The youth unemployment rate is more likely double the official figures released in May, with new reports warning there’s a more “devastating truth” lurking.
While the official unemployment rate for Australians aged 15 to 24 was 16.1 per cent in May, fund management firm Fidelity said in reality, the figure is actually closer to 32 per cent.
“Arguably, the unemployment rate is not reflecting the true devastation that Covid-19 has had on Australia’s 15-24 year old workforce, given a large proportion are employed in the heavily impacted food service, retail, hospitality, and tourism sectors,” said Fidelity International cross asset specialist Anthony Doyle.
Over 3.3 million Australians are currently receiving JobKeeper, meaning they are not recorded as unemployed. But many would be uncertain as to whether they’ll remain employed if or when the wage subsidy ends, Doyle said.
“To attempt to gain a true picture of the impact of Covid-19 lockdown measures on Australia’s youth workforce, we can calculate an unemployment rate based on the assumption that those who dropped out of the labour force in April and May continued to look for a job,” Doyle stated.
These people would therefore be counted as unemployed.
“Under this assumption, Australia’s youth unemployment rate is currently 26.8 per cent, rather than the official figure of 16.1 per cent for May.”
What’s more, those aged 15-24 make up around 15 per cent of the labour force, meaning the outlook is even worse.
“Assuming this age cohort represents an equivalent proportion of the 3.3 million people that are currently receiving the JobKeeper payment, and 25 per cent of those on JobKeeper lose their job when the entitlement ends, then the youth unemployment rate rises to 32 per cent,” said Doyle.
“Arguably, this underestimates the true level of youth unemployment, as this age cohort likely represents a greater proportion of those receiving JobKeeper payments.”
Doyle said the current crisis would have long-lasting impacts for Australia’s youth workforce.
One ramification would see young Australians starting their career right now lose a staggering $32,000 in income over the next decade, according to EY research.
“A recessionary jobs market can have a disproportionate medium-term impact on those early in their career and with limited experience, through lower wage growth and fewer opportunities and flexibility,” the EY report found.
It would also mean a $22,000 lower borrowing capacity for a first home, and $30,000 less in superannuation.
“There are also severe social ramifications, including loss of motivation and erosion of confidence,” Doyle said.
“Globally, high youth unemployment levels have also been associated with social unrest, higher levels of criminal activity and political turmoil.”
What can young Australians do during a recession?
The best thing to do during a recession is to be proactive, EY economists Jo Masters and Bonnie Barker said.
“Proactively making small changes to habits and mindset now, such as increasing savings rates, boosting superannuation contributions and potentially moving jobs if the opportunity presents to upskill, improve the job skills match or boost income can make a material difference,” they stated.
Teen entrepreneur Jack Bloomfield said it’s a good time to be upskilling.
“To get the job, you will need to upskill,” he said.
“Do anything you can to increase the attractiveness of your CV. This could mean taking an online course in 21st-century marketing tactics, social media or even team management.”
Being strategic with your finances, like adopting 20/30/50 rule for savings, that is, saving 20 per cent of your income each pay cheque, will save young Australians an extra $28,000 over the course of the decade.
Are you a millennial or Gen Z-er interested in joining a community where you can learn how to take control of your money? Join us at The Broke Millennials Club on Facebook!