Editor’s Note: This is an edited version of an article from the ‘Oxford Analytica Daily Brief’. Oxford Analytica is a global analysis and advisory firm that draws on a worldwide network of experts to advise its clients on their strategy and performance.
From the ‘Occupy’ phenomenon to last year’s ‘Arab Spring’ uprisings, young people have been at the forefront of recent social protest trends. There is nothing new in youth-led protest; but since the 2008-2009 global financial crisis, youth unemployