Coronavirus: young feel pay pain after recovery

Young working Australians face missing out on $32,000 in lost wages over the next 10 years in a post-COVID-19 world.

 

Young Australians taking the first jobs of their careers in the teeth of the COVID-19 recession face missing out on $32,000 in lost wages over the next 10 years.

Those graduating from school or university in 2020 do so at a particularly inauspicious time. The unemployment rate jumped by nearly two percentage points between March and May as the partial shutdown of the economy to prevent the spread of the virus sparked mass lay-offs.

Younger workers are more than twice as likely to have lost jobs. The jobless rate among 15 to 24-year-olds over the two months to May surged 4.5 percentage points to 16.1 per cent — the highest level since 1997, according to the Australian Bureau of ­Statistics.

In contrast, unemployment among Australians aged 45 and older has barely budged since the health crisis hit.

“Recessions are felt by everyone, but in this downturn we’ve seen young Australians bear the brunt,” EY chief economist Joanne Masters said. “And even for those who get a first career job, there is actually a lasting impact.”

The first decade of a career usually provides the most rapid rate of wage rises, as green employees quickly learn new skills.

New research from EY shows that, absent a recession, the average 21-year-old embarking on a career could have expected their income to grow by about 113 per cent by 2030. In dollar terms, that is equivalent to moving from an annual salary of $48,000 to $105,000. Wage rises slow in following years.

The average 31-year-old banks a 57 per cent increase in the following decade, the average 41-year-old a 45 per cent rise, and those aged 51 on average will be earning only 38 per cent more by the time they reach 61.

Overseas research suggests those taking their first professional roles in a recession typically earn 9 per cent less than they would have in more normal times — a setback that fades slowly and disappears after 10 years.

In the Australian context, young Australians will be earning on average an annual income of $4000 less than they would have otherwise over the first four years — a handicap that shrinks and disappears by the time they reach 31. This equates to $32,000 less ­income over a decade.

This could result in more than $7bn in lost wages over the next 10 years for young Australians ­entering the labour force in 2020, EY’s analysis showed.

“While it may feel like Australia’s economy will bounce back once lockdown is lifted, that won’t change the impact the recessionary job market will have on recent school or tertiary graduates,” Ms Masters said.

The class of 2020 would be “adversely affected” regardless.