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Counting the cost of early school leaving

By John Spierings - posted Friday, 15 October 1999

In the so-called ‘new economy’, where a premium is placed on transferable skills, the capacity to learn, intellectual flexibility and robustness, those without basic post-compulsory qualifications are at an extreme disadvantage.

The problems encountered by those who leave education early without a qualification are serious. "As competitive pressures rise, labour markets are becoming more demanding for young people, and the consequences of being under-skilled and unqualified are rising," the OECD recently observed. But this disadvantage is not inevitable, it can be arrested through a more effective use of existing resources, better signposting and integration of options, and a modest annual injection of new resources to better meet the needs of early school leavers.

In previous generations the strength of the youth labour market, particularly for young men, meant that leaving school early was not such a great risk – there were reasonable safety nets and opportunities in the world outside school. In today's labour market however, the risks are real and substantial.


The collapse of the full-time youth labour market, and the widespread casualisation of remaining job opportunities, means that the workplace is not such a safe place to grow up in. Mentoring, training, learning and socialisation opportunities to assist young people to make the long-term transition to independence through work are disappearing.

A measure of the scale of disadvantage now encountered by early school leavers is that in 1998 of 114,000 teenagers not in education or training, and who were either unemployed or not in the labour force, 80,000 had left school before completing Year 12.

In many ways these early school leavers have only precarious skills making it more likely they will be caught in a cycle of precarious employment and unemployment. They are relatively ill-prepared to face the demands of the ‘new economy’. They experience continuing disadvantages in the labour market, especially in terms of markedly higher rates of unemployment and lower hourly earnings.

For the first time in Australia the cost of this disadvantage to individuals, governments and the rest of society over the course of a lifetime has been quantified, and the result is startling. NATSEM at the University of Canberra puts this cost at $2.6 billion annually, based on 1998 data.

The cost is even more concerning because school retention in Australia has fallen from a high of 77 per cent in 1991 to 71.8 per cent in 1997. Australia is one of the few OECD countries where school retention has declined in the 1990s.

Retention levels are below the national average in New South Wales, South Australia, Tasmania and the Northern Territory. Just 66 per cent of young male students complete Year 12 compared to nearly 78 per cent of young female students.


The policy response to this situation needs to be multifaceted: efforts need to be made to encourage potential early school leavers to stay on at school, and equally, to provide positive supports and pathways for them in the world outside school if they choose to leave.

Recent initiatives such as Full Service Schools and strengthened school-industry links are designed to assist young people to cope with the changed economic and cultural landscape of the past two decades. But these measures do not go far enough or deep enough to cope with the dimensions of youth marginalisation now facing us. Some positive endeavours are being made in current policy, but too often the responses are piecemeal and fragmented.

In addition the use of the new Youth Allowance to provide a strong imperative to remain at school is unlikely to impact significantly on the large numbers of young people for whom school is a predominantly negative experience.

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About the Author

Dr John Spierings is a Research Strategist with the Dusseldorp Skills Forum (DSF). The Forum will publish The Cost to Australia of Early School Leaving, a major study undertaken by NATSEM and Why Australia needs a national Youth Commitment. Both are available from DSF.

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Dusseldorp Skills Forum (DSF)
University of Canberra
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