Youth Labor Underutilization in Australia Following the Global Financial Crisis

Youth Labor Underutilization in Australia Following the Global Financial Crisis

Scott Baum (Griffith University, Australia), Michael Flanagan (University of Newcastle, Australia), and Bill Mitchell (University of Newcastle, Australia)
DOI: 10.4018/978-1-7998-2779-5.ch005
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In the wake of the Global Financial Crisis, although the Australian economy remained largely buoyant in aggregate terms, outcomes across different groups were not evenly shared. In labor market terms, different demographic groups appeared to more or less impacted by the post-GFC economic environment. One such group were young people, who witnessed a change in employment fortunes compared to others in the labor force. This chapter provides an investigation of these uneven labor market outcomes and presents an analysis of youth labor underutilization using pooled panel data, taking account of both individual level supply-side factors together with the strength of the local labor market (demand-side). The result is an analysis that accounts for the impact of changing macroeconomy, local labor market conditions, and the employability assets of young individuals. The result illustrates the impact of the post-GFC economy of the youth labor market.
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In the period following the Global Financial Crisis (GFC), there was general agreement that the Australian economy had managed to deflect much of the negative impacts that had seen other international economies suffer from diminished levels of economic growth with serious flow-on effects to labor markets. This resilience was heralded by both the Australian government and international organizations, such as the IMF, as an example of good economic management. According to one Australian media outlet, ‘[l]uckily in Australia we avoided a long-term unemployment problem—in part due to China, but also because of the massive stimulus program put through by the Rudd Government’ (Pickering, 2014). While it is certainly true that the Australian economy managed to remain buoyant while others faltered, it is equally true that in the period following the GFC, changes in the performance and management of the macro-economy have resulted in a gradual diminishing of economic performance across many areas, not least the labor market. Labor market changes extended beyond simply shifts in unemployment and included increases in broader measures of joblessness including underemployment and underutilization, diminishing job security perceptions and changes to the very nature of work. What has been especially concerning has been the long-term impacts on joblessness and employment disadvantage. While all labor sub-markets have been impacted, the impact on the youth labor market has been heightened with significant impacts on the level of both unemployment and underemployment.

Understanding the post-GFC patterns of youth labor underutilization is the focus of this chapter. Its main purpose is to consider the factors associated with youth underutilization including the characteristics of at-risk individuals and the characteristics of the local labor markets and the macro-economy that individuals operate in. The analysis in the chapter provides a unique opportunity to consider the ways that these cross-cutting factors have impacted on labor market outcomes. By utilizing panel data regarding labor market outcomes for individuals aged between 15 and 24 years of age and linking the individual data to broader macro-level factors. The panel data, covering the years 2008 to 2015, is taken from the Household, Income and Labor Dynamics Australia (HILDA) survey and is combined with regional labor market statistics from the Australian Bureau of Statistics. This combined dataset allows the following research questions to be addressed:

  • 1.

    What was the impact of supply side characteristics on the risk of an individual’s labour being underutilised?

  • 2.

    What was the impact of aggregate/ spatial demand side characteristics on the risk of an individual’s labour being underutilised? and

  • 3.

    What was the impact of macro-economic forces in the post-GFC period on an individual’s labour being underutilised?


Labor Underutilization And Young People: Patterns And Problems

It has been widely acknowledged that in Australia, as elsewhere, the labor market plight of young people aged between 15 and 24 has been increasingly bleak in the period following the Global Financial Crisis. In the period prior to the global downturn, both unemployment and underemployment (and hence underutilization) had been trending lower, a situation that had been in play since the last major downturn of the late 1990s. While there was a sharp increase in all measures in the immediate period of the GFC, the outcomes for young people have continued to deteriorate up until late 2014 and have yet to return to pre-GFC levels. This is despite an improvement in aggregate labor market figures over the same time. Moreover, the post GFC period has seen underemployment taking a larger share of the total underutilization rate than had previously been the case. In terms of magnitudes, the headline unemployment rate moved from 8.9% prior to the GFC to peak at 14.1% in November 2014, while underemployment moved from 11.6% to 17.3% over the same period. The combined underutilization rate moved from 20.5 per cent prior to the GFC, to a high of 31 per cent at the end of 2014 before declining to the current (Feb 2019) level of 28 per cent (figure 1).

Figure 1.

Youth unemployment, underemployment and underutilization, Australia, 2007-2019 (trend data) Source: Australian Bureau of Statistics, Labor Force Australia, cat no. 6202.0


Key Terms in this Chapter

Labor Underutilization: The state of employment disadvantage associated with either unemployment, under-employment or marginal labor force attachment.

Labor Supply Factors: Factors such as an individual’s education, health, sex, ethnic background or age that impact on the supply of labor.

Marginal Labor Force Attachment: The characterization of a person who is not working and not actively looking for work but would take a job if one became available.

Labor Demand Factors: Factors such as the strength of local labor markets or firms hiring practices that impact on the demand for labor.

Underemployment: The characterization of a person who is working but employed part time and wanting more hours (underemployed by hours) or a worker who is not making full use of their skills and abilities (underemployment by skills).

Employment Scarring: The long-term social and economic impact of a period of joblessness on an individual.

Social Capital: Networks of relationships among people who live in a society.

Unemployment: The characterization of a person who is not working, bout is actively looking for work. Does not include people who are characterized as marginally attached.

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