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Getting young people into work

By David Leyonhjelm - posted Monday, 8 August 2016


Youth unemployment is one of the great tragedies of our time. Young people emerge from study in the expectation of becoming self-reliant, only to have their aspirations thwarted and to face continuing reliance on others.

There is obviously a cost to the economy, but even more important is the adverse impact on both future earnings and self-worth.

At close to 13%, Australia's official youth unemployment rate is more than double the overall rate. In some areas it is many times this. There are also large numbers of young people who are underemployed in casual and part-time jobs. And whenever there is a downturn, they lose their jobs first.

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This problem is not unique to Australia. Indeed, in quite a few developed countries it is far worse. For example, youth unemployment is over 40% in Greece and Spain, and over 20% in Italy, France, Belgium, Finland and Sweden.

On the other hand, it is just 2.5% in Thailand, about 5% in Japan and 7% in Germany. The difference is not simply attributable to good luck.

In Australia it is perfectly legal to work for nothing. Indeed, voluntary work is actively encouraged by the government and there are tens of thousands of Australians who provide their time and labour in the service of others for no reward.

It is also legal to do nothing and be paid. The government provides unemployment benefits equivalent to $5.70 an hour to those 21 and under who are looking for work, and $7 an hour to those over 21.

However, when it comes to paid work, it is illegal to work and be paid less than the minimum wage. This is $12.10 at18, $14.60 at 19, $17.30 at 20 and $17.70 if 21 or older. For casuals, it's over $22.

The key difference between countries with high and low youth unemployment is the focus of their labour laws. In Australia and others like it, the priority is on those who have a job and their conditions of employment. In countries where youth unemployment is low, the priority is on getting those who do not have a job into work.

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Labor senators, all of whom are union-affiliated, regularly claim any reduction in the minimum wage would undermine the living standards of working people. In their view, allowing anyone to work for less would inevitably flow on to those who had a job, dragging down their wages. Apart from the adequacy of unemployment benefits, I rarely hear them express concern for those who do not have a job.

The argument in favour of reducing minimum wages is rarely heard from the other side of the chamber. And as for the government as a whole, all it does is appear at Fair Work Commission hearings to argue for modest increases in the minimum wage.

The idea that a lower minimum wage will mean pay cuts for all low paid workers who already have jobs is simplistic in the extreme. Such thinking fails to recognise that the value of individual workers differs. Moreover, those already in a job have clear advantages over those who are unemployed, and are clearly worth their current pay or they would not be there.

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This article was first published in the Australian Financial Review.



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About the Author

David Leyonhjelm is the Liberal Democrat Senator for NSW.

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