The job crisis for young New Zealanders

What is our youth unemployment rate? And what will it take to get more of our young people into work?

Looking for work: Shannon Lee Johnson, photo/David White

After three years of being unable to find a suitable job, graduate Cameron Grant began to ask himself whether it was worth hanging onto his dream of working in the website industry. He had a fine arts degree, is creative and passionate about his career choice and has well-developed skills, but he constantly found employers were not interested in people without experience.

“I just couldn’t get a break, I couldn’t get anyone to take a risk on me.” He tried offering himself as an intern. “For the right person I would definitely have worked for nothing, because what I needed right then was some industry experience and some contacts, but I couldn’t even get that,” says Grant.

The now 29-year-old Wellingtonian admits there were moments when he wondered whether he was doing the right thing. “There I was in my late twenties feeling like a complete loser, still staying with my dad, with no money at all, painting houses three days a week and doing websites for $300 that would take me 12 weeks to make. It crosses your mind – ‘what’s wrong with me? Is there something about my personality?’ When I saw everyone walking to work and I was walking home to go to my bedroom I would think ‘why does everyone have a job except me?’”

For Grant, the career break came when, mostly to keep up his own morale, he rented office space to work on his own digital projects, where other people were doing similar work. One contact led to another, and now he’s employed full-time on an e-commerce plug-in. He now feels confident that with his career established he will be okay, but thinks we need to make it much easier to cross the bridge from qualification to employment.

The problem of youth unemployment has gained worldwide attention as stalled economies shed jobs. The International Labour Organisation warned this week about the growing risk of social unrest – a threat that seems all too real in such cities as London, Rome and Athens, which have recently had riots. Social instability is also sweeping through the Middle East – another region with high youth unemployment.

“Increased crime rates in some countries, increased drug use, moving back home with parents, depression – all of these are common consequences for a generation of youth that, at best, has become disheartened for the future and, at worst, has become angry and violent,” the ILO said. In the UK, youth unemployment is nearing one million, although some employers note when they advertise unskilled jobs, they sometimes get no British applicants, only people from other European Union countries.

Recently, the Guardian quoted Nigel Meager, director of the Institute for Employment Studies, as saying the economy had changed in the past 20 years. “There are fewer jobs for people with no qualifications. Jobs that used to go to people with school-leaving qualifications are now going to graduates.” Meager said the long-term unemployed could be scarred professionally and psycho­logically. “A year of unemployment in early adulthood has a much bigger effect on your career prospects and earnings than a year out of work at 30 or 40. If I have been previously employed, I know that my skills have previously been valued. If I’ve never been employed, I have no psychological material to draw upon.”

These concerns are echoed here. In August, think tank the New Zealand Institute released a paper called “More Ladders, Fewer Snakes: Two Proposals to Reduce Youth Disadvantage”. In that report, the institute said, “Disengaged, inactive youth are at greater risk of lower earnings, needing social assistance, criminal offending, substance abuse, teenage births, suicide, homelessness, and mental or physical ill health.”

So, what’s the situation with youth unemployment in New Zealand? Because unemployment can be measured in various ways, the statistics can be misleading and often capture only part of the picture. For example, Grant’s situation – being a graduate unable to find work in his preferred field – is not uncommon, but the exact extent of underemployment, where people do jobs for which they are overqualified, is impossible to quantify. University graduates working in retail or labouring jobs, which are sometimes low paid, with unsociable hours and little job security, do not, of course, show up in unemployment figures.

However, the New Zealand Institute’s August paper caused a flurry of concern when it was released, partly because it noted that “45% of New Zealand’s total unemployed are youth, meaning our youth have the highest share of unemployment of any youth population in the OECD”. In particular, the paper noted, the youth unemployment problem was concentrated among 15- to 19-year-olds.

These statistics are worrying, but they are often misquoted, making the problem seem worse than it is. Although a large percentage of the unemployed are young people, the overall unemployment rate is 6.5%, which is not especially high historically or internationally. But that is often not the impression the public gets. Just last week, Owen Glenn, writing in the New Zealand Herald, said, “New Zealand has the highest rate of youth unemployment in the OECD.” That same weekend, Rod Oram in the Sunday Star-Times made the same mistake, saying, “We now have the highest youth unemployment rate among developed countries.”

