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Employers' Perspectives - Part Three: Youth and the Long-term Unemployed

Youth and the long-term unemployed  cover image.

Introduction

This research study assesses employment of two groups: youth and the long-term unemployed.

Youth who become disengaged from the labour market and do not engage in education or training are referred to as NEET (not in employment, education or training). The proportion of youth in this category increased during the recession and has remained elevated since.  In June 2008, New Zealand’s NEET rate for youth (aged 15–24) was 10.6 percent, this increased to 13.7 percent in 2010, before falling to 13.1 percent in 2012. This report discusses barriers faced by youth in obtaining employment and looks at initiatives to address these so that policies targeting this rate are better informed.

For the purposes of this report, the long-term unemployed are defined as those who have been unemployed but seeking employment for six months or longer.  Employers were given this definition at the start of the interview to ensure consistency of meaning. 29 percent of unemployed people have been unemployed for six months or more; this proportion increased slightly over the recessionary period. Understanding the barriers faced by the long-term unemployed and the potential policies that employers see as improving the likelihood of hiring this group is an integral part of improving these figures.

The research involved analysis of data collected from two main sources: quantitative data from the 2011 National Survey of Employers (NSE), with a sample of nearly 2,000 employers, and qualitative data from interviews with 53 employers in Hawke’s Bay, Auckland, Dunedin/Invercargill and Wellington.

Key findings

Barriers for youth

There are five key barriers that affect employers’ hiring of youth applicants and make them more likely to hire an older applicant, particularly in a time when overall unemployment is growing:

Barriers for the long-term unemployed

There are four key barriers that employers report affect their hiring of the long-term unemployed applicants:

A focus on training and education

When employers discussed potential initiatives that would influence their likelihood to hire youth or the long-term unemployed, nearly all focused on education or skills.  Employers were clear that they were looking to employ staff who possessed the necessary skills for the job, and would be willing to pay above the adult minimum rate if this would attract higher quality candidates.

Initiatives like the Youth Guarantee scheme[1] are consistent with what employers are looking for from the Government to improve their likelihood of hiring youth applicants.  Training subsidies for the long-term unemployed, such as the Job Streams initiative[2] for Work and Income clients, also appear to be in line with suggestions from employers for improving the chances of the long-term unemployed. 

Employers were clear that they were looking to employ staff with the right skills for the job. These included appropriate qualifications and training, and ‘soft’ skills like attitude, work ethic, communication and team work. These skills are highly sought after and employers are willing to pay above the minimum wage in order to attract quality applicants, rather than risk hiring someone without them.

Sub-minimum wages

There were a small number of employers who suggested reintroducing youth minimum wage could improve their likelihood of employing 16 and 17 year olds.  This is in contrast to the low level of interest reported by employers in the new entrants’ minimum wage (2 percent in the 2011 National Survey of Employers).  The majority of employers in the qualitative interviews had little or no awareness of the new entrants’ minimum wage, and of those that were aware, very few had used the sub-minimum rate. 

The lack of interest was in part due to the complexity of the criteria for using the new entrants’ minimum wage and the relatively small saving the reduced wage gave, as well as the belief by some employers that it was not fair to pay one staff member less money for the same job based on age and that the calibre of applicants would be lower if the pay rate was lower.  Reducing the complexity of a sub-minimum wage rate may increase the uptake of the rate for those employers who are not using the new entrants’ minimum wage based on the complexity issue alone.  However, for employers who believe a lower wage rate is unfair, or that they would not attract a high calibre of applicants if offering a lower rate, a focus on training and education is more likely to improve employment opportunities in these workplaces.

 


Related reports on employers’ perspectives


[1] See more information on the Youth Guarantee scheme

[2] See more information on Job Streams.