Young jobseekers are suffering the ultimate penalty

Labor’s new plan to tackle youth unemployment with a pilot project to improve core employability skills may have some merit. But a more effective approach to battle this ballooning issue would be removing regulatory barriers for successful employability of young people.

In particular, a temporary immunity to penalty rates and other excessive award entitlements for young workers would encourage more employment. And such an approach is urgently needed to alleviate the growing jobless numbers.

In Australia, youth unemployment is more than double that of the adult rate. And such plight is not limited to our borders. The struggle to start a professional life is indeed a global issue, afflicting both developed and developing nations.

Almost a quarter of the world’s youth are not in employment, education or training (NEET). Among the 34 members of the OECD nations,recent estimates point approximately to 40 million young NEETs. In Australia alone, there are over half a million.

The damaging effects of youth unemployment can persist into adulthood. Apart from lasting psychological impact, NEETs are more likely to suffer lifetime wage deterioration. Australians who were unemployed in their youth tend to be three times more likely to be unemployed in later stages of life.

Social costs are an inevitable consequence as an idle youngster is easy prey for drug abuse, domestic violence and crime involvement.

This is exacerbated by the traps of welfare dependence and poverty, as the longer a person is unemployed, the harder it becomes to find a job — with social stigma, further skill losses and lack of confidence contributing to this self-perpetuating cycle.

The research points to four broad causes of youth unemployment: technological changes; skills mismatch; regulation constraints; and low economic growth. The first two causes are linked together as inexperienced, unskilled jobseekers are hit hard by automation of a service-oriented economy.

Since it is not possible, nor desirable, to stop the disruptive forces of innovation, much has been done to address skill shortages. Alas, despite vast public spending, results are mixed and inconclusive.

There is no silver bullet for the problem, but a proven, more effective strategy would be easing of labour market regulatory constraints, to foster a conducive environment for economic growth and job creation.

In the Australian case, the byzantine system of industrial relation awards demanding prohibitive penalty rates for young workers is ripe for change.

The penalty rate system introduced back in 1947 was designed to penalise employers hiring outside the conventional 9-to-5 working day. However in contemporary times, the rates penalise not only employers (with the undesirable consequence of reduced hiring capacity), but also young and unskilled jobseekers.

There is no compelling ethical cause for such a hindrance to youth job creation.

For young students, weekend and night shifts are predominantly the only feasible ones that do not clash with class times. For someone who is not in employment, education or training, and probably struggling to make ends meet, a Sunday work shift cannot be not deemed a plausible inconvenience. It is in fact a real blessing in which vital work ethics and basic professional skills (team work, discipline and maturity) are developed — not to mention the extra income.

Due to a prohibitive penalty rate regime, the minimum casual pay for a 20-year-old in the lowest employee level in the fast food industry is $29/hr on a Sunday (or a substantial $46/hr on public holidays). Similar pay levels (if not higher) can also be found in many other industries that are a gateway for young job starters.

Such exorbitant price floors certainly do not help the youth unemployment cause.

Even without taking modern award entitlements into account, Australia already has a strong safety net for all workers. No matter the age, gender or skill level, all Australian employees are safeguarded by the National Employment Standards comprising important minimum workplace entitlements, including a maximum standard working week and paid annual leave.

Moreover, the purchasing power of our minimum wage is one of the highest among OECD members, only behind Luxemburg, Netherlands and Belgium.

A temporary immunity to penalty rates and other excessive award entitlements for young Australians should be taken seriously as an effective measure for the most vulnerable to have a fair go when looking for a job. Populists — or worse, vested interests — should stop campaigning against it.

Youth unemployment is a multifaceted issue, demanding a wide range of welfare measures to alleviate the problem. Although targeted assistance to help make ends meet and address skill shortages should not be ruled out, other market-oriented approaches must be part of the solution.

After all, there is no better welfare program than freeing job access for the most vulnerable in our society.