- New analysis by EY shows the average 21 year old Australian entering the workforce in 2020 will miss out on $32,000 in lost wages over the next 10 years, which translates to having $22,000 less to spend on a home and $30,000 less in their superannuation by the time they retire.
- EY’s analysis suggests this could potentially result in over $7 billion in lost wages over the next 10 years for young Australians entering the labour force in 2020.
- EY says the recession affected workforce will be characterised by a “Driver-Passenger” dynamic based on the level of proactivity demonstrated by young Australians in the face of lower job opportunities and subdued economic conditions.
New analysis by EY shows that the average 21 year old Australian entering the workforce in 2020 will take a significant hit to wages growth and savings over the next 10 years, and retire with less superannuation, when compared to those who entered during a non-recessionary period. The analysis also suggests this could result in as much as $7 billion in lost wages over the next 10 years for young Australians entering the labour force this year.
The analysis published in Driver or Passenger: how recessions impact young Australian workers examines the impact of the recession on the average 21 year old Australian entering the workforce in 2020 and looks at six “personas” that vary in age from 18 to 23 years old and in jobs ranging from labourers to law graduates to demonstrate the impact of starting a job in a recession.
“Australia’s first recession in close to 30 years will be felt by all age groups with most of the country’s workforce having never worked during a recession. This analysis provides a snapshot of how one demographic – 18 to 23 year olds entering the workforce – will be impacted but it also provides insight into what can be done by individuals and businesses to lessen the negative impact,” said EY’s Chief Economist, Jo Masters.
“There is no doubt starting a job in a recession is hard, however young Australians have a clear choice to make. They can either be a passenger or a driver. The Passengers risk consigning themselves to the wages slow lane while the Drivers give themselves a fighting chance to attain goals for their career, home ownership and retirement,” said Ms Masters.
Using Census data from the Australian Bureau of Statistics (ABS) and information from the U.S. National Bureau of Economic Research (NBER) the analysis shows that up to 90 per cent of an individual’s income growth occurs in the first 10 years of working, meaning that not only will the recession have an immediate impact on income but it could have a long lasting negative impact on wages for this group for years to come.
“For young Australians who are facing lower job opportunities in subdued economic conditions, upskilling via short courses, improving financial literacy and exploring jobs that present the opportunity to improve jobs skill match or boost income, and ensuring a proactive savings plan, are steps that will help them to overcome the economic challenges,” said Ms Masters.
But the findings are also important for employers and the Government, said Ms Masters.
“Workforce behaviours and expectations will change - employers will need to be more flexible on expectations about years worked in a job and there should be greater value placed on other sector experience. Strategies around talent retention will be crucial, along with workforce planning and mapping skills to future roles,” said Ms Masters.
“The Government is already pivoting from immediate support during the lockdown phase towards policies to underpin sustainable economic growth and job opportunity. While there is a role to support those facing into an economy in transition, proactive policy will also be needed to encourage job creation, assist with skill matching and supporting proactivity through financial literacy,” concluded Ms Masters.
Press contact: Belinda Skurnik, EY Media Relations
+61 405 395 200 , Belinda.firstname.lastname@example.org