In fact, New Zealand’s actual rate of unemployment among those aged 15-24 is 17.4%, according to the Department of Labour’s figures for April-June, and nowhere near the highest among the OECD. The OECD records New Zealand’s youth unemployment rate for 2010 at 17.1%, a long way from Spain’s 41.6%, Greece’s 32.9%, Ireland’s 28.7% or Italy’s 27.9%. For the youngest cohort, those aged 15-19 only, New Zealand’s unemployment rate is 24.6%, with Spain on 61.4%, Italy 45.6%, Greece 39% and Sweden 36.2%.

The situation is not completely bleak. Social Development Minister Paula Bennett points out “there are around 55,000 16-year-olds and around 65,000 17-year-olds in New Zealand. By our reckoning, about 100,000 are pretty much fine. They’re going to go to school, get some form of qualification, they know what they will do when they leave school or their parents are edging them along and they will be all right.

“But we’ve got approximately 10,000 or more Neets – not in education, employment or training – and they are a real, real concern for the country. Ninety per cent of them will go onto the benefit when they turn 18. They are the ones most likely to be out of work and spend long periods of their lives on welfare.”

She also points out there have already been some wins in youth unemployment. According to the Department of Labour, New Zealand’s Neet rate (the proportion of 15- to 24-year-olds not in employment, education or training) was at 9.8% in the April-June quarter, down from 10.7% a year ago, despite the generally subdued employment market.

And even if some of the drop is explained by young people staying on at school because they cannot find a job, their attendance at school may be to their advantage. The New Zealand Institute says despite generally good educational statistics in New Zealand, 26% of 15- to 19-year-olds in New Zealand were not in full- or part-time study in 2008, compared with 18% in OECD countries.

Job seeker Vaughan Flavell, photo/David White

“According to the Ministry of Education, ‘more of our 14- to 18-year-olds have disengaged from the education system than in many other comparable countries’. Having a higher proportion of students disengaged leads to lower retention at school and to New Zealand having the lowest median leaving age from initial education in the OECD. By age 16 an estimated 36% of students are reported to be usually or always bored, 29% rarely or only occasionally enjoy learning, and one-quarter want to leave school as soon they can, or already have,” the institute said.

“‘Boredom’ might be an oversimplification,” says institute director Rick Boven. “I think it’s probably more complicated than that. It’s sort of alienation and giving up. There’s a whole lot of stuff going on, and I think boredom is an unfortunate shorthand, because it suggests that all you need to do is make it more interesting.” Boven argues the drop-out rate is not the fault of schools, because the transition to work is not part of their responsibility, although he argues it should be.

“My father’s generation talks about people who were disengaged in education and at 15 would leave school and take on a trade,” says Labour employment spokeswoman Jacinda Ardern. “Now our expectation is that people stay in school, but we haven’t transitioned to making sure that those young people who would have moved into those industries are still being catered for within that schooling environment. If we do that, there should be fewer reasons why these kids become disengaged.” She says part of Labour’s policy will be to try to make the transition from school much smoother and clearer.

“If you’re going to go on to tertiary education it’s pretty obvious what you do, but if you’re not going to do that, the pathways are pretty ad hoc and not at all clear. The Gateway policy is about putting young people into industry when they’re still at school and giving them some on-the-job training and experience with employers. It has proven to be really effective and we want to target more vulnerable young people through that programme. But then we haven’t really got a robust system to ensure that when a young person is transitioning out of school that we are giving them the assistance and guidance that they need.”

She said the previous Labour Government set up a Youth Transition Service but it is not in place for the whole country and sometimes the service struggles to know whom it should be working with. “Labour’s policy is to extend the Gateway programme throughout New Zealand so we pick them up at the school gate, rather than at the Winz door.”

National has also announced comprehensive election policies aimed at reducing youth unemployment, focusing in particular on the transition to work. Bennett says there will be a law change so that schools have to advise the Ministry of Social Development when young students quit school. She says this is part of a policy specifically targeting the most disadvantaged of the young unemployed. National’s plan is to pay organisations, on a success-fee basis, to get these young people skills, training and ultimately employment. Bennett knows it won’t necessarily be straightforward.

“Some are transient, street-smart. They change cellphones every three months and keeping contact with them is difficult. Many of them have only ever known a home dependent on welfare. Their ambition and their connection with work and with society in general are pretty limited. It’s complex – it takes someone attaching to them over a relatively long period of time and sticking with them as they get into jobs that mean something to them, preferably with some up-skilling as well, and as they find mentors in the workplace.”

It can be done, she says. “In January last year I had 23,600 on the unemployment benefit aged under 24. Now it’s about 15,000, so in the last 18 months we’ve managed to get that many off benefits, so there is work for them. Attitude counts a lot. It’s a combination of giving them hope and a change in attitude on their part in some of them, much better follow-through and someone working beside those who have the most complex problems.”

The New Zealand Institute’s Boven says people also need to be realistic about how hard it can be. “One of the issues in finding a way back for these kids is that they actually don’t know about work. In Denmark they require all young unemployed to turn up at the Job Centre every day. And one of the reasons they do that is to get them used to getting out of bed and going somewhere, because they’ve had so little structure in their lives that it becomes an issue.

“You make a good introduction [to an employer] and everybody’s got goodwill, but many of these young people have not been socialised sufficiently to know how to behave properly. Unless the employer is pretty patient and understanding, it turns to grief and how does the kid feel then and what do they do next?”

Although there are still worker shortages in New Zealand – the dairy and horticultural industries bring in labour because they cannot find New Zealanders willing to do the work – both main political parties have wage subsidies on the agenda. In particular, the subsidies are aimed at encouraging employers to take on young people.

On top of 90-day trials, National has announced a starting-out wage, which Prime Minister John Key says “will give some of our youngest and most inexperienced workers a much-needed foot in the door”. The starting-out wage will be set at 80% of the adult minimum wage and those eligible will be:

• 16- and 17-year-olds in their first six months of work with a new employer;
• 18- and 19-year-olds entering the workforce after more than six months on a designated benefit; and
• 16- to 19-year-old workers training in a recognised industry course involving at least 40 credits a year.

The Government’s Job Ops scheme already provides a subsidy of $5000 towards the wages of a young person coming off a benefit if an employer keeps this person on in a new job for at least six months. “We’ve found that 92% of those who have gone through it have not gone back onto a benefit and it’s been hugely successful,” says Bennett.

Seeking work: Sarah Jones, photo/David White

Labour is proposing a similar scheme with a subsidy of $8727 – equivalent to the unemployment benefit – for an employer giving an apprenticeship to a person under 20 who is on the dole. Labour says it will also “explore options” to include the use of group apprenticeships for small businesses.

Both major parties are promising more subsidised training places. In Labour’s case, this will include 1000 with a “Maori mentoring element” and 1000 with a “Pasifika mentoring element”. The Government has also been focusing on improving the quality of training programmes, Bennett says. “TOPS [Training Opportunities Programmes] provides about $85 million worth of training, predominantly for young people, but the Ministry of Social Development took about 40% of it a year ago because we thought we could get much better outcomes.

“It’s a huge spend and in many cases we were seeing young people just churning through fairly low-quality training programmes, so we’re putting real effort into getting that stuff right.” Training must be useful, particularly where students are accruing student loans. The Industry Training Federation, the umbrella group for industry training organisations, said this week it too is working on ways to “lift performance and continue to deliver value to taxpayers”.

“As well, industry training organisations are working to ensure the success of the Vocational Pathways initiative, which redefines how the NCEA system can be used so that school leavers are better placed for industry-related further study or work,” Industry Training Federation chairman Ian Elliot said.

Of course, policy changes can have unintended consequences. Take the increase in the youth minimum wage to the same as the adult minimum in 2008. A Department of Labour report in August revealed that this, combined with a 75% increase in the adult minimum wage at the same time, caused about 20-40% of the drop in the proportion of 16- to 17-year-olds in employment by 2010.

Although most of the election policies are aimed at youth in need of more training or support, Cameron Grant’s bruising experience is a reminder that even young graduates with degrees are struggling in the current job market. He thinks a lot more should be done to introduce school leavers to those realities before they choose their tertiary study courses.

“I knew my fine arts degree wouldn’t be the most employment-friendly degree, but I had no idea just how unfriendly it would be. I think it’s important to learn about stuff that’s not directly job-related, but the thought certainly crosses my mind that if I’d done a computer science degree I would now be five or six years ahead in my career.

“I still see endless young people studying BAs, fine arts, fashion, design, computer animation and motion graphics. Now there are jobs in these areas, but only a fraction. I think many people studying in these areas would not be doing so if they were better informed about the economy and job market.”

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