One of the key ingredients in the Egyptian revolutionary recipe was frustrated unemployed youth.  OECD countries themselves might be cooking up a similar cocktail of social instability, based on a reading of a recent OECD report.

Youth unemployment has increased dramatically these past three years.  They have been among the first to lose their jobs, in part because large numbers are on temporary contracts.  This means that it is easy and cheap to fire them.  Looking ahead, the job prospects for youth seem grim. 

Youth unemployment is usually higher than the average for the economy as a whole.  A lot of it is short term, as young people move out of education, and take time to find the right job. 

In the decade leading up to the global financial crisis, youth unemployment gradually crept down from 16 to 14 per cent.  Sure, there were still problems. 

First, there are the kids who are “left behind”.  They tend to lack a diploma, come from an immigrant/minority background and/or live in disadvantaged/rural/remote areas.  These kids are usually neither in education, employment or training (NEET) and accounted for some 11 per cent of OECD youth population in 2008. 

And then, there are the “poorly-integrated new entrants”.  These kids face significant barriers to finding a stable job.  They may have qualifications, but they frequently go back and forth between temporary jobs, unemployment and/or inactivity – even in good times. 

But overall the situation was improving, even if everything was not rosy. 

Then, “big, bam, boom”.  The global financial crisis struck, and youth unemployment went sky-high -- much more than for the overall labor force.  For OECD countries, youth unemployment jumped to 18.5 per cent of the labor force of 15 to 24 year olds in the third quarter of 2010 – up from 13.5 per cent three years before.  In other words, nearly 3 1/2 million youth, especially the less well educated, joined the ranks of the unemployed in 3 years.

In the US, youth unemployment increased 7.4 percentage points to 18.2 per cent, while in Europe it rose 6.2 percentage points to 21.1 per cent.  Youth unemployment exceeds 25 per cent of the labor force in Finland, Greece, Ireland, Italy, the Slovak Republic, Spain and Sweden.  In Spain, the youth unemployment rate is up to 40 per cent!  Obviously, there are some countries which are doing better than others.  Youth unemployment is still at 10 per cent or less in Austria, Germany, Japan, Korea, Mexico, the Netherlands, Norway and Switzerland.  Overall, youth are twice as likely to be unemployed as adults. 

These unemployment statistics are one thing.  But the drama is that they don’t pick up the big number of kids who are in the NEET group, basically kids who have dropped out.  The NEET group rose from 10.8 per cent in 2008 to 12.5 per cent of the youth population in 2010.  That means some 16.6 million kids, 10 million who have given up hope and 6.7 million who are still seeking work.

What to do?

First of all, we have to get out of this global economic crisis which has had a much bigger impact on jobs than anyone imagined.  Even now, there are lots of things that government can do like: providing income support to unemployed youth to sustain their job search; assisting them in their job search; and encouraging firms to hire youth, by offering temporary subsidies targeting low-skilled youth and those who have completed their apprenticeship. 

Looking beyond the crisis, the OECD has a number of recommendations to tackle the structural problems afflicting the youth jobs situation, such as: ensuring that youth leave education with recognized qualifications; facilitating the transition from school to work by apprenticeship schemes or work experience; and reducing the demand barriers for youth labor.  Getting off to a good start in the labor market lays the foundation for a good career.  It can be difficult to catch up after an initial failure.   

Measures to tackle the youth jobs crisis have been implemented by some countries like Denmark, the Slovak Republic, Belgium, Korea and Australia.  But overall, too few countries are taking pro-active steps.  This is regrettable because the OECD estimates that 30-40 per cent of school leavers are at risk of having future job prospects scarred by the economic crisis.

The OECD’s policy analysis is laudatory.  But the prospects for an improvement in the youth jobs situation are dim: 

.  As US Federal Reserve Chairman Ben Bernanke said, “We do see some grounds for optimism about the job market over the next few quarters …Even so, if the rate of economic growth remains moderate, as projected, it could be several years before the unemployment rate has returned to a more normal level.” 

.  In a 6 March interview with the UK Daily Telegraph Bank of England Governor Mervyn King has warned of the risk of more financial crises, if we don’t reform banks.  The “too big to fail” problem has not been solved. 

.  With the economy and employment situation remaining fragile for possibly many years, we are likely to see even greater “informalisation” and “casualization” of work.  More and more people, who would prefer to have a permanent full-time job, will resort to part-time or temporary or some other form of irregular work.  Overly strict regulation on permanent contracts in countries like France, Italy, Japan and Spain dissuade employers from offering permanent contracts.  In Japan, for example, one-third of the labor force has an irregular work situation, and many of those are youth.  At least half of all young workers have a temporary contract in Slovenia, Poland, Germany, Spain, Portugal, Sweden, Switzerland and France.    

.  Government stimulus packages in response to the global financial crisis allocated very little funds to directly supporting job creation.  And now that budget cutbacks are made in many countries to get unsustainable deficits under control, education budgets are being hit and student fees are rising in the UK.

.  Anyone, especially youth, who is unemployed for a long time eventually loses skills, and then self esteem and confidence, and risks falling into the ranks of the permanently unemployed.

As the OECD Secretary-General Angel Gurria said, “Investing in young people is vital to avoid a scarred generation at risk of long-term exclusion”.  Most regrettably, there is a great chance of that risk becoming a reality with a lost generation on the cards.  This would be a tragedy.  Youth are perhaps the greatest assets of any society.

As Mervyn King said “the people have a right to be angry”.  He is right.  And if we do see a “lost decade” for our youth, we will see more and more of this anger spill over into the streets.

References:

OECD, Off to a good start? Jobs for Youth.  2010

http://www.oecd.org/document/31/0,3746,en_2649_37457_46328479_1_1_1_37457,00.html  

Bernanke, Ben S. Bernanke.  Semiannual Monetary Policy Report to the Congress Before the Committee on Banking, Housing, and Urban Affairs

U.S. Senate, Washington, D.C.  March 1, 2011

http://www.federalreserve.gov/newsevents/testimony/bernanke20110301a.htm