Kushlan Sugathapala: Youth unemployment - support or sanction?

New Zealand's labour shortages are evidence that jobs exist but just not for our young and inexperienced unemployed. Photo / Eric Herchaft, Getty images, File

OPINION

National’s Louise Upston, in launching its “Welfare that Works” policy to tackle youth unemployment, asked some searching questions.

If this Government can’t help people off benefits and into work now, then when will they ever be able to; and why has [the] Government allowed 50,000 more New Zealanders to become dependent on the Jobseeker benefit?

So why are many young people kicking their heels at home? Why has this worsened in the past five years, and will National’s sanctions-heavy proposal work?

Jobseeker Work Ready (WR) beneficiary numbers (excluding those unable to work immediately due to disability) increased by 17,000 from mid-2018 to December 2019 and spiked another 52,000 in 2020 (peak pandemic); trending down by 36,000 since.

The five-year increase is 33,000, and 13,000 youth jobseekers are more than one year on the benefit. The age group with the highest unemployment rate is teens between 15-19 years old; 16 per cent in the December quarter (almost five times the overall rate of 3.4 per cent). This reduces to 5.7 per cent for 20-24 years.

Illustration / Daron Parton

The trend is the same for underemployment, a staggering 42 per cent for teenagers. These are young people, already at work, crying out for more hours.

It’s evident that school-leavers with lower levels of education and no work experience find it harder and take longer to find employment, but get absorbed over time.

The problem is a lack of opportunities, not a desire to sleep on couches.

Māori and Pasifika unemployment rates are double the overall rate, probably due to lower education levels. The current labour shortages show jobs are there, but not for our young inexperienced unemployed. It’s easier to hire skilled staff from overseas instead of training our young and paying for costly apprenticeships.

The unemployment rates among higher age groups (30-64 years) are consistently below 2.5 per cent, with no discernible effect on wage inflation or employee shortages. This suggests that the economy can sustain a much lower unemployment rate.

Our problem is a lack of skilled staff, not a lack of bodies. It’s obvious that the faster we can skill our youth, the lower their unemployment.

National contends that a dramatic drop in sanctions during Labour’s time in government is the primary cause for the rise in Jobseeker beneficiaries (kindness doctrine). Sanction numbers dropped markedly during 2018/2019, and Jobseeker beneficiary numbers increased.

The Ministry of Social Development (MSD) says a significant reason for this increase was a downturn in the manufacturing and construction industries in 2018.

It is also likely that more are signing up for the benefit due to rising costs, especially housing.

Jobseeker beneficiary (WR) numbers now track closer to the unemployed numbers of NZ Stats. Sanctions were discontinued during the peak Covid period and now run at around 50 per cent of pre-Covid levels.

Will the National Party’s proposal work? It seeks to focus on the young as soon as possible, proposing to start after three months of unemployment.

National prefers contracting external nonprofits and iwi, instead of MSD internal and external intensive case managers (ICMs), who focus on the long-term unemployed, not the young.

MSD trialled using ICMs for early entrants to unemployment and scrapped it as less successful. It is debatable whether the drop in sanctions was a significant reason for the increase in Jobseeker beneficiaries; irrespective, they remain an essential part of the programme.

What’s missing from National’s proposal and the best tool for helping the young is apprenticeships. Germany has one of the lowest levels of youth unemployment in the OECD and the most extensive apprentice programme globally. Vocational training is encouraged while still at school. There is strong support from employers who view apprenticeships as a vital recruitment tool and build long-term relationships.

Kushlan Sugathapala. Photo / Supplied

Youth unemployment in Germany was 5.8 per cent for 15-24 years as of December 2022; more importantly, there was little difference between teen (15-19 years old) and older youth (20-24 years).

Germany’s problem is the opposite of ours. Currently, the number of young people applying for apprenticeships is significantly lower than the national target and requirements. This is partly due to more opting for university education.

The NZ Apprenticeship Boost Scheme, which subsidises employers, significantly increased apprenticeships from 53,000 in 2019 to 78,000 in 2021 (46 per cent).

The scheme, which supported employers with a subsidy of $1000 per month ($500 effective August 2022) for 24 months, expires in December. Its cost was $292 million for 2021/22; a rough estimate of expenditure at the current rate would be $150m annually.

MSD assists long-term unemployed into work with funding to get suitable clothing, tools etc. Relocation grants to help with moving. This is something to consider for the youth (rather than the $1000 incentive after 12 months proposed by the National). MSD also places many unemployed with large employers like Fletchers and Downers but doesn’t track statistics. Nor how much they use public sector employers, who presumably will be more supportive.

Will National (or Labour) continue the Apprenticeship Boost scheme? National is right; we need to do better to get our young into employment quicker.

However, the answer may be providing more opportunities and training rather than sanctions. Cyclone recovery is an opportunity but only if we provide the young with skills to contribute.

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