Student employment is at record levels, but can it last?

In March 2020, as Australians realised that COVID was a major problem, I wrote a pessimistic post about student employment. For a while during 2020 that pessimism was justified. But not in 2021. Tertiary student employment is at an all-time high, driven by more jobs and less labour market competition.

Retrenchment

For the ABS Participation, Job Search and Mobility survey the sample is full-time students who have completed Year 12 but have no post-school qualifications. For this group retrenchments were high in 2020. Of the people who were students in February 2021, and had been employed in February 2020, 6.5 per cent had been retrenched over the previous 12 months. This compares to retrenchment rates of about 2 per cent a year in the 2016-2020 period.

The ABS monthly and quarterly labour market reports do not include retrenchments by student status, but do provide a time series for 15-24 year old workers. About 24 per cent of those workers were full-time tertiary students in 2020. As the chart below shows, retrenchments for 15-24 year olds spiked in the May and August quarters. In the May 2020 quarter they were 31 per cent of all retrenchments. JobKeeper slowed overall job losses from the end of March, but this demographic is relatively high on people not meeting its personal eligibility criteria. Temporary migrants such as an international students were not included in JobKeeper and casuals needed to have been in their job for 12 months.

Employment to population ratio

The main analysis supported by the labour force statistics is full-time tertiary students aged 15-24 years. The chart below shows that just between March and April 2020 the proportion of tertiary students in employment fell significantly, down nearly 9 percentage points. Student employment levels were already coming off their summer peak, with employment rates declining from 65 per cent in December 2019 to 46 per cent in May 2020.

The recovery in employment rates, however, is as striking as the decline. In July 2021 67.5 per cent of full-time tertiary students aged 15-24 years had a job, the highest proportion in a time series that goes back to 1986. Apart from other months in 2021, employment rates had occasionally exceeded 65 per cent in the month of December, as part of the normal summer increase. But this peak is in July, which reached its previous maximum of 59.5 per cent in 2008. Students have Christmas in July employment levels.

To lessen the distraction of seasonal changes, the chart below shows month-to-month employment rates for the last three years. From August 2020 employment levels were back to 2019 levels, despite Melbourne being stuck in lockdown. From February 2021 employment rates began pulling ahead of the levels expected based on recent experience.

Employment numerators and population denominators

Changes in employment rates are affected by both the numerator (students in work) and the denominator (the population of students). Either or both can cause a change in the employment rate.

The chart below shows that jobs in 2021 are up on recent years from February. The July numbers are the highest recorded in that time series going back to 1986. They must therefore be the highest ever, since in the 1980s there were not half a million full-time 15-24 year old tertiary students, let alone that many with jobs.

Tertiary student numbers by month show that the population denominator significantly influences seasonal changes in the employment rate. While jobs increase over summer, the employment rate is boosted by people finishing their courses and transitioning out of being a student. In February and March new people transition into the status of student. Many of them already have jobs so they increase the absolute number of employed students early each year.

Seasonal effects aside, we can see from the student numbers chart that a declining total population of tertiary students helps to boost the employment rate. If student numbers had been the same in July 2021 as 2019 but employment levels the same as in July 2021 the employment rate would have been 65 per cent, 2.5 percentage points below the figure recorded.

International student numbers

Frustratingly, we don’t have 2020 domestic higher education student numbers yet, let alone 2021, although some early indicators suggested an increase on last year. Unless there is a big surprise in domestic enrolments, the decline in student numbers must be entirely or mostly due to fewer international students.

As of 30 June 2020 the number of international students present in Australia was about 163,000 lower than it had been in either 2019 or 2020. As of November 2019 about half of international students were employed, although the proportion was a bit lower (44 per cent) for those aged 15-24. In that age bracket, comparing the ABS Characteristics of Recent Migrants survey and the aggregate labour force results for November 2019, 23 per cent of all employed students were internationals.

International students and jobs

Migration experts point out that migrants create jobs. While this must be true in the aggregate, since migrants increase total demand for goods and services, when migrants concentrate in specific labour markets this may disadvantage non-migrants. Jeff Borland and Michael Coelli recently argued that younger Australians have lost jobs to international students and other migrants who compete for the same lower-skill, flexible jobs.

The chart below shows the dozen most common student jobs as of 2016 – I hate using such old data, but only census statistics give us this level of detail, and the 2021 census numbers will not be available until the second half of 2022. It shows that domestic students are often, but not always, looking for similar jobs to international students and other temporary visa holders. Some occupations – cleaners, food trade workers, and delivery drivers – would not be top student jobs except that international students are willing to take them. And some sales, hospitality and food work would not be available except for the demand created by international students and other migrants.

But at the margins it seems quite possible that domestic students now benefit from less competition in the occupations they share with international students.

Could the job numbers be wrong?

While domestic students face less labour market competition, the increase in jobs still needs explaining. We should not rule out the possibility that the ABS numbers are wrong, at least in the detail. The labour force survey has about 50,000 respondents, but the further it is broken down into sub-categories (full-time student, 15-24 years, etc) the greater the risk that the sample is off. Respondents remain in the survey for 8 months, with one in eight rotating off each month, so an unrepresentative spike in employed tertiary students could persist for a while.

The ABS-ATO payroll data is one source of data for reality checking the labour force survey. It’s a count of wage and salary payments being processed. In the labour force survey, someone can be counted as employed despite not being paid in a given period, but this person would not be counted in the payroll data – an important difference during lockdowns. The payroll data does not report by student status, but it does have age, keeping in mind that in the labour force survey about a quarter of working 15-24 year olds are full-time tertiary education students. A significant constraint is that this data series only starts in January 2020, so we are missing important comparative context. But we can see the big dip last year and the subsequent recovery. The payroll data also confirms that 2021 was much better than 2020 for this demographic, with a decline at the end as lockdowns again hit economic activity.

Where are the extra jobs coming from?

The quarterly labour force data can be broken down by age and occupation but it tends to be volatile at this level of detail. I’d want a trend to persist over several surveys and/or be corroborated with other sources to be confident it is real. I’m going to use industry level data to explore what might be driving the overall numbers.

Of the three biggest industries for student employment only one, accommodation and food services, is still well below its pre-COVID peak. Travel bans and lockdowns have killed cafes and restaurants, which won’t be back in pre-COVID numbers anytime soon. Despite the gloomy outlook for total industry employment, in June 2021 this industry had more vacancies than at any previous point in a time series going back to 1994 (38,000; not massive as a % of total employment). This is consistent with employers losing the temporary migrant staff on whom they previously relied. Despite fewer total jobs, it is probably easier for a domestic student to get one.

Retail in June 2021 was below its all-time peak for filled jobs (total jobs is filled jobs plus vacancies), but the best June on record. Job vacancies, while not at their highest level ever, are well above the typical figures of recent years (at 34,000). Again, domestic students may be getting jobs that would formerly have gone to temporary migrants, although migrants are less important to retail than the food industry.

The industry that was already surging before COVID, and has continued to do so, is health care and social assistance. The migrant reliant social care sector is possibly recruiting students to fill vacancies caused by closed borders. COVID responses may also be driving student employment up. The Victorian and Queensland governments, for example, are recruiting students in health related courses to deliver vaccinations.

The future

In the short term, the payroll data suggests that student work is trending down again, as lockdowns in Melbourne in Sydney force businesses to not trade or reduce their capacity. Realistically, lockdowns will depress employment in some industries until November or December. But the experience of 2020-21 suggests lockdown yo-yo effects, with jobs falling with restrictions and then surging when freedom is restored.

The medium term is much harder to assess. Many people have observed that employment numbers are much better than anyone expected last year. They seem inconsistent with empty shops in the streets and the big global loss of output due to COVID. Are we headed for another recession, when stimulatory fiscal and monetary policy are wound down? What will happen when Australians start spending more money abroad?

For students, however, there is room for at least moderate optimism about job prospects over the next six months or so. Vaccination centres will be busy for a while yet. An easing of lockdowns and travel bans will boost student job prospects in some sectors. Fiscal and monetary policy will continue to boost demand. And temporary migrant numbers will keep falling until well into 2022.

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