Australians starting work in 2020 face long-term salary drop, new modelling predicts

Those entering the workforce this year are looking at a six per cent loss in earnings over the decade

Australians entering the workforce for the first time this year will face a long-term drop in salary as a result of the coronavirus pandemic’s economic impact, new modelling predicts.

As originally reported by Buzzfeed News earlier today (April 30), figures presented by the Australian Greens, based on economic modelling by University of Melbourne economics professor Jeff Borland, predict those entering the job market this year will face a six per cent mean reduction in their salary for the next decade.

The Greens put this figure at $35,000 over ten years, based on the average full-time salary of a 24-year-old.

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In economics, this long-term impact is known as ‘scarring’. In a labour market paper prepared earlier this month, Borland defines scarring as “a long‐term negative impact on a worker due to some adverse labour market experience early in their work-life”, such as entry into the market during macroeconomic downturn or experiencing unemployment early on in working life.

“Downturns cause a delayed entry to employment – and that delay then has long‐term effects on the probability of employment or earnings when employed – for example, due to skill atrophy or negative effects on motivation,” Borland wrote in the paper.

“Workers may need to take jobs to which they are less well-matched during a downturn. Needing to accept a job that is lower quality or to which a worker is less well-matched can cause long‐term negative effects when it is not possible to quickly move to a new job that is higher quality or to which a worker is better matched.”

Speaking to Buzzfeed News, Greens leader Adam Bandt said this salary reduction can have major ramifications for young people.

“This $35,000 over a decade isn’t just loose change — that could go to rent, it’s a housing deposit that’s been taken away from you, money that could pay off your car, or go into your savings to get ready for a rainy day,” he said.

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On April 21, the Australian Bureau of Statistics released figures showing how young people have been disproportionately affected by the coronavirus pandemic in terms of unemployment. Between March 14 and April 4, jobs decreased across the board by six per cent.

According to ABS statistician Bjorn Jarvis, “the largest impact of net job losses, in percentage terms, was for people aged under 20, for whom jobs decreased by 9.9 per cent.” The hardest-hit industries were hospitality, arts and mining.

On top of that, a million casual workers are currently ineligible for the government’s JobKeeper payment scheme – half of whom the Greens said are under 24.

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