A Generation at Risk: The Global Youth Unemployment Crisis

The world, according to the business leaders at Davos 2012, is “sitting on a social and economic time bomb:” global youth unemployment. Many leaders at the World Economic Forum’s meeting last year iterated that failing to employ the youth today amounts to a “cancer in society,” which not only affects economic growth now but will significantly stifle future growth. The figures have not improved since Davos 2012: as of last year  12.4 percent of people aged 15 to 24 worldwide were unemployed, which has increased to 12.6 percent in 2013. Now, young people are three times more likely to be unemployed than adults.

According to the International Labor Organization (ILO), in a global labor force of 3.3 billion, some 200 million people are unemployed, 75 million of which are between the ages of 15 and 24.  ILO’s Global Employment Trends for Youth 2013 report points out that the weakening of the global recovery in 2012 and 2013 has further aggravated the youth jobs crisis—youth unemployment increased by as much as 24.9 percent in the Developed Economies and European Union between 2008 and 2012. Both developed nations and emerging economies alike are struggling to create pathways to employment for their young citizens. Youth unemployment rates, which have continued to soar since 2008, are particularly high in three regions: Developed Economies and European Union, the Middle East, and North Africa. The lowest regional youth unemployment rates in 2012 were South Asia, with 9.3 percent, and East Asia at 9.5 percent. The highest were 28.3 percent in the Middle East and 23.7 percent in North Africa. In the advanced economies, the statistics are equally worrying.  In the European Union, the rate was at a 10-year high of 22.6 percent in 2012—with Greece at a staggering 54.2 percent and Spain at 52.4 percent—while  16.3 percent of the youth in the United States was unemployed.

Unemployment rates alone do not demonstrate the scale of the issue, given the 290 million young people more broadly classed as NEETs (not in education, employment or training). According to the Organization for Economic Co-operation and Development (OECD), 14.8 percent  of young Americans were qualified as NEETs in the first quarter of 2011, while the figure was 13.2 percent in the European Union. In the OECD area as a whole, one in six young people were without a job and not in education or training. The proportion of young people neither working nor studying illustrates how well economies manage the transition between school and work, which has become particularly problematic in developed economies.

The skills mismatch in youth labor markets is an underlying cause of this persistent and growing trend. McKinsey, a global management consulting firm, reported that in the nine countries that it studied (America, Brazil, Britain, Germany, India, Mexico, Morocco, Saudi Arabia and Turkey) 40 percent of employers were struggling to find candidates with adequate skills for entry-level jobs. In contrast, almost 45 percent of young people said that their current jobs were not related to their studies, and of these more than half viewed their jobs as temporary and said they were planning to leave. Another survey by Accenture found that in the United States, 41 percent of college graduates from the last two years had to take jobs that do not require a degree. The skills mismatch shows that over-education and over-skilling coexist with under-education and under-skilling.  This is particularly the case in most developed economies, where the job market is split between high-paying jobs that most workers are not qualified for and low-paying, low-skill jobs that do not provide a sufficient income.

Many economists think that such a systemic mismatch requires policymakers to reform rigid labor markets and implement education policies that would close the gap between the world of education and world of work. Creating vocational and technical programs and forging stronger relations between future employers and future employees are seen as remedies to ease the school-to-work transition. Germany, where apprenticeships and vocational training have long been the norm, has the second lowest rate (8.2 percent) of youth unemployment in the European Union. Such training programs, backed by a certification system, would allow employees to have skills transferable across companies and industries. However, only less than a quarter of education-providers offer similar practical courses involving hands-on learning in the classroom or training on the job.

It is also unclear if similar training programs would produce similar results in other countries, given that Germany’s export-driven economy is characterized by high-tech manufacturing, which employs many highly-trained manual workers. Thus, determining country-specific needs will be crucial for employing wide-ranging and well-targeted reforms. The ILO suggests that some labor market policies, such as targeting the employment of disadvantaged youth, promoting self-employment to assist potential young entrepreneurs, and implementing international labor standards ensuring that young people receive equal treatment at work, are necessary to revamp youth labor markets across countries.  Without significant reforms, it is estimated that there will be a global shortfall of 85 million high- and middle-skill workers for the labor market by 2020.Unless bold reforms are undertaken, many fear that the economic and social costs of long-term unemployment, discouragement and pervasive low-quality jobs will not only continue to undermine the growth of many economies but will also put a whole generation at risk.

By: Sera Tolgay

Sources: BBC News, Huffington Post, International Labor Organization, The Economist, Time Magazine, CNN, Business Week

Photo Credit: Paris January 15th, 2009 Student Protest courtesy of Flicker user frog and onion

Is Having the Right Skills Enough to Get Hired in Post-Recession America?

One of the most common explanations for the persistent high unemployment in America since the 2007 recession is the skills gap. An Accenture report estimates that, “about a third of employers worldwide are experiencing critical challenges filling positions due to a lack of available talent, and almost three-fourths of employers are affected by talent shortages to some degree”.  Technology and globalization processes have increased the demand for talented and high-skilled workers, and many say that the nation’s education institutions have not risen to meet the challenge effectively.

The Brookings Institute issued a report that includes eleven “new learning skills in the 21^st century” that are crucial for our students. These include: simulation, multitasking, and distributed cognition (effectively utilizing tools that enhance mental capacity). Meanwhile, the Center for 21^st Century Skills advocates six different skills: information literacy, creativity & innovation, collaboration, problem solving, communication, and responsible citizenship. Proponents of the skills gap view see unemployment as structural, a product of supply falling behind demand in the skilled labor market. A recent Wilson Center publication by Paul Vallas argues that the skills gap “poses a major threat to the United States’ long-term economic competitiveness”. The American education system is falling further behind the performance of other countries, and addressing the “massive achievement gap present within the U.S. between minority and socio-economically disadvantaged students and their more affluent peers” should be a national priority.

However, many disagree with this assessment of a skills gap as the main cause of high US unemployment, and propose a demand-side rebuttal that focuses on the drop in real household wealth associated with the recent recession. This has decreased household demand nationwide and thus crippled job growth. Research done by the Economic Policy Institute  argues that persistent unemployment at all levels of education, and in most major sectors of the economy indicates that the current high rates of unemployment are caused by more than just a skills gap. They also attribute the rise in educated labor as a percentage of the total labor force to the rapid growth in sectors that demand high-skilled labor. Other research  at the Economic Policy Institute points to record corporate profits in the past year, saying that businesses learned during the recession how to make money with lower labor costs, and now don’t need to hire as many people to make higher rates of profit. Some of this can be explained by the fact that traditionally labor intensive industries have been the hardest hit by the recession, while high-tech companies with lower labor demands have seen the most growth.

To create policy that will improve the state of the economy, it is important to understand the causal linkages for the unemployment problem in America. . For example, structural unemployment cannot be solved with demand-side economics such as stimulus packages. On the other side, education initiatives and on the job training is the answer to a skills gap.

Posted by: Ben Copper

Sources: Accenture, Brookings Institute, Economic Policy Institute, CNNMoney, Commerce Department

Photo Credit: flickr user, Dita Margarita