Australia was one of the few OECD countries to emerge from the Global Financial Crisis (GFC) without facing a recession, usually defined as negative GDP growth for two consecutive quarters. However, the (overall) unemployment rate did increase following the GFC and has still not returned to the pre-GFC levels. Unemployment rates for youths went up much more dramatically and remain high. This paper investigates the impact of the GFC on youth unemployment and long term unemployment. In particular, we study whether the GFC had a bigger impact on youths than adults, and whether youth unemployment rates increased due to an increase in youth wages relative to adult wages. To anticipate our results, we find that the youth unemployment rates increased significantly more than that of adults even though youth wages had been falling relative to adult wages…
In this paper we have studied the youth labour market and its response to the Global Financial Crisis. We showed that the youth labour market was significantly different from the adult labour market and more likely to be more volatile. Unemployment rates for youths increase more rapidly during a recession due to the fact that many young people are working in cyclically sensitive sectors, working in part-time casual employment. As a result, when a recession hits, employers stop hiring new entrants (the youths) and begin to fire youths as they are in vulnerable employment. We showed that the high youth unemployment could not be explained by high youth wages, by the minimum wage, or by so-called generous unemployment benefits.
If we would like to lower youth unemployment rates it is important to create increased growth, particularly in the industries that are the main employers of young people, namely, construction, manufacturing, retail trade and accommodation and food services for males, and retail trade, accommodation and food services, and health care and social assistance for females. Since manufacturing has been on a declining trend for decades, the main industries that would help young people would be a stimulus to (say) tourism that helps retail trade, accommodation and food services. In recent years there has been an increase in temporary visas for migrants (e.g. the backpackers, or 457 visas) who compete with youths in employment in restaurants, accommodation, etc. With an ageing population, there needs to be an increase in health services, this would increase the employment of young women as (say) nurses. To summarise, if the growth rate of the economy was stimulated it would decrease youth unemployment rates. In the context of a growing economy young people need to have greater access to apprenticeships and to on the job training schemes
Chosen excerpts by Job Market Monitor. Read the whole story at The Impact of the Global Financial Crisis on Youth Labour Markets
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