the unemployment rate for 15-24 year olds during the pandemic.

Recessions make it harder to find the best match between workers and jobs

Job mobility in the youth labour market has recovered from the initial shock of the COVID-19 pandemic, though it remains below pre-GFC levels.

  • The ability to move between jobs allows workers to find work that better matches their skills and interests and this, in turn, typically leads to higher pay. In the early days of the pandemic, opportunities to move to better matched jobs were limited and many workers stayed with their employers.
  • Job mobility has recovered to be higher than the rates observed over the past decade, though the rate of job mobility for young workers remains below the levels observed in the period before the Global Financial Crisis.

A significant share of young workers report being mismatched to their jobs.

  • Job mismatch is especially concerning for young workers, with evidence suggesting that 80 per cent of career earnings growth occurs in the first decade of work (Murphy and Welch 1990) and the ability to switch jobs to ‘find the right fit’ is important in generating faster earnings growth.
  • The share of young workers that report being mismatched has not changed much over recent years and the COVID-19 recession had limited effects on mismatch rates.

The rate of ‘helpful’ job transitions for mismatched workers is steady.

  • Higher rates of job switching are particularly important for young workers in the wrong jobs (mismatched workers). The pandemic initially caused a sharp decline in the rate of job-switching for mismatched workers, though the rate of switching has recovered since then.

Young people increasingly work in lower-skilled services roles.

  • Employment opportunities for young people are primarily in services, specifically in hospitality, food preparation and sales assistant roles. The share of young people in these roles is highest in younger age groups, reflecting young people taking up these jobs part-time alongside further education or as their first jobs after completing secondary education.
  • For 23-25 year olds, the share of employment in these roles is smaller, reflecting a larger share of this cohort having completed tertiary education and working in roles requiring post-secondary qualifications. However, in the lead-up to the pandemic, the share of 23-25 year olds still working in hospitality or sales has been increasing, potentially driven by a larger share remaining in tertiary education or worse employment prospects in other industries.

Labour market outcomes are worse for the long-term unemployed...

There is some evidence of a growing share of young people that have been out of work for a lengthy period of time.

  • Since the pandemic there has been a significant increase in the share of young workers that have been unemployed for more than a year. The pandemic has exacerbated the long-term youth unemployment problem that has been apparent since the GFC.

The regions of Australia with the highest rates of unemployment are also those in which people are spending the most time out of work.

  • The positive correlation between unemployment rates and unemployment duration across regions indicates that some regions are particularly susceptible to long-term scarring effects from the pandemic-induced recession.

The long-term unemployed face greater difficulty finding work.

  • This graph shows the proportion of unemployed individuals who managed to get a job over time. There are three key areas where there is a risk that job finding may have become more difficult: for those in regional areas, for those who have been searching for work for a long time, and for those who have never worked.
  • There are concerns that labour markets in regional areas are weaker than in cities. However, Tthe share of unemployed workers finding employment in a given month is broadly similar across urban and regional areas, with unemployed workers in urban and regional areas benefiting from the strong labour market recovery.
  • Workers who have been searching for work for more than six months face greater difficulty transitioning back into employment. Similarly, people who have never worked or have not worked in over 6 months, also have lower probabilities of entering employment compared to people who have worked more recently. These trends have remained consistent over the past 15 years.

Young Jobseeker recipients are highly concentrated in disadvantaged regions.

  • The share of young people that are receiving JobSeeker payments is concentrated in areas associated with greater disadvantage, such as outer suburban and regional Australia.
  • This map uses illion data to estimate the relative shares of Jobseeker and Youth Allowance (for job seekers) payments in regions across Australia. The data are presented as an index between 0 and 100, with higher numbers indicating a greater relative share of the population in that region are on support payments compared to the rest of Australia.

... and for those in disadvantaged areas

Unemployment is higher in disadvantaged areas.

  • Young Australians living in areas with greater household disadvantage tend to have more difficulty finding employment, with unemployment rates in these areas higher than in more advantaged areas. These disadvantaged areas tend to be clustered in regional Australia or the outer rings of the capital cities.

More education tends to increase employment.

  • Across age and gender groups, higher levels of education are associated with higher employment rates. People who have not completed high school have the lowest employment rates, whereas people who have completed Bachelor-level or higher qualifications have the strongest rates of employment.
  • Note: 15-24 year old Bachelor’s degree and postgraduates are combined due to issues with small sample sizes.

Youth not in employment, education or training living in disadvantaged areas are a concern

The share of young people who are not working or studying full-time has declined well below pre-pandemic levels, to the lowest rate since 2008.

  • Both young men and women have benefited from this decline. Although the decline from the COVID-19 peak was initially slower for young men, the NEET rate for both young men and women are now similarly low.
  • This graph plots the percentage of young people who are currently not in employment, education or training (NEET) in each month, breaking it down by gender and age group. The NEET rate (percentage of individuals in NEET out of the population) is a key indicator of engagement in the labour market, tending to grow during economic downturns such as the GFC.

The COVID-19 recession drove a large increase in NEET.

  • The increase in the share of young people that are NEET is due to both more people becoming NEET and more people staying NEET.
  • This graph breaks down the monthly entry and exit from NEET status by gender and geographic area as a proportion of the population. The NEET flow rate represents the difference between NEET entry and exit.
  • The flow of people into NEET increased sharply in 2020, driven by the COVID-19 recession. The subsequent rapid recovery in the labour market saw a large flow out of NEET status. This flow was common across capital cities and regions, and across both males and females.

Young people living in regional areas are increasingly not studying or working.

  • The probability of a young Australian being NEET increases with distance from Australia’s capital cities. Furthermore, this difference has increased through time. This suggests that economic opportunities are concentrated in capital cities, and young people from disadvantaged backgrounds living in regional areas are being increasingly left behind in the labour market recovery.

Opportunities to limit scarring effects

Employment opportunities vary by region and industry.

  • The job opportunities available to young people have changed significantly, both overall and across regions and industries, over the past 20 years.
  • The graph shows net changes in jobs by industry. A net increase in jobs indicates that the industry is growing in a region, while a decrease indicates a decline. The table supplements this with a gross measure that shows how many new jobs were created in an industry, without taking into account job destruction.
  • The most common occupation and industries for young people (under 25 years) tend to be in hospitality, sales and carers positions. This is true across most regions, and these industries make up a larger share of employment. In contrast, the most common occupations and industry for older workers vary much more across regions and are less concentrated.