A Generation at Risk: The Global Youth Unemployment Crisis

student protest

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

Advertisements

Graduation Rates: the Good, the Bad, and the Ugly

graduationOne of the main goals President Barack Obama laid out during his first term was to return America to its previously held position as the country with the highest number of college graduates per capita by 2020. This American Graduation Initiative (AGI) requires increasing the percentage of college graduates in the US workforce by 50% by the end of the decade. In order for the AGI to be accomplished, the number of college graduates would have to increase by an annual 16% every year from 2010-2020. However, the problem in reaching this goal may be rooted in low graduation rates, rather than low enrollment numbers.

America2020 is a private sector approach to the same problem, focusing specifically on STEM (Science, Technology, Engineering, and Math) graduates. Their plan is to encourage STEM degree completion by committing industry professionals to volunteer their time mentoring and teaching students in these fields. There will be an estimated 10 million STEM job openings by the year 2020, and OECD data reports that US students tend to have a low interest in science. This approach has already seen significant improvements in graduation rates with the schools involved and those students who have participated in the program are far better prepared for college.  Citizen Schools, one of the major forces behind the America2020 initiative, along with representatives from the White House and several big-name companies recently convened here at the Wilson Center to discuss details of its implementation and how they could be involved.

The American Dream 2.0 is an initiative by the Bill & Melinda Gates Foundation that, “offers a comprehensive framework for how the hundreds of billions invested in the financial aid system can increase college access, affordability, and completion”. According to the Foundation’s findings, 46% of students enrolled in higher education institutions fail to graduate within six years. This rate increases to 63% for African Americans and 57% for Hispanics. In addition, total annual borrowing for college has more than doubled in the past ten years, as tuition rises faster than family income or inflation. These statistics are worrying, because those who borrow money for school but end up dropping-out without earning a degree have higher unemployment rates than those who graduate.

Good news comes from high school completion rates, which reached a record high in 2010 at 78.6%. While this is certainly heartening, fewer than half of those in the class of 2012 were ‘college ready’ as determined by the College Board last fall. In order to meet the challenges of President Obama’s AGI, education policymakers need to focus not only on college enrollment rates, but also on access, affordability, completion rates, and high school rigor. Although in the current fiscal climate, large scale investments in education may be harder and harder to implement, the effects of education investment on the productivity and success of our nation’s young people are immeasurably important.

By: Ben Copper

Sources: Huffington Post, PR Newswire, White House records, EducationSector.org, Citizenschools.org

Photo Credit: flickr user: Smithsonian Institution

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

skills gapOne 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 21st 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 21st 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

Labor market figures show modest signs of growth into 2013

unemploymentThe month of November featured the highest level of job openings in five months. The total of 3.68 million was an increase by 11,000 compared to the month of October. Though the gains are modest they are positive signs that the U.S. economy might be heading on the right track to a more robust recovery.

Brian Jones, senior economist at Societe General in New York, commented that labor market indicators all point towards improvement. In total, 155,000 jobs were added in December and 161,000 in November. Perhaps more importantly than the sheer number gains in jobs added is the fact that the hiring was accompanied by gains in wages and a longer workweek. What further adds to this positive trend is the unemployment rate, which in November stood at 7.7% – the lowest level in more than four years. Some economists believe that if the unemployment rate continues to drop at this pace it will reach about 7.1% by the end of 2013.

One problem that continues to linger, however, is that of discouraged workers who are not considered part of the labor force and therefore technically not “unemployed”. The labor participation rate in November stood at 63.6% – a figure that according to Nigel Gault of HIS Global Insight remains low by historical standards. In fact, much of the improvement in the unemployment rate over the past two years can be attributed to people dropping out of the labor force. In some ways, determining how to decipher the statistics released by the Department of Labor becomes a question of interpretation with the bigger question of an American economic recovery still lingering.

Posted by: Samuel Benka

Sources: Bloomberg, TIME, The New York Times

Photo credit: 2008 Fall Career Days 005 courtesy of Flickr user pennstatelive

Is College Too Easy?

This blog has focused on the current unemployment and underemployment crisis among recent college graduates and explored several of the proposed explanations for it.  One explanation that many are reluctant to talk about however, is the possibility that students are learning far less in college than they used to.  Evidence has mounted recently that shows that students, across majors and schools, are spending less time studying and are demonstrably learning less.  This mirrors the trend we wrote about previously in the K-12 system.

In 2010, the American Enterprise Institute released a highly-cited paper entitled Leisure College, USA that concluded, among other things that “In 1961, the average full-time student at a four-year college in the United States studied about twenty-four hours per week, while his modern counterpart puts in only fourteen hours per week”  and that the decline cannot be explained by “changes over time in student work status, parental education, major choice, or the type of institution students attended”.  Instead, the overwhelming evidence points to a culture change that has turned the “college campus into a place where academic effort is scarcely detectable and the primary student activities are leisure-based”.  Students rarely have to perform intellectual tasks to receive high grades and spend little time devoted to studies outside the classroom.

