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Youth Labour market outcomes after the Recession

The last Household Labour Force Survey (HLFS) investigation report1 on youth (those aged 15-24 years), released in April 2010, looked at the impact of the recent recession on young people.

The report noted that youth are more vulnerable during downturns in the labour market as they are more likely to face job losses compared to adult workers (those aged 25 years and older). This is due to their lower level of experience and skills compared to older workers and also because they are often over-represented in industries2 that are heavily affected during recessions.

This report looks at whether there has been any change in the labour market outcomes for youth from December 2009 (i.e. end of recession, beginning of recovery period) to March 2011.

The impact of the Christchurch earthquake in February on young people is not captured in the data used in this report.

Key points

  • There have been some positive developments for youth as the labour market has slowly improved since December 2009.
  • The youth unemployment rate in the March 2011 quarter was four times the adult unemployment rate, but it dropped by 1.2 percentage points since December 2009.
  • The proportion of youth who are not in employment, education or training (NEET) has decreased between December 2009 and March 2011 with improving labour market conditions.
  • There is evidence to suggest that young people, in particular those aged 16-17 years, are opting to stay in school or remain engaged in study.

Why are youth unemployment rates higher than those for adults?

Since the downturn, youth suffered a larger rise in unemployment than adults (see Figure 1). The youth unemployment rate in the March 2011 quarter was four times the adult unemployment rate. The higher unemployment rate for youths compared to adults is an observation that is true across all OECD countries. This is true regardless of whether the economy is performing well or poorly.

There are a number of key reasons as to why youth experience higher unemployment than adults. They include:

  • Youth have less experience and fewer skills, making them less likely to be hired and more likely to be laid off than adult workers. Many young people will not have completed or entered further education, making it difficult to compete against older workers.
  • Many youth who enter the work force for the first time are also likely to engage in a certain amount of “shopping around”, meaning they might wait longer to find work that suits their requirements and tastes.
  • Youth often lack in both labour market information and job search expertise. In contrast, adults find it easier to find work through previous employers, references and colleagues.

Figure 1: Youth and adult unemployment rate in New Zealand, March 1991-March 2011

Figure 1: Youth and adult unemployment rate in New Zealand, March 1991-March 2011.

Data table for Figure 1

Youth unemployment

Youth have been heavily affected by the recession. The youth unemployment rate increased from 9.2% in the December 2007 quarter (immediately before the recession) to 19.0% in the December 2009 quarter (when it was at its peak during the downturn). Some young people who lost their jobs during the downturn have continued to look for work, causing the youth unemployment rate to increase during this period.

Over the past year, youth labour market outcomes have begun to improve in line with the recovery in the overall labour market. The youth unemployment rate fell from 19.0% in the December 2009 quarter to 17.8% in the March 2011 quarter while the number of youth in employment grew by 8,500 during the same period. This is an indication of a positive turnaround for youth during the recovery period.

Others have decided to leave the labour force altogether, with many of these youth returning to study. The number of young people who are not in the labour force grew by 8,200 between December 2009 and March 2011.

Youth unemployment by age group

The unemployment rate for youth differs by age group. Those aged 16-17 years are more likely to be unemployed than older youths (18-19 and 20-24 year olds).

Figure 2: Youth unemployment rate by age group, March 2001-March 2010

Figure 2: Youth unemployment rate by age group, March 2001-March 2010.

Data table for Figure 2

Figure 2 shows that the unemployment rate for 16-173 year olds had the sharpest increase since the downturn. The unemployment rate for this age has increased by about 4 percentage points between December 2009 and March 2011. This has been driven by those who left school but were unable to find work. On the other hand, there has been a drop in the unemployment rates for 18-19 and 20-24 year olds.

Youth not in employment, education or training (NEET)

Youth who are not in employment4, education or training (NEET) are not engaged in learning (formal and informal5) or work. Youth who are NEET are seen to be most at risk of poor labour market outcomes.

Figure 3 shows that the NEET rate for youth has increased from 7.3% in the December 2007 quarter to 12.2% in the December 2009 quarter. The increase in the youth NEET rate is due to the recession and can be attributed mostly to the large drop in employment during that period. However, by the March 2011 quarter, the NEET rate had dropped to 9.9% which is an indication that more young people are choosing to stay in school or to remain engaged in study.

Figure 3: Youth NEET rates by age group, March 2004-March 2011

Figure 3: Youth NEET rates by age group, March 2004-March 2011.

Data table for Figure 3

NEET by age group

The recession led to a rise in NEET rates for all youth age groups but this trend has started declining since December 2009 with improving labour market conditions (see Figure 3).

Youth in the 16-17 age group tend to have the lowest NEET rates compared to other age groups as the majority are still in school. On the other hand, youth in the 18-19 age group tend to have the highest NEET rates as this is a transition age where youth are either waiting for tertiary courses to start, or are entering the labour force for first time.

Figure 3 also shows that the NEET rates for 16-17 and 18-19 year olds increased in the March 2011 quarter when compared to the December 2010 quarter. The NEET rates for the 16-17 age group rose from 7.2% in the December 2010 quarter to 8.2% in the March 2011 quarter. This growth is probably driven by a number of those who left school and were unable to find work around this time. The NEET rates for 18-19 year olds grew from 12.7% in the December 2010 quarter to 15.7% in the March 2011 quarter.

Unlike in the younger age groups, the percentage of 20-24 year olds who are NEET dropped from 11.4% in the December 2010 quarter to 10.6% in the March 2011 quarter. Youth within this age group have the lowest unemployment rate which could explain the decline in the NEET rates for this group.

There has been a rise in youth who are not in employment but are engaged in study

Overall, the proportion of young people who are not employed but are engaged in study6 has increased since the downturn. Youth engagement in study rose from 34.2% in the December 2009 quarter to 36.4% in the March 2011 quarter.

Figure 4 shows a sharp increase in the proportion of 16-17 year olds who are engaged in study since the downturn. The proportion rose by about 8 percentage points which shows that more youths in this age group are choosing to remain in school than go into employment due to the fact that it is harder for them to find jobs.

Growth for 18-19 and 20-24 year olds was more stable, rising only by less than one percentage point since the December 2009 quarter.

Figure 4: Youth who are not in employment but engaged in study by age group, December 2004-March 2011

Figure 4: Youth who are not in employment but engaged in study by age group, December 2004-March 2011.

Data table for Figure 4


Endnotes

1 Link to report: www.dol.govt.nz/publications/lmr/hlfs-investigation-reports/recession-impact/index.asp

2 These industries were Hospitality, Retail trade, Communication services and Construction based on the December 2009 quarter HLFS data.

3 15 year olds were excluded as the majority are still at school and not working.

4 This includes youth who are unemployed and not in the labour force.

5 Informal learning is study that is not undertaken full-time.

6 The total number of youth engaged in study is calculated by adding together those engaged in formal study, informal study and student still in school.