Kushlan Sugathapala: Youth unemployment is not an economic solution

New Zealand has an unemployment rate of 17 per cent for teenagers, dropping to 6 per cent for those aged 20-24 years as they acquire skills and find jobs. Photo / Warren Buckland

OPINION

“Unfortunately, very few governments think about youth unemployment when drawing up their national plans,” said Kofi Annan, former United Nations Secretary-General.

The young unemployed are an easy punching bag for many right-wing politicians and commentators. However, the story of youngsters lying on couches, on PlayStations, and swilling beer is more myth than fact.

If living on the minimum wage is stressful, it’s magical thinking to imagine many enjoy being out of work, living on a Jobseeker Benefit of one-third of the minimum wage. Over 25 per cent of suicides are from unemployed, who comprise less than 4 per cent of the working-age population.

Our economic system differs vastly from pre-Rogernomics, when unemployment was near zero for 40 years until 1976. In 1959, we had all of five people claiming the unemployment benefit. Rob Muldoon once deadpanned he knew every single unemployed person.

Ironically, the same politicians who destroyed that system now castigate the unemployed.

Illustration / Daron Parton

Economics professor Tim Hazledine writes that the economy now needs an army of unemployed to function. And it seems, increasingly, an army of immigrants.

Although the Reserve Bank (RBNZ) has a dual mandate of inflation and employment, its priorities are clear when it wants to kill inflation by “engineering a recession” and throwing tens of thousands out of work. Or when it bleats “above maximum sustainable employment” whenever unemployment goes below 4 per cent.

Economists such as Stephanie Kelton, who advocate for full employment, argue there will be no inflation if goods and services the society needs are produced. We have our experience of running less than 1 per cent unemployment for 40 years.

Many employers will tell you they get applicants but not the skills they need; hence the hue and cry to relax immigration with 100,000 still unemployed.

It was a different story when the Government extended work and working holiday visas and gave prior warning of an immigration reset, saying that we needed to be more resilient. The fervent promises they would take the grace period to train our own were long forgotten.

Over 90 per cent of jobs advertised are for applicants with experience.

Not many want to bear the cost of training the young unskilled, thus the 60 per cent increase in apprenticeships once the Government subsidised them. It’s blindingly obvious that when you are young with few qualifications, it’s harder to find work - which is why we have an unemployment rate of 17 per cent for teenagers, which comes down to 6 per cent for youth (20-24 years) as they acquire skills and find jobs.

Māori and Pasifika unemployment is usually double the overall. Teenage under-employment is a staggering 37 per cent; these youngsters are already off the couch and crying out for extra hours.

The Ministry of Social Development (MSD) focuses its Intensive Case Management (ICM) more on the harder-to-move long-term unemployed and those with “complex needs” than the newly unemployed. It talks about the “staircase” of unemployment, those with physical and mental health, housing needs etc on the bottom stairs. On the top stairs are people who only require job training, assistance with preparing CVs, job search skills, etc, and can move quickly into employment.

The MSD ran a successful ICM trial from 2015 to 2017 and now has over 100 internal intensive case managers and several community providers contracted for ICM.

Large employers such as Downers and Fletchers help MSD place the unemployed (industries like construction are more suited to some unemployed, and recessions in these sectors impact young jobseekers more). It’s uncertain how much they use government departments and SOEs, who are more likely to take a long-term view and a national interest in their employment policies.

Countries like Germany and Japan have low youth unemployment as their employers look for long-term relationships and are willing to invest in apprenticeships. Germany also starts trades training in schools.

Kushlan Sugathapala.

We need more immigrants also due to the disconnect between our universities and workforce needs. Many of our brightest head to Australia as they can’t get into our medical and dental schools or find studying too expensive, leading to shortages of nurses, teachers, etc.

The Green Party’s Minimum Income Guarantee for students would help immensely to increase our workforce in the skills the countries sorely needs, and would increase equity.

The National Party’s proposal to focus intensive support on youth (18-24 years old) once they hit three months of unemployment has merit - to move quickly before demotivation, depression, and other issues kick in.

However, the focus must be on providing opportunities than punishment.

We can start at 15 years, as teen unemployment is the highest of all age groups.

So does Peter McCardle’s “community wage, to change the unemployment benefit from a payment for doing nothing to effectively, a contract payment to a jobseeker... for... 20 hours of work or training. The unemployed had to be kept active” - as long as they got at least a trainee wage and all efforts were made to find meaningful work and skills the country needed.

We can and must reduce unemployment, and there are many options, but this requires a mindset change from the RBNZ, the employers, educators, the MSD and the politicians to get on board.

- Kushlan Sugathapala is a researcher and writer on social justice issues.