A demographic crunch looms large on the horizon. The labour market is hamstrung by a ‘skills crisis’ and the level of the long-term unemployed remains remarkably resilient. In response, we’ve heard the Federal Government’s desperate plea to single mothers and the disabled to put the oar in. Skilled migration is to be drastically increased and work for the dole expanded.
Unfortunately, these reforms ignore the source of the problem. For the Australian labour market to overcome the dual challenges of an ageing population and a growing skills shortage, it is crucial that increasing numbers of young people successfully make the transition from school to full-time work and education.
On this count, Australia is moving in the wrong direction.
The recently released report How young people are faring 2004, prepared by the Dusseldorf Skills Foundation, reveals that making the transition from school to work or study is harder now than it has been since the recession ‘we had to have’ in 1990. Most alarmingly, this comes on the back of thirteen years of continuous economic growth and at a time of the lowest unemployment rate since 1978.
Thanks to Peter Nicholson at the Australian
The report found that more than a quarter of eighteen and nineteen year olds were not in full-time education or employment. In fact, the proportion of teenagers not in full-time work or study has barely declined since the recession of the early 1990s.
Significantly, 22 per cent of young adults aged twenty to twenty-four are also not in full-time education or work – some 309 000 young Australians. This overall number is 14 per cent higher than in 1995.
This worrying trend has been described by some, including the former Australian Prime Minister Paul Keating, as the cause of ‘the new poor’: the growing number of low-skill young Australians stuck in intermittent employment, with few prospects for advancement.
The group of young Australians most ‘at risk’ of failing to enter further education or find employment are early school leavers. According to the Australian Bureau of Statistics, only 37 per cent of early school leavers were engaged in education or training in 2000.
For many young people, leaving school early is an easy option. However, without an adequate education or access to vocational training, there are few opportunities for a successful working career.
Whereas in the past, when early school leavers had little trouble finding work in blue-collar occupations such as manufacturing, the decline in low-skill work has left early school leavers in contemporary Australia in a particularly precarious situation. In fact, the Business Council of Australia found that seven years after leaving school, 21 per cent of young men and 59 per cent of young women who left school in year nine were unemployed.
At last count, almost 49 per cent of Australia’s unemployed were under twenty-five years old.
The absence of the required vocational skills among early school leavers and other disadvantaged youths acts as a permanent barrier to their movement from ‘welfare to work’. Without a real skill transfer to this group by way of a significant short-term public investment in their vocational education and training, the long-term costs of their dependence upon welfare – both personally and to the public purse – will be both significant and ongoing.
When one considers the long-term costs, it is extremely disappointing that the most recent Federal budget committed only $17 million in new funding to training, especially when the sum dedicated to tax cuts – $5.56 billion – was some 365 times this figure.
Rather than education and training, the Federal Government’s strategy has been to expand ‘mutual obligation’. Yet ‘mutual obligation’ has done nothing to meet the country’s skills shortage because our Federal Government persists in funnelling disadvantaged youths into ‘work for the dole’ community projects that have little to do with their job prospects, and that ignore the sectors most in need of new employees.
The results have been telling: only 14 per cent of work for the dole participants end up in full-time jobs. Trebling the number of hours jobseekers must spend ‘working for the dole’ before they can qualify for a training credit, as has been outlined in the most recent ‘welfare to work’ reforms, will only increase the likelihood of participants failing to find full-time work.
Now is the time for the Federal Government to come good on its side of the mutual ‘welfare to work’ bargain.
Since the mid-1990s, Denmark has tackled skills shortages and persistent unemployment by its own version of mutual obligation: one which requires the unemployed to enter education and training to equip them with the skills the economy needs, and which are likely to gain them full-time employment.
Yet this kind of ‘mutual obligation’ costs money. The OECD’s Employment Outlook 2004 reports that Denmark spends 0.94 per cent of its GDP on training the unemployed; Australia spends 0.02 per cent.
Both the Federal Government and the OECD agree that individuals who participate in training have a higher probability of being employed. Moving people off the welfare rolls, therefore, is a matter of providing jobseekers the opportunity to acquire the skills required by the labour market.
We currently spend $7.6 billion per year on Newstart and Youth Allowance payments. Investing a few more in training our young unemployed is one that will pay for itself in the long run. The question remains whether there is the political will to move beyond the blame game to focus on the future: our young people.
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