Expanding the Youth Unemployment Conversation

Let’s face it, 2014 was not a banner year for young people in the job market. As 2015 gets underway, levels of youth joblessness, underemployment, and idleness continue at historic levels worldwide; and trends are not likely to reverse anytime soon according to projections from the International Labor Organization (ILO). As many as a third of young people in a number of countries in the Middle East and North Africa are among the statistics. Across the Eurozone, youth unemployment reached an unprecedented 23 percent; significantly higher than 2007 levels of 15 percent (before the global recession hit). An estimated 50% of South Africa’s youth are out of work. Speaking at Bocconi University in Italy in December as a new report was released, Christine Lagarde, Managing Director of the International Monetary Fund (IMF) claimed “this is not just a cross for the young to bear. Sooner or later this is a cross that society will need to bear. Persistent unemployment not only undermines economic activity, it undermines people’s self-esteem, and it tears at the fabric of society and institutions by breeding inequality and sometimes violence.”

While the collective reaction may be imbued with a sense of urgency, it may not necessarily be well-informed informed or strategic. A lack of youth-specific data and research has made it difficult to understand and respond to the specific structural, institutional or environmental factors that have made joblessness among young people particularly acute. Helping to fill such gaps, the IMF’s study of 22 advanced economies across Europe provides a quantitative analysis of the employment situation before and after the recession, as well as of the effect of active labor market policies (ALMPs) that gives a clearer picture of these underlying dynamics.

Writing last fall, I contended that “meeting the youth employment challenge means recognizing that there is no single cause or solution. It means addressing the skills gap. But, it should also mean a more dynamic approach that assesses and addresses other gaps that permeate both the supply and demand sides of the employment coin.” In exposing many pieces of the youth unemployment puzzle, the report informs and expands the conversation in search of more nuanced, contextually specific and comprehensive responses.

The report reveals two key trends. One, the decline in economic growth accounts for roughly half of youth unemployment (as much as 70% in Greece, Spain, Cyprus). And two, young people were already in a downward spiral of joblessness when the financial crisis hit: suggesting that other issues were at play. Among the leading factors found to drive up or sustain high levels of youth unemployment are the changes in output (slowdown in growth, especially consumption), duality of the labor market with large numbers of young workers on temporary contracts, higher labor costs, business cycles and a heavy concentration of youth in small and medium-sized enterprises (SMEs) and sectors more sensitive to fluctuations in the economy such as hospitality, retail and manufacturing. At the same time, more vocational education and investment in well-designed targeted ALMPs such as support, training and services are associated with lower youth unemployment.

As the report makes clear, the situation demands a diverse policy response. In addition to skills and job-relevant training and apprenticeships (in close partnership with the private sector), governments should surely consider or reconsider labor policies such as, minimum wage, taxes, payroll subsidies and employment protections that deter longer-term hiring. They should also explore more deliberately how a broader range of economic growth policies — trade, industrial and infrastructure, monetary, regulatory — can break through the array of supply and demand bottlenecks inhibiting young people’s successful entry and future in the workplace.

While available statistics and emerging evidence suggest the undercurrents of the youth unemployment phenomena in Europe are not necessarily unique to the region, further analysis of this kind is needed to explain trends in other advanced, emerging and developing economies and expand the policy dialogue even further. Survey based research such as the School to Work Transition Surveys from the International Labor Organization, along with rigorous assessments of specific interventions such as 3IE’s impact evaluation of the controversial youth wage subsidy voucher in South Africa (spoiler: they find people with voucher were more likely to get and stay in a job than those without), continue to point towards the need for comprehensive, evidence-based policy approaches.

Unfortunately, the situation could worsen before it improves. But, a better-informed, wide-ranging, and strategic response could address it more quickly and effectively.

Originally published on December 24, 2014, this post was modified on January 8, 2015. You can review a selection of my other writings and interviews here.