IR reforms could improve employment opportunities for young Australians

Almost eight years after the 2008 financial crisis, young Australians still face a significantly tougher job market than before the crisis. To illustrate, the employment-to-population ratio for young Australians aged 15 to 24 remains well below rates experienced prior to the crisis (see figure below based on the latest ABS Labour Force data released last Thursday). The crisis and resulting loss in business confidence saw a sharp fall in the employment-to-population ratio for young people over 2008-09, and after that it continued to decline (more gradually) before starting to recover over the last 1-2 years. It is arguable that industrial relations changes, particularly the introduction of the 2009 Fair Work Act, have constrained employment opportunities for young people to some extent in the post-financial crisis years.

empl_pop_ratio_15_24_Jun16

On 612 ABC Brisbane last Tuesday morning, in an excellent interview regarding Queensland’s high rates of youth unemployment in many regions, CCIQ’s Director of Advocacy Nick Behrens highlighted several ways that IR rules are constraining employment growth. For example, Nick noted that minimum engagement periods (e.g. an employee must be given a shift of three hours at least) are too long, and this rules out some employment opportunities, such as two hours of employment after-school for a young person. Hence, Nick recommends lowering the minimum engagement period. Also, Nick advocates reinstating junior rates of pay for twenty-year old retail workers and adopting the Productivity Commission’s recent recommendations regarding penalty rates. Finally, Nick is concerned about recent increases in first and second year apprentice pay rates that have made them unaffordable to some employers.

IR changes along the lines recommended by CCIQ would no doubt be unpopular with many, particularly with current workers who would lose out, but changes such as those recommended should be considered if we are genuine about improving employment opportunities for young Australians.

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4 Responses to IR reforms could improve employment opportunities for young Australians

  1. Alistair Robson says:

    It would be very interesting to see the change in hours worked by this age cohort. I suspect many of these people would be casual. It’s easier to reduce hours for casual shift staff than full time workers but keep them employed for at least one hour a week (the definition of “employed”). This would make the employment to population ratio a less reasonable insight into how the labour market is affecting people and their pay packets. It would be interesting to see any academic research on the relationship between the two. Beyond that I suspect there is a lot of reform fatigue in Australia and overseas nowadays. It may take a “crises” to get the reforms you recommend.

    • Gene Tunny says:

      Good suggestion to look at hours worked. Thanks, Alistair.

    • Jim says:

      I suspect there is a role for modifying industrial relations and the current data (as presented) doesn’t really tell the whole story.

      Alistair. I acknowledge your comment about “reform fatigue”, but I suspect any “fatigue” is more a function of the endless talk about potential reform (most of it very incremental) than “fatigue” from any genuine reform implementation. The last major economic reform implemented by the Government was probably the GST (about 15? years ago), and I’m not sure we have had a really major labour market reform in the current millennium. Perhaps the national electricity market could be considered as a major reform, but its influence on consumer welfare and industry productivity is probably pretty negligible (at best).

      • Alistair Robson says:

        The reform “fatigue” I’m referring to is an international phenomenon. It is particularly evident in recent UK and USA (and Australian I suspect) elections. Over time the number of people who have FELT “left out” from the benefits of these reforms has grown to now a sizeable number. This is more than endless talk about potential reform from our politicians and is having significant political impacts. I suspect much of this is about increasing uncertainty as jobs have been lost through free trade agreements, fewer product market regulations (such as price controls for dairy as an example), and seemingly less bargaining power over wages (previous labour market regulations). In Australia the labour market has been deregulated over the past few decades, manufacturing jobs have gone overseas, and people seem to feel far less certain and in control about their lives. Whether any of this is actually true or not doesn’t really matter, people do feel this impacts and are fatigued by all these changes. Our connections to politicians have felt even more distant as local governments in many states have morphed into regional governments and we seem to think our opinions no longer are valued by politicians. As an economist I agree in theory reform provides many positives to society, but I suspect politically economic reform will get harder. This is an international phenomenon which doesn’t seem to be going away any time soon.

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