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Young Australians take $7bn income hit
Australians aged between 18 and 23 who began their careers during the COVID-19 recession are likely to see a long-term negative impact on their finances, according to new research.
Young Australians take $7bn income hit
Australians aged between 18 and 23 who began their careers during the COVID-19 recession are likely to see a long-term negative impact on their finances, according to new research.
Consulting group EY has found that young Australians who are entering the workforce during the COVID-19 pandemic could lose $32,000 in wages over the next decade as well as lose $30,000 in superannuation.
This will collectively cost younger Australians an estimated $7 billion in lost wages over a 10-year period.
“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.
Using government data, the findings show that 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 wages, it will have an everlasting impact on future income.
“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,” Ms Masters said.
She highlights that just because younger Australians have an uphill battle does not mean they can’t regain some of their losses.
“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,” Ms Masters explained.
The economist highlighted that the findings do not just have an impact on young people, but also employers and government decision making.
“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,” Ms Masters said.
“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,” Ms Masters concluded.
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