Generation Jobless?

Turning the youth unemployment crisis into opportunity

P. Vogel

• Publisher: Palgrave Macmillan
• Year: 2015
• Print ISBN:
  9781137375933
• eBook ISBN:
  9781137375940
• Topic: Business
• Subtopic: Business Communication
• Index: Business

Offering guidance on the opportunities and threats for future generations, and featuring interviews with business leaders, this book provides a constructive look at change. It directs the youth to become job creators, not job seekers, and to approach the corporate and political worlds with an entrepreneurial mind-set.

Part I

Youth Unemployment—Background and Outlook

We are facing a great test of our time—an epidemic of youth unemployment. Half of the world’s young people in the labor force are either working poor or unemployed. The global youth unemployment situation is intolerable, in particular for young women. In countries rich and poor, unemployment rates for young people are many times those of adults—and of course joblessness is the tip of the iceberg. Many are stuck in low wage work with no protection in the informal economy. Many others find that their schooling has not equipped them with the tools for today’s job market … Work is far more than a source of income; it is a source of dignity! Ban Ki-Moon; ILO, 2014a

chapter 1

The Youth Unemployment Crisis and the Threat of a “Generation Jobless”

I think it is probably the first time, at least since the Second World War, that a new generation faces the future with less confidence than the previous generation.

José Manuel Barroso; European Commission, 2011

The recent economic crisis, the worst since the Great Depression in the 1930s, has led to a disproportionate increase in youth unemployment around the world. Young people in both developed and developing economies are facing harsh labor market conditions. In 2013, more than 70 million young people were unemployed with even greater numbers not even being considered in these statistics because they either dropped out of the system or because they never entered it.

In the developing world, where almost 90% of the world’s youth is located, many young people are living in poverty with their only access to work being informal or under indecent employment conditions. However, as we have witnessed over the past years, youth joblessness is not only a problem of poor countries but a truly global problem with an equally grim picture being drawn in the developed world. In Europe, for example, youth unemployment rates have increased by 60% since 2008 (ILO, 2012a), leaving every fourth employable young person without a job. In many countries these numbers are even greater with Greece and Spain having passed 50% youth unemployment back in 2012. According to the ILO the overall youth unemployment is projected to further increase in the near future.

Other labor market indicators such as a widening gap between youth unemployment and adult unemployment and an increasing NEET (neither in employment, education or training) rate add up to an even bleaker outlook for youth. All these factors combined force us to take the initiative and come up with quick win solutions and at the same time sustainable ones for the future.

OFFICIAL STATISTICS BY THE ILO

The global youth unemployment rate, estimated at 12.6% in 2013, is close to its crisis peak. 73 million young people were estimated to be unemployed in 2013. At the same time, informal employment among young people remains pervasive and transitions to decent work are slow and difficult.

By 2018 the global youth unemployment rate is projected to rise to 12.8%, with growing regional disparities, as expected improvements in advanced economies will be offset by increases in youth unemployment in other regions, mainly in Asia.

Rising youth unemployment and falling labor force participation contributed to a decrease in the global youth employment- to-population ratio to 42.3% in 2013, compared with 44.8% in 2007. Part of this decrease is due to rising enrollment in education. The global youth employment-to-population ratio is projected to be 41.4% in 2018. Globally, the ratio of youth to adult unemployment rate hardly changed in recent years, and stands at 2.7 in 2013. Young people therefore continue to be almost three times more likely than adults to be unemployed, and the upward trend in global unemployment continues to hit them strongly.

Note: The ILO contribution was provided by Dr. Duncan Campbell, Director Global Mega-Trends Research Department, International Labour Organization (ILO) of the United Nations. It has been adopted from ILO (2013)

But why is youth in such a seemingly hopeless situation? Various complex and inter-connected issues have collectively caused this crisis and their resolution will also require a collective effort. One of the main reasons for why these past years have been particularly harsh for young people is that the economic crisis and the resulting drop in overall demand for employees has coincided with the occurrence of fundamental structural shifts in the way we live and work. This is best expressed by the fact that a quarter of all the job losses of young workers have occurred after the crisis was officially over (O’Sullivan et al., 2014).

Other reasons can be broadly classified as supply-side issues, demand-side issues, and supply-demand mismatch issues. On the supply side it is factors such as a rising youth population, lack of skills of young workers, the proportion of young people with tertiary but non-vocational degrees (mainly in developed world), and fundamentally different characteristics of today’s young people compared to previous generations. Demand-side factors include poor macroeconomic performance, inflexible labor markets, a fundamentally different labor market and world of work and the rise of temporary employment of youth. Moreover, there is a mismatch between supply and demand including skills mismatch or an expectation mismatch.

Given the magnitude of these factors, the reduction of youth unemployment is one of the major challenges governments are currently facing and will be facing for decades to come (Schoof, 2006). If no suitable labor market solutions are identified, the result of the widespread and persisting youth unemployment will be economic waste, an undermined social stability and a marginalization of the local workforce, a valuable natural resource for any country.

In addition, this crisis could have long-term consequences for the unemployed youth. While unemployment is bad at any age, it is particularly harsh early in a person’s professional life. A growing body of academic literature suggests that early unemployment has life-long “scarring” effects on an individual (decreased salaries, and affected mental and physical health), their families (increased financial burden and challenge of handling the situation), economies (waste of economic resources) as well as the entire country (threatened social stability, criminality, and loss of tax revenues). The economic and social costs resulting from a prolonged youth unemployment crisis continue to rise and undermine the growth potential of economies.

Everybody, from the protesters of the Arab Spring and those in front of the Greek parliament to policymakers, to international organizations, employers, entrepreneurs, media, parents, and young people, around the world are debating the youth labor market crisis, and coming to the conclusion that if we do not make this our priority number one and act, that today’s youth will be scarred for life and branded as the “Generation Jobless,” cursed to be marginalized at work and in society (Wallstreet Journal, 2011; The Economist, 2013).¹

Youth unemployment does not have to end in a catastrophe. But if we want to avoid a Generation Jobless we need to act quickly and implement both short-term solutions for today’s youth and long-term solutions to avoid repeating today’s crisis. It is of critical importance that all involved stakeholders collectively work on these solutions to create decent employment conditions for young people around the world. Unfortunately, the short-term solutions that can be implemented on the spot are not necessarily sustainable and might even make things worse in the long run. Yet, do we have a choice?

to avoid a Generation Jobless we need to act quickly

What we know for sure is that there is no “one-size-fits-all” solution for youth unemployment. Instead, we need to build a plethora of customized solutions that each addresses one or more of the underlying issues. Tackling youth unemployment from different angles by implementing multi-stakeholder solutions that are well coordinated and orchestrated is the best bet we can make. The ultimate goal must be to create more and better employment opportunities for young people and associated with it a national and international framework to smoothen the transition from school to work. We need to rethink our education systems in order to improve the match between skill demand and supply; thus the issue of under-education or under-skilling (young people who do not have sufficient skills for the jobs that are available on the labor market) and that of over-education or over-skilling (young people’s skills are not being used to the full potential). Furthermore, and linked to the previous point, we need to promote the attractiveness of vocational education and training (VET) to ensure that we achieve a more balanced set of profiles with academic and vocational competencies. Most importantly, industry partners need to be at the core of the solution to ensure that the proposed strategies are driven and fully supported by the labor market (ETUC, 2013).

there is no “one-size-fits-all” solution for youth unemployment

By taking a global, multi-stakeholder perspective this book assesses the youth labor market crisis, including the drivers and outcomes, and showcases proven solutions. The goal is to give guidance to each of the involved stakeholders on how they can become part of the solution. This introductory chapter continues as follows: The next section will introduce a range of definitions and relevant youth labor market indicators. Thereafter, the main causes of the youth unemployment crisis are discussed, both from a supply and a demand perspective. This is followed by a regional analysis of the crisis pointing towards the major differentiators between developed and developing economies. The chapter concludes with an assessment of the situation in case we do not manage to get a hold of the crisis and the threat of a Generation Jobless.

1.1 Definitions and Indicators

The first thing to do before entering a more detailed discussion about youth unemployment is to define what I mean by “youth” and “unemployment.” While intuitively it seems quite obvious what these two words stand for, it actually becomes tremendously complex when employing a more holistic and global perspective that accounts for regional differences such as the education system (e.g., the differing levels of compulsory education and net enrolment rates across regions)² or the labor market (e.g., when do individuals in a specific country typically transition into the labor force? Are there any government programs that allow individuals to officially register as “unemployed”?). So to ensure that we are talking about the same things I will next discuss some core definitions that are being used in this book.

1.1.1 Youth

In the broadest sense youth can be considered the transition ...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures and Tables
• List of Case Studies and Solution Ideas
• Foreword
• Preface
• Acknowledgments
• About the Author
• Part I Youth Unemployment—Background and Outlook
• Part II From Crisis to Opportunity
• Afterword
• Notes
• Bibliography
• Index