But maybe students are studying less because technology makes it more efficient or because they come to higher education better prepared than they used to.  Unlikely, say Richard Arum and Josipa Roksa, authors of Academically Adrift: Limited Learning on College Campuses, published in 2011.  Not only are students studying less, they are evidently learning less.  Arum and Josipa examined survey responses, transcript data, and results from the Collegiate Learning Assessment (a standardized test taken by students in their first semester and at the end of their second year) and concluded that “for a large proportion of students, the gains in critical thinking, complex reasoning, and written communication are either exceedingly small or empirically nonexistent”.  According to their research at least 45 percent of students did not demonstrate any statistically significant improvement in CLA performance during the first two years of college and further study has indicated that 36 percent of students did not show any significant improvement over four years. They state, “While these students may have developed subject-specific skills that were not tested for by the CLA…they are failing to develop the higher-order cognitive skills that it is widely assumed college students should master”.

Arum and Roksa’s conclusions are strengthened by the accounts of many students who report that they spend increasing numbers of hours on nonacademic activities, including working, rather than on studying. They enroll in courses that do not require substantial reading or writing assignments; they interact with their professors outside of classrooms rarely, if ever; and they define and understand their college experiences as being focused more on social than on academic development.

There have been specific accounts as well about, for instance, the relative ease of a major in business, which is the most popular major in the country, or the lack of writing required of students.  The fact is that many students and institutions seem to be operating under the assumption that graduating with a diploma, a credential, is enough to be competitive in a knowledge-based, globally competitive economy.  This may or may not be the case right, but it almost certainly will not be in the medium or long term.  The American higher-education system is still the envy of the world but the gap between the US and other countries is closing in both measures of quantity and quality.  As the gap closes, college graduates will be expected not only to have the credential, but also the knowledge and skills that the credential ostensibly indicates meaning that a serious examination of the culture and methods at American universities would serve everyone well.

Posted by: Sean Norris

Sources: The Chronicle of Higher Education, The New York Times, Inside HigherEd

Photo Credit:Studying on the Heart” courtesy of flickr user Earlham College

College grads find themselves without jobs or underemployed

On average college graduates with bachelor’s degree have higher incomes than high school graduates and GED holders. However, the economic climate has not been kind to college grads and many recent graduates have found themselves jobless or underemployed. Out of the 1.5 million recent grads in the job market this year, about half of them were underemployed in food services as waiters, bartenders, baristas, as well as in retail, reception and other lower-wage jobs. Median wages overall are down for bachelor’s degree holders and young grads are finding themselves in jobs that only require a high school diploma or less.

This phenomenon does not equally affect all college graduates in all areas of study. Recent grads with majors in anthropology, philosophy, humanities and the arts were among the least likely to find jobs appropriate to their level of education. On the other hand, graduates with degrees in nursing, teaching, accounting, computer science, and engineering were among the most likely to find a job that suited their level of education and their field of study.

College graduates are finding that they are being squeezed out by more experienced and even higher educated workers who hold additional degrees and years of work experience. In addition to competition from others, graduates face technological changes that eliminate jobs entirely and replace people with computers. Most job gains are going to workers at the top and bottom of the wage scale in jobs that can’t be replaced by machines or computers.

In addition, U.S. workers may be falling victim to “degree inflation” in which bachelor’s degrees are more common in lower-wage jobs, but still inadequate for higher-wage options. Harvard economist Richard Freeman advises student who don’t know what they will be doing with their degree, or if they don’t have a degree in mind, “take some job, if you can get one, and get a sense first of what you want from college.”

Posted by Devon Thorsell

Source: Yahoo Finance

Photo credit: South Dakota State University Graduation courtesy of flickr user Sarah Cady

News Digest: Pinched

The following is an event summary from a book discussion hosted by the Program on America and the Global Economy on August 8, 2011.

While the current recession is causing millions of Americans real and tangible pain today, the wounds inflicted by the current economic climate may prove to be more long-lasting and damaging than originally thought.  This is the argument espoused by Don Peck in his recently released book, Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It.  The book, which is based upon Peck’s cover story from the March 2010 issue of The Atlantic Magazine, details how the lingering effects of this recession will be felt by those hardest hit for the remainder of their professional lives.  As Peck stated, “[l]ong recessions leave deep, permanent scars on society.”  The event was moderated by Kent Hughes, the Director of the Program on America and the Global Economy.

Peck began by bringing the audience back to the spring of 2009.  Lehman Brothers had collapsed.  TARP (The Troubled Assets Relief Program) had been signed into law by President George W.Bush and the Federal Reserve had been active on a number fronts.  When President Obama was inaugurated in January of 2009, the economy felt as if it were in free fall; some 750,000 jobs were lost in that first month.  The nation was holding its collective breath in an attempt to weather the storm.  Many of the economists Peck spoke with warned that our sigh of relief was premature.

It was during this time that Peck interviewed economists who first told him that this recession will have more than a cursory impact on those adversely affected.  Peck stated that for these individuals “there really was a lifelong impact.”  This lifelong impact was especially felt by the young with limited education who had only recently entered the workforce.  Starting in very difficult circumstances, this group “quite literally never caught up,” Peck argued.

This phenomenon is not unique to the current moment in time.  Peck discussed the recession of the early 1980’s and found that those who entered the workforce during that downturn were still suffering the consequences twenty years later.  Among the issues they faced were the fact that they were disproportionately in non-professional jobs, they were well behind on income, and they clung more tightly to their careers.  As Peck researched further he found that similar experiences were reported throughout American history, including the 1970’s, the end of the gilded age, and, of course, the Great Depression. Read more of this post