Youth unemployment: modern trends and consequences

Youth unemployment: modern trends and consequences

19 April 2017

Youth unemployment is one of the biggest problems of the European regions and the majority of developing countries. Post-soviet countries are not an exception. In Armenia, Georgia and Ukraine the level of youth unemployment can be compared to the level of African and Latin- American countries. The true scale of youth problems on the labor market are way bigger, as the work young people find can be hardly classified as decent. Young people have to face violation of their rights, illegal employment and subemployment.

Though the effects of recent economic crisis were significant, its consequences  differ across Europe. The countries hit the most by the crisis have higher level of youth unemployment. The “scarring” effects of long-term youth joblessness leaves a legacy that reduces lifetime earnings, increases the risk of future periods of unemployment, and results in poorer health, well-being.

Size of the problem

In a climate of renewed concerns about global economic growth,  youth unemployment is on the rise after several years of improvement.

Global economic growth in 2016 is estimated to stand at 3.2 per cent, 0.4 percentage points lower than the figure predicted in late 2015. The downward revision is a result of recessions that were deeper than expected in some key emerging commodity-exporting countries, including Argentina, Brazil and the Russian Federation. In addition, growth in developing countries, at only 4.2 per cent in 2016, is at its lowest level since 2003. Despite anticipation of a slight improvement in global growth for 2017, global investment and hiring decisions remain subdued in the face of the uncertainty generated by a rapidly changing environment.

Consequently, the global youth unemployment rate is on the rise after a number of years of improvement, and is expected to reach 13.1 per cent in 2016 (from 12.9 in 2015). This is very close to its historic peak in 2013 (at 13.2 per cent) and where it is expected to remain in 2017. As a result, after falling by some 3 million between 2012 and 2015, the number of unemployed youth globally will rise by half a million in 2016 to reach 71 million and will remain at this level in 2017.

The deterioration is particularly marked in emerging countries where the unemployment rate is predicted to rise from 13.3 per cent in 2015 to 13.7 per cent in 2017 (a figure which corresponds to 53.5 million unemployed in 2017, compared to 52.9 million in 2015). The youth unemployment rate in developing countries is expected to remain relatively stable, at around 9.5 per cent in 2016, but in terms of absolute numbers it should increase by around 0.2 million in 2016 to reach 7.9 million unemployed youth in 2017, largely due to an expanding labour force. Finally, in developed countries, the unemployment rate among youth is anticipated to be the highest globally in 2016 (14.5 per cent or 9.8 million) and will decline to 14.3 per cent in 2017.

In developing countries the high level of youth unemployment reflects the list potential for national economic transformation and leads to social instability. Developing regions with high level of unemployment include North Africa (26.6%), Middle East (24.0%) and CIS countries (22.6%).

Tendencies of youth unemployment in CIS countries are similar to the global ones. In 2016 the average level of unemployment varies between 13-20%. At the same time, in Armenia and Georgia the figures will amount to 35%, in Ukraine - 28%, the highest ever level over the independence period.

In Russia the high unemployment level is linked to mismatches in education and market demands. The government tries to balance the situation with various vocational education programs and other measures. 

Job quality for youth

Another alarming tendency is linked to the growth of so-called "working poor". The large numbers of young people are working, but do not earn enough to lift themselves out of poverty. In fact, roughly 156 million youth in emerging and developing countries (37.7 per cent) live in extreme poverty (i.e. on less than US$1.90 per capita per day) or in moderate poverty (i.e. on between US$1.90 and US$3.10) despite being in employment. Among working adults the numbers make 26 per cent.

Meanwhile, in developed countries with available information, youth are more at risk of relative poverty (defined here as living on less than 60 per cent of median income) despite having a job. For example, the share of employed youth categorized as being at risk of poverty was 12.9 per cent in the EU-28 in 2014, compared to 9.6 per cent of working adults, i.e. aged 25–54. In addition to low pay, young people frequently work involuntarily in informal, part-time or temporary jobs. For example, in the EU-28, among youth employed in part-time or temporary positions in 2014, approximately 29 per cent and 37 per cent, respectively, are doing so involuntarily.


Similar tendencies can be observed in CIS countries. Kazakhstan and Azerbaijan, for example, have a lot of young people working in the informal sector. According to trade unions of Azerbaijan, the country does not have problems with youth employment. However, the quality of jobs remains low, and major part of available jobs can be found in the informal sector. 

Moscow bureau of the International Labor Organization helps post-soviet countries to fight information employment and other negative factors in the labor market. Thus, for Kazakhstan the ILO has developed an employment plant till 2020,  enabling to keep the youth unemployment level at 5%. To pilot projects have been lunched in Azerbaijan, including allocation of subsidies for employers - half of the wage for young specialists with higher education; and development of self-employment, especially in regions.

Increased willingness to migrate

Facing the prospect of unemployment, working poverty and/or vulnerable forms of employment, young people tend to look abroad for better education and employment opportunities.

In 2015, 20 per cent of the global youth population aged between of 15 and 20 were willing to move permanently to another country. In some regions the figures amount to 38 per cent.

In 2015, almost 51 million international migrants were aged between of 15 and 29, more than half of whom resided in developed economies. Additionally, in 2015, 20 per cent of the global youth population in this age range were willing to move permanently to another country. At the regional level, the willingness to migrate among youth is highest in sub-Saharan Africa and Latin America and the Caribbean, at 38 per cent in 2015, followed closely by Eastern Europe at 37 per cent. The percentage of young people willing to move remains high, at 35 per cent, in Northern Africa, as well as in the Arab States where this rate grew from 21 per cent in 2009 to 28 per cent in 2015. The lowest average inclinations to move are instead found in Southern Asia and Northern America where only 17 per cent and 15 per cent of youth respectively are willing to leave their country (data for Northern America refer to 2014). Within each region, and especially in sub-Saharan Africa and Northern, Southern and Western Europe, cross-country differences remain sizable, with youth in poorer countries typically showing the highest propensity to migrate.

Core reasons of youth unemployment growth

Based on an extensive review of the research and debates on definitions of youth unemployment, there are several core factors influencing job search:  

  • General economic situation in the world. Global economic growth in 2016 is estimated to stand at 3.2 per cent, 0.4 percentage points lower than the figure predicted in late 2015.
  • Lack of necessary information for young people, especially for youth with low social capital. Many young people do not have enough knowledge about the modern labor market, which does not let them make a right choice in career building. School does not give proper preparation for such choice.
  • Lack of skills. Many educated graduates have only theoretical knowledge and are not fit enough to solve pressing problems they may face at work. Modern youth lacks such skills as cooperation, communication, critical and creative thinking. The problem lies in weak ties between the school and employers.
  • Lack of experience. Many employers are skeptical about skills of graduates and do not want to spend time teaching them while experienced workers may be unemployed and available for hire.
  • Lack of contract jobs, suitable for entry level skills. Some labor markets, especially in developing countries, suffer demographic mismatch between the number of young people seeking jobs and the level of local economic activity. The most available jobs are in the informal sector or underdeveloped industries.

In tough times young people are often the first to lose out. They are relatively inexperienced and low-skilled, and in many countries they are easier to fire than their elders. As a result, many young people have to face long-term unemployment or underemployment.

Consequences (youth left behind)

The harm today’s youth unemployment is doing will be felt for decades, both by those affected and by society at large.

Prince’s trast research has found that youth unemployment leaves a “wage scar” that can persist into middle age. The longer the period of unemployment, the bigger the effect. The best predictor of future unemployment, research shows, is previous unemployment. a young person who spends just three months out of work before the age of 23 will on average spend an additional 1.3 months in unemployment between the ages of 28 and 33 compared with someone without the spell of youth joblessness. Similar research published by The Economist shows that if a young man spends a year unemployed before the age of 23, ten years later he can expect to earn 23% less than the other, and 16% less 20 years later.

Moreover, the “scarring” effects of long-term youth joblessness leaves a legacy that reduces lifetime earnings, increases the risk of future periods of unemployment, and results in poorer health and well-being, proclivity for crime.

Youth unemployment has direct costs in much the same way all unemployment does: increased benefit payments; lost income-tax revenues; wasted capacity.

Conclusions

The lack of engagement in regular paid employment can result in a vicious downward circle in terms of subjective senses of recognition, value, and well-being. The consequences of differentiated trajectories are socially divisive. At a very individual level, the consequences of the barriers encountered by attempting to make the transition to independent adulthood, through employment, housing, and family formation, will have an aggregate effect in relation to demographic and fertility trends.

Youth transitions to economic independence and adulthood are becoming increasingly more difficult and protracted. The distinguishing characteristics of contemporary youth labor markets reflect structural changes in employment and increased demands for labor flexibility and changing skill requirements, new patterns of migration, polarization created by family legacies,

The 2030 Agenda for Sustainable Development provides a unique opportunity to incorporate youth policies into comprehensive sustainable development strategies. After all, improving outcomes for youth through appropriate youth employment and social policies is fundamental to inclusive and sustainable societies and to the achievement of the SDGs.

Sources:

  1. World Employment and Social Outlook 2016: Trends for Youth http://www.ilo.org/global/research/global-reports/youth/2016/WCMS_513739/lang--en/index.htm 
  2. Five Characteristics of Youth Unemployment in Europe. http://sgo.sagepub.com/content/5/1/2158244015574962
  3. Fiscal policy and the youth labour market. http://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_466541.pdf
  4. http://www.ilo.org/dyn/youthpol/en/f?p=30850:1001:0::NO:::
  5. Europe - Regional eAnalysis. http://www.ilo.org/dyn/youthpol/en/f?p=30850:2001:0::NO:2001:P2001_REGION_CODE:EU
  6. In which countries is it hardest for young people to find work in 2016? http://www.ilo.org/global/about-the-ilo/multimedia/maps-and-charts/enhanced/WCMS_514559/lang--en/index.htm
  7. princes-trust.org.uk
  8. Left behind. http://www.economist.com/node/21528614 

 

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