The Cost of Dropping Out

Australia risks creating an underclass of people who face long-term unemployment and chronic poverty unless it curbs the number of young people dropping out of school early.

Research commissioned by the Business Council of Australia (BCA) released today has found that without concerted action, at least 80,000 young Australians over the next decade are likely to leave school early and face long-term unemployment.

The BCA said it was also concerned that this number was likely to escalate beyond the next ten years if no action was taken now.

BCA Chief Executive, Ms Katie Lahey, said the figures not only represented a lifetime of social and economic hardship for many individuals who struggle to find permanent work because they do not complete Year 12 or equivalent, but also a major cost to Australia’s overall economy.

Ms Lahey said the BCA-commissioned research – entitled The Cost of Dropping Out: The Economic Impact of Early School Leaving – found that:

  • Australia’s rate of early school leaving has not improved over the last decade; and
  • The overall cost to the Australian economy if the current rate of early school leaving continues will total nearly $2 billion a year by 2020.

“Those people who leave school early and do not pursue other forms of education and training or find sustainable employment will face a life characterised by unemployment and poor living standards,” Ms Lahey said.

“But there are flow on effects beyond the individual.

“The broader community pays through higher welfare costs, higher health costs, higher crime rates and other social impacts. Business faces labour and skills shortages.

Ms Lahey said the ongoing reduction of unskilled or low skilled jobs in the Australian job market over the next ten years would see employment opportunities for young people leaving school early continue to shrink.

“The BCA believes that without concerted action, the period beyond the next decade is likely see a significant increase in the numbers of early school leavers joining the ranks of the long-term unemployment and welfare dependent,” she said.

Ms Lahey said the research highlighted a number of factors accounting for early school leaving, including living in regional and rural areas, coming from low socio-economic backgrounds and having poor literacy and numeracy skills. 

She said both the Commonwealth and the states had put in place a number of programs to address the problem, but unfortunately these efforts have yet to succeed.

“We urgently need a more concerted and co-ordinated response to the problem,” Ms Lahey said. 

Ms Lahey said the BCA’s research outlined a number of options that should be looked at as part of a multi-tiered strategy to address the problem.

They include improved school programs, improved job and career advice, the use of case management and mentoring, and the development of alternative education and training pathways.

Ms Lahey said: “While the solution required upfront investment shared by Commonwealth, state and territory governments the research demonstrates that the long-term economic, welfare and educational benefits as a result of successfully addressing early school leaving will be substantial.

“Many people would find the prospect of an underclass at odds with a fair Australia,” Ms Lahey said.

“Yet, that is exactly what we face if we do not tackle this problem quickly and effectively."

The Cost of Dropping Out: The Economic Impact of Early School Leaving