Why is Youth Unemployment always high?

by Zachary Hayward and Matt Nolan

Youth unemployment in Australia was 8.3% in August. Although this is a historically low level, it remains substantially higher than the national rate of 3.7%.  At any point in time, there are always a large number of young people out of work and looking for a job in Australia. So why is that the case?

In this micronote, we find that young people find jobs at the same rate as older Australians (the job finding rate), but they are more likely to end employment and become unemployed (the separation rate). 

Young people are both more likely to voluntarily leave an employer and more likely to leave involuntarily. However, once we control for some of the determinants of leaving a job (low tenure, low levels of education) we find that:

  • Young Australians are more likely to voluntarily leave their job than similar older Australians.
  • Young Australians are less likely to be involuntarily displaced than similar older Australians, through redundancy or being laid off.
  • Voluntary displacement is a much larger determinant of the high youth unemployment rate than involuntary displacement.

These results suggest two things:

  1. If we want to understand the costs and consequences of youth unemployment, we have to understand why young people appear to be voluntarily leaving their jobs – and the pathways they face after doing so.
  2. The risk of being fired is related to weak job attachment – low tenure, low skill level – rather than necessarily being a product of firms choices about age.

In future research, e61 intends to look more deeply into the pathways for those who voluntarily leave work – to better understand the risk that such departures can lead to long and persistent declines in income and life satisfaction.