Young workers hit hardest by training cuts and rising unemployment

New employment data this week will show that younger people are bearing the brunt of a weaker job market as employers favour experienced workers. 
Stats NZ will publish the latest monthly employment indicators for August on Friday.
The previous monthly data for July showed fewer jobs were being filled by young people. Though the overall number of jobs filled for the month fell 0.5 percent compared with July 2023, jobs filled by youth (15-19 years old) were down 12.8 percent, and by young adults (20-24 years old) down 3.3 percent.
Infometrics principal economist Brad Olsen said the trend mirrored that of the global financial crisis.
“When you face a downturn and job numbers fall and unemployment increases, generally it’s last in first out,” he said. “Generally, we see younger people bearing the brunt of economic downturns.”
That led to more young people leaving the country, and higher youth unemployment, he said.
Young people accounted for almost half the increase in unemployment in the latest data for the June quarter. The youth unemployment rate sits at 21 percent, and the young adult rate is 8 percent, significantly higher than the 4.6 percent rate for the overall population.
Olsen said younger workers who entered the job market during the pandemic, when the labour market was tight, may now be struggling.
“A lot of young people either would have left school or left further study and gone and got a job because there was good pay and lots of hours on the table,” he said.
“If those same young people are now losing roles, and they might not have completed school, they might not have completed further education, they might not have some of the base qualifications that they would otherwise normally have in the economy, and that might mean that longer term they do struggle more than otherwise to get into work.”
Though a weaker labour market may normally prompt younger people to turn to education and training, he noted the tertiary education system was in a state of flux as the Government moved to dissolve Te Pūkenga, the national mega-institute created to combine polytechnic and workplace learning.
Craig Renney, an economist and director of policy at the NZ Council of Trade Unions, said he was concerned that the Government had made access to training harder.
A report by Business and Economic Research Ltd (Berl) noted Budget 2024 had made cuts to the Apprenticeship Boost scheme, which provides subsidies to employers of eligible apprentices working towards a qualification. The scheme is due to continue this year with no change to the monthly rate of $500, representing a cut in real terms, and from next year the programme will be cut in half and targeted to first-year apprentices only, ending funding for second-year apprentices.
Meanwhile, the Fees Free scheme for tertiary students will change from the first year to the final year of study from next year. Tertiary fees for students are likely to increase as the Government is enabling providers to increase tuition and training fees by up to 6 percent – something they had not previously been able to do, Berl said.
Renney said the changes acted as a disincentive to move into tertiary education or skills training. 
“What we don’t want to see is a group of people for whom there’s real difficulty getting them into the labour market because the young people don’t have the skills, and getting them into skills acquisition becomes harder and more expensive,” he said.
Some 12.4 percent of those aged 15 to 24 were not in employment, education or training, according to the latest June figures. The measure peaked at 15.1 percent in late 2009 as youth unemployment rose following the global financial crisis.
“Industries which often provide entry-level opportunities for youth, such as hospitality, retail, and construction, face weak demand in the current economic climate,” Infometrics said in a recent commentary.
“As a result, there are fewer job opportunities for youth, and competition for jobs in these industries is heightened, with youth potentially having to compete with older, more experienced candidates.”
Olsen said there were longer term risks in having young people out of work or training.
“The longer you have young people on unemployment or out of work and disengaged, often the harder it can then be to re-engage them, and the greater the chance that you start to have long-term dependency that starts to settle into the economy.
“Research shows pretty clearly that over time, that group can become quite a sustained burden on society in terms of the amount of money that the state has to pay to support them, and often the other difficulties that come out the other end, in terms of social and welfare issues.”
Still, he said it was a difficult balancing act for the Government to support jobs without stoking inflation.
Employment Minister Louise Upston said the current trend in youth unemployment was concerning because when the economy was going through periods of recession, as it has been recently, young people were hit harder by the effects of a tough job market.
“We are starting to see green shoots of change, but Jobseeker Support numbers have been long forecast to get worse before they get better,” she said.
She said the Government had put under-25s at the heart of its strategy to have 50,000 fewer people on Jobseeker Support benefits by 2030 and is targeting $1.1 billion set aside in Budget 2024 for employment programmes for young job seekers who were at risk of getting trapped in the downward spiral of welfare dependency.
The Government had reset the welfare system to make sure it was checking in on young people within six months of them going onto a Jobseeker benefit, to make sure they got the support they needed and were on the right path to a job, she said.
It had introduced a phone-based employment case management service focused on helping them, and was reserving 30 percent of all places with in-person MSD case managers for job seekers aged under 25, she said.
The Government was investing $9.45 million on expanding the number of places for young job seekers in community-led employment programmes that provide job coaching from 5400 to 7500, she said.
“Under our government, young job seekers will get the direction they need through a plan of agreed actions they will need to take to obtain employment and address the challenges that are preventing them from finding a job,” she said.
“All these changes combined are expected to see approximately 65 percent of all young job seekers on welfare receive intensive one-on-one support from either a case manager or a community-led programme,” she said.
Berl analyst Simon Hunt said the reasons for the rising unemployment rate of young people were complex, and likely to include a combination of factors such as decisions to prioritise work over study, the rising cost of living, a tightening job market, and the allure of moving overseas. 
“It appears a growing number of young New Zealanders are choosing to leave the country long-term,” he said in a report titled ‘Young adults bear the brunt of increasing unemployment’.
 “This exodus of young talent will negatively impact our future workforce and deserves close monitoring.”