If you were hoping for a pay rise in 2021, we’ve got bad news for you

The recession hasn’t hit Australia as badly as expected, but things could be about to get worse – here’s how to ensure you’re not hit harder.

Australia is recovering from its worst downturn in many decades. But how does an economy heal from a recession? How does it work? What happens? Who are the winners and losers? What are the best strategies for not missing out on the recovery?

Recovery from a recession isn’t even. Some people bounce back fast, some bounce back slow. Or never. The overall picture can be looking good while some households are still stuck in what feels like a deep hole. In 2021 how can you make sure you’re back on your feet?

IT HASN’T BEEN SO BAD, YET

Australia’s recession hasn’t been as severe as expected. The worst fears – waves of bankruptcies that dragged good businesses down along with the bad – have not happened. The law simply hasn’t made insolvencies possible so far and when they finally do come through, we will probably be back in a period of general economic sunshine, making their impact smaller. That’s the good news.

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Aussie businesses haven't closed their doors at the rate anticipated. Picture: Supplied

Initial forecasts were for double digit unemployment and massive underemployment. Those have also not come to pass. Why? Massive government spending that filled the gaps left when consumers got frightened and businesses closed.

We need growth to continue to get jobs to come back and give us a chance at wages growth. Will the government keep support up at a level good enough to create strong growth? I worry they will be so pleased with the early signs of recovery they will stop spending too soon. And businesses look to share that concern.

As the next graph shows, they’ve been borrowing a lot less. Usually business borrowing allows them to build factories and offices, to grow and hire people. But business borrowing has been shrinking. That’s a disappointing sign for the prospects of economic growth in 2021.

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As this graph shows, businesses aren't confident things are picking up. Picture: Supplied

Remember the economy back in January? It wasn’t that flash. We were struggling along with high underemployment and low wages growth. If it wasn’t for the virus we’d probably still be talking about how difficult it is for the Australian economy to recover from an enormous summer of bushfires that devastated a lot of regional areas. Even a recovery to pre-virus levels will leave areas of weakness.

That means it is time to start positioning yourself for success. Don’t leave things to chance.

WINNERS AND LOSERS

In the worst part of the recession, women were the biggest losers. Lockdowns hit industries that employ a lot of women, like hospitality. You can see the big dip in female jobs in the next chart. But as time has gone on and the lockdowns have mostly been lifted, this has been reversed. Now it is men who find their employment levels lower than they were in March.

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Women were initially hit hard, but men are now bearing the brunt of job losses. Picture: Supplied

This matches the pattern of previous recessions. Male employment takes a bigger hit in the long run. After the 1990s recession it took almost a decade – nine years – for male full time employment to recover to its previous level. Men who lose their jobs need to be especially vigilant about getting back into work.

Don’t assume you’ll find a job easily, and remember that unskilled jobs are getting rarer. When unemployment is high it’s a perfect time to get a qualification, whether it’s a ticket to drive a forklift or a law degree. Even Google itself is offering online IT courses these days. They cost $300, with no experience necessary, aiming to help people get jobs.

Recessions have a way of speeding up those long run trends that were happening anyway. Over the decades women have been moving into employment and men are moving out, especially out of full time work. The recession is going to make that process move in fast-forward for a while.

Another good example of the recession speeding up pre-existing trends is online shopping. The events of 2020 have put a rocket under online and Australia will never look back. If you’re wondering what sort of industry you might work in in 2021, consider logistics. We are going to need ever more warehouse people, delivery people, and customer support people in retail.

Another strategy that can work to prevent you getting stuck in a rut is moving house. Being stranded in a town where the industries are no longer thriving is a recipe for disaster. Weakness creates weakness and it can hurt your long run career potential to be stuck in a town where you have to take a lowly job to survive.

If you live in a town that mostly serves foreign tourists (Queensland, NT, I’m looking at you), it could be a long time until the borders open up again. There’s never been a better time to move to a city, with rents falling. However if you live in a town that domestic tourists enjoy, (eg beach towns near big cities) you’re probably going to make a killing over the next year!

That’s the lesson of previous recoveries. There are opportunities out there. Some companies grow fast in an economic recovery. Some people get left behind. If you’re able to position yourself in one of the places and industries that’s doing well, your long-term prospects can within a few short years, look very bright indeed.

Jason Murphy is an economist | @jasemurphy. He is the author of the book Incentivology.