The Productivity Commission’s Climbing the Jobs Ladder Slower Report July 2020
The Productivity Commission’s recent report “Climbing the Jobs Ladder Slower: Young People in a Weak Market” looked at job and income outcomes for young workers between 2001 and 2018. The findings show that even before COVID, many young people found their position on the jobs ladder has been sliding ever lower since the GFC, regardless of their qualification levels.
Between 2002 and 2007 one effect of Australia’s economic growth on the jobs market was that some Bunbury waiters were paid $50 an hour to stop them being headhunted to drive Haulpaks in the Pilbara. At that time young people coming to the workforce, from university in particular, had more choices than any cohort since the mid-1980’s. This would have been apparent to all if the Jobs Ladder report had drawn its unemployment data back to 1990. That would have shown that the unemployment rate for 15 – 24 year olds since the GFC, while problematic at 12%, was still far better than the average of more than 18% in the second half of the 1990’s.
The most widely commented on finding from the Jobs Ladder report is that the post-GFC cohorts of young people had reduced incomes that could result in wage scarring for a decade. The scarring is an inference made by comparing post-GFC cohorts with those who entered the workforce between 2001 and 2007. Given the state of youth unemployment since 1990 it should not surprise anyone that incomes for 20 – 24 year olds reduced after the boom ebbed away. The focus on wage scarring has distracted from the disturbing trends that caused those lower incomes.
Lower Job Quality
What the Jobs Ladder report shows is that by 2018, people aged 20 – 24 with sub-bachelor qualifications have suffered a substantial decline in average job quality. Workers aged 25 – 34 with Bachelor degrees also had jobs with substantially worse quality scores in 2018 compared to the same age bracket in 2001.
The number of higher quality jobs has grown appreciably since 2001, as has competition for them. The expansion of the Tertiary sector has created an over-supply of suitable workers for those jobs. The 2012 – 2015 graduates are the last cohort included in the Jobs Ladder report. The quality of the jobs they could secure within a year of graduating had diminished significantly. In this cohort, there are many more workers whose job quality is far lower than previous cohorts, what the Productivity Commission refers to as “unlucky workers.”
The most disturbing finding in the Jobs Ladder report is that those unlucky workers continue on the same trajectory for a long time in their careers. Employers make no allowances for someone with suitable qualifications and job experience in low quality roles when choosing junior workers. They choose the new graduates over the unlucky workers. The net result for those young workers who took a low quality job when they entered the workforce between 2010 – 2014, is that by 2018, they had made little progress towards securing a higher quality job.
Stalled progression to better jobs
This lack of mobility from lower quality roles to higher ones has serious implications for young people, and presumably the makeup of the workforce in another 10 to 20 years time. This reduction in job mobility applies not only from lower to high quality roles but from part-time to full-time roles. The Jobs Ladder report found between 2008 and 2018 there was no large upward movement to better jobs. Worryingly they also found no evidence that young people who took lower quality jobs found better jobs in the recovery. Given the current COVID tinted outlook, this could mean that without another super-cycle resources boom, young people coming to the workforce since 2010 will do even worse than the young people who suffered through the very high unemployment and under-employment conditions of the 1990’s. Many of whom were able to find some improved level of employment during the 2002 – 2007 boom.
The effect of COVID on the labour market for young people has seen them swamp universities with domestic applications for 2021 – up more than 30% for many institutions. The data underscoring the Productivity Commission’s findings indicate many of those students are caught in a Catch 22 situation. They will incur a significant debt by going to uni, and their expectations of being able to find quality full-time work is likely to reduce even further in the face of economic weakness, and significantly increased competition for roles of any sort after graduation. Which isn’t actually the dilemma because the prospect of making your way in Australian society without a Bachelors degree is now riskier than ever.
The Elephant in the Room
One way the Productivity Commission’s report exacerbates the problem young people face after COVID, is continuing the myth that 2001 – 2007 is a standard we should use as a reference for what is normal. That was a once in 30 years peak unlikely to be repeated any time soon. This is the reality that needs to be promoted by governments and educators. Many young people will continue to do well in the workforce, as you would expect in what remains one of the wealthiest countries on the planet.
However, aside from that blip of good fortune, the proportion of young people doing poorly in our labour market has been a national disgrace for more than 30 years. There needs to be far more recognition that regardless of what governments of any persuasion do over the next 2- 3 years, the job outlook remains bleak for an increasing proportion of our young people. We need to be more conscious that the gap between our hopes for young people in the job market and what so many of them can reasonably expect has never been greater. The expectations of all concerned need a strong dose of mollification.
The full report can be found here