Is It ‘Dog Days’ for the Young in the Australian Labour Market?

• Published date: 01 December 2021
• Author: Jeff Borland,Michael Coelli
• Date: 01 December 2021
• DOI: http://doi.org/10.1111/1467-8462.12431

The Australian Economic Review, vol. 54, no. 4, pp. 421–444 DOI: 10.1111/1467-8462.12431

Is It ‘Dog Days’for the Young in the Australian Labour Market?

Jeff Borland and Michael Coelli*

Abstract

From 2008–2019 there was a substantial

deterioration in employment outcomes for

the young (aged 15–24 years) in Australia.

Their employment/population rate decreased

by 4.3 percentage points, whereas for those

aged 25 years and above it increased by 1

percentage point. We argue that the major

cause was the young being ‘crowded out’

from employment due to an increase in labour

market competition. Adjustment to increased

competition also meant they were more likely

to: be employed part‐time or long‐term

unemployed; start their work careers in

lower‐quality jobs; and need to compete for

jobs through activities such as unpaid

internships.

1. Introduction

In the decade after the global financial crisis

(GFC) employment outcomes for the young in

Australia worsened substantially relative to

other age groups. Figure 1 shows annual data

on the cumulative change in the employment/

population (EMP/POP) rate for young (15–24

years), prime age (25–54 years) and older (55

years plus) populations, compared to 1993.

The deteriorating labour market situation for

the young post‐GFC is immediately apparent.

From 2008–2019 their EMP/POP rate de-

creased by 4.3 percentage points, whereas the

rates for persons aged 25–54 and 55 years and

above increased by 1.1 and 4.1 percentage

points respectively.

Our main contention is that worsening

employment outcomes for the young in the

decade following the GFC were caused

primarily by increases in labour supply which

have meant extra competition for jobs sought

by the young, and resulted in them being

‘crowded out’from employment.

1

Poorer labour market outcomes for the

young matter for several reasons. First, the

immediate well‐being of the youngis adversely

affected by having lower income. Second,

there is the danger of long‐term scarring effects

from entering the labour market at times when

it is more difficult to get into work—with

negative effects on future income and potential

aggregate out put.

2

Third, there may be spill‐

over effects from worsening employment out-

comes for the young that have macro‐economic

implications—such as slowing the rate of

adoption of new technologies (e.g., Adao,

Beraja and Panda lai‐Nayar 2020).

*The University of Melbourne, Victoria 3010,

Australia. Corresponding author: Borland, email:

<jib@unimelb.edu.au>.

An initial version of this article was presented at the

Melbourne Economic Forum in May 2018.

The reference to ‘dog days’is from Garnaut (2013).

We have benefited greatly from comments by a co‐editor

and two anonymous referees. We also thank James

Bishop, Natasha Cassidy, Peter Davidson, Catherine de

Fontenay, Bob Gregory, Kate Griffiths and participants in

seminars at the Commonwealth Treasury and Reserve

Bank of Australia for helpful comments and suggestions.

Research in this article has been funded by ARC

Discovery Grant DP160102269.

© 2021 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics

Published by John Wiley & Sons Australia, Ltd

Our analysis starts by recognising that

labour supply of the young is heterogeneous.

Two main groups of young labour force

participants are identified: first, full‐time

students who are mainly looking to work in

part‐time and relatively low‐skill jobs; and

second, young people who are not attending

education full‐time (not studying or studying

part‐time) and looking for work commensu-

rate with their education qualifications.

Table 1 presents information on the distribu-

tion of young labour force participants

between these groups. Full‐time students

who are employed part‐time or looking to

work part‐time represent 37.2 per cent of total

labour supply of the young. Those who are not

attending education full‐time are 60.7 per cent

of labour supply. This latter group are

predominantly (about two‐thirds) working

full‐time or unemployed and looking for

full‐time work.

The next stage of our analysis is to describe

the nature of competition faced by each group

of young labour force participants, and how

that competition increased in the decade

following the GFC. We argue that this

descriptive evidence is consistent with in-

creases in labour supply making it more

difficult for the young to obtain employment.

Young full‐time students are shown to be

concentrated in a subset of occupations in

sales, hospitality and food preparation, where

most competition comes from other young

jobseekers. For this group, the main source of

extra competition has been from rapid growth

in international students and working holiday-

makers in Australia.

Young people who are not attending

education full‐time exhibit more diversity in

the types of jobs they are able to perform and

are seeking—and hence competition is with

labour force participants in prime age and

older age groups with similar qualifications

looking for the same type of job. Broad‐based

growth in labour supply—especially from

the older population—has therefore been the

main source of extra competition for the

young who are not attending educat ion

full‐time.

Other potential explanations for deterior-

ating employment outcomes for the young are

also considered. One main alternative is

business cycle conditions. Economic down-

turns always disproportionately adversely

affect employment of the young. That is

because the young are over‐represented

among jobseekers, and are having to make

the transition into employment at a time when

Figure 1 Change in Employment/Population Rate from 1993, by Age, Australia, 1993–2019 (August)

0

2

4

6

8

10

12

14

16

18

20

1993 1996 1999 2002 2005 2008 2011 2014 2017

Change in EMP/POP

(In year specified minus 1993)

15-24

25-54

55 plus

Notes/Sources: (i) Changes are calculated for August in each year compared to August 1993; (ii) ABS, Labour Force,

Australia, Detailed, Table 01.

422 The Australian Economic Review December 2021

© 2021 The University of Melbourne, Melbourne Institute: Applied Economic & Social Research,

Faculty of Business and Economics