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The global downturn is a problem for our children too The global downturn is a problem for our children too
(2 months later)
The OECD’s Economic Outlook for 2013, released on Tuesday, suggests that unemployment in OECD countries will remain high through to 2014, with young people and the low-skilled hit hardest. The OECD’s Economic Outlook for 2013, released on Tuesday, suggests that unemployment in OECD countries will remain high through to 2014, with young people and the low-skilled hit hardest. 
It is not surprising the OECD noted the rise in youth unemployment, given that, as noted here earlier this week, youth employment suffers the most during economic downturns:It is not surprising the OECD noted the rise in youth unemployment, given that, as noted here earlier this week, youth employment suffers the most during economic downturns:
More troublingly, the OECD report notes: “In many OECD countries, job losses and earnings losses have been concentrated in low-skilled, low-income households more than in those with higher skills and incomes.”More troublingly, the OECD report notes: “In many OECD countries, job losses and earnings losses have been concentrated in low-skilled, low-income households more than in those with higher skills and incomes.”
When read alongside the Productivity Commission’s (PC) working paper Deep and Persistent Disadvantage in Australia the Outlook serves notice that many families across the OECD will face hardship for years to come.When read alongside the Productivity Commission’s (PC) working paper Deep and Persistent Disadvantage in Australia the Outlook serves notice that many families across the OECD will face hardship for years to come.
The working paper received some coverage, mostly focusing on the very small section which suggested that genetics play a part in determining disadvantage. The main reason for the link with genetics is the role genes might play in cognitive ability. Though, even at best, the PC suggests this could explain about one-fifth of the differences in test scores achieved by students from different socio-economic backgrounds.The working paper received some coverage, mostly focusing on the very small section which suggested that genetics play a part in determining disadvantage. The main reason for the link with genetics is the role genes might play in cognitive ability. Though, even at best, the PC suggests this could explain about one-fifth of the differences in test scores achieved by students from different socio-economic backgrounds.
While talk of genes is always good for a headline, for most people the biggest determinant of disadvantage is education and unemployment.While talk of genes is always good for a headline, for most people the biggest determinant of disadvantage is education and unemployment.
The PC paper reproduced a graph from Natsem modelling which shows the clear impact education has on earnings over a lifetime:The PC paper reproduced a graph from Natsem modelling which shows the clear impact education has on earnings over a lifetime:
Unlike the Australian Bureau of Statistics, the US Bureau of Labor Statistics compares unemployment and educational attainment, and the difference of unemployment levels across educational levels is quite stark:Unlike the Australian Bureau of Statistics, the US Bureau of Labor Statistics compares unemployment and educational attainment, and the difference of unemployment levels across educational levels is quite stark:
What is also noticeable is that, much like youth unemployment, the unemployment rate of those with less than a high-school diploma rises first, and also increases the most.What is also noticeable is that, much like youth unemployment, the unemployment rate of those with less than a high-school diploma rises first, and also increases the most.
In Australia, the Victorian Department of Education and Early Childhood Development’s four-year longitudinal study of youth (thanks to reader “Melbourne Woman” for the link) found that after four years only 44% of those in the study who left school before completing Year 12 and who did no further study were in full-time work, compared with 61% of those who left before Year 12 but did do further study – such as vocational training.In Australia, the Victorian Department of Education and Early Childhood Development’s four-year longitudinal study of youth (thanks to reader “Melbourne Woman” for the link) found that after four years only 44% of those in the study who left school before completing Year 12 and who did no further study were in full-time work, compared with 61% of those who left before Year 12 but did do further study – such as vocational training.
The Productivity Commission found that the best way to avoid poverty and avoid long-term disadvantage was “securing a position in the core labour market” – that is, an ongoing job rather than temporary work.The Productivity Commission found that the best way to avoid poverty and avoid long-term disadvantage was “securing a position in the core labour market” – that is, an ongoing job rather than temporary work.
The problem, however, is that the Productivity Commission also concluded that “there is strong evidence to show that education, employment and good health are associated with protection against disadvantage”, and that “education stands out as the critical factor associated with improving life chances”. The reason this is a problem is that educational attainment is highly intergenerational. It found that “a person whose father has achieved a university degree is much more likely to go on to university — 66% compared with 29% for those whose father only obtained Year 10 or below.” And thus it can become a bit of a cycle.The problem, however, is that the Productivity Commission also concluded that “there is strong evidence to show that education, employment and good health are associated with protection against disadvantage”, and that “education stands out as the critical factor associated with improving life chances”. The reason this is a problem is that educational attainment is highly intergenerational. It found that “a person whose father has achieved a university degree is much more likely to go on to university — 66% compared with 29% for those whose father only obtained Year 10 or below.” And thus it can become a bit of a cycle.
In the US, intergenerational entrenchment of advantage and disadvantage has become so great that one 2004 study found that brothers were more likely to have a similar income than they were to have a similar height or weight. As the journalist Timothy Noah put it, an American male is less the master of his fate than he is of his body mass index!In the US, intergenerational entrenchment of advantage and disadvantage has become so great that one 2004 study found that brothers were more likely to have a similar income than they were to have a similar height or weight. As the journalist Timothy Noah put it, an American male is less the master of his fate than he is of his body mass index!
The Productivity Commission also noted the importance of early-childhood learning, citing evidence that showed “attending preschool improves children’s readiness for school and students’ performance”. But it also noted that the likelihood of a child attending preschool or a preschool program was highly linked to whether or not the child’s parents were employed, and overall that “the employment status of a child’s parents is strongly correlated with a child’s development”.The Productivity Commission also noted the importance of early-childhood learning, citing evidence that showed “attending preschool improves children’s readiness for school and students’ performance”. But it also noted that the likelihood of a child attending preschool or a preschool program was highly linked to whether or not the child’s parents were employed, and overall that “the employment status of a child’s parents is strongly correlated with a child’s development”.
And this is where the rubber meets the road when we look at economic recessions. The paper noted that “unemployed job seekers with high levels of employability tend to find jobs more quickly, but those that experience longer spells of unemployment become less attractive to employees, which contributes to the loss of skills and disconnection from the labour market”.And this is where the rubber meets the road when we look at economic recessions. The paper noted that “unemployed job seekers with high levels of employability tend to find jobs more quickly, but those that experience longer spells of unemployment become less attractive to employees, which contributes to the loss of skills and disconnection from the labour market”.
If we look at the UK, we see rather horrific evidence of what the GFC did to employment:If we look at the UK, we see rather horrific evidence of what the GFC did to employment:
In the 15 years from 1993 to 2008, UK employment grew at a pretty linear rate. When the GFC hit, employment went back to 2005 levels. And while it has now grown to beyond where it was in 2008 (something that can’t be said for the US), it remains well behind where it would have been were it not for the GFC. Following the 1993-2008 trend, by the end of this year there would have been about 31m employed rather than the expected 29.7m.In the 15 years from 1993 to 2008, UK employment grew at a pretty linear rate. When the GFC hit, employment went back to 2005 levels. And while it has now grown to beyond where it was in 2008 (something that can’t be said for the US), it remains well behind where it would have been were it not for the GFC. Following the 1993-2008 trend, by the end of this year there would have been about 31m employed rather than the expected 29.7m.
That’s over a million more adults who are now facing the cycle of disadvantage than would have been expected five years ago. And when you factor in that youth and those who are low-skilled are the ones most hit by economic downturns, you see the cycle of disadvantage being sped up by recessions.That’s over a million more adults who are now facing the cycle of disadvantage than would have been expected five years ago. And when you factor in that youth and those who are low-skilled are the ones most hit by economic downturns, you see the cycle of disadvantage being sped up by recessions.
When viewed alongside the Productivity Commission’s working paper it’s clear that long-term unemployment is not merely a problem for the period of that unemployment. The problems can flow through for 15 to 20 years, on to children who currently aren’t so much worried about entering the workforce as entering primary school.When viewed alongside the Productivity Commission’s working paper it’s clear that long-term unemployment is not merely a problem for the period of that unemployment. The problems can flow through for 15 to 20 years, on to children who currently aren’t so much worried about entering the workforce as entering primary school.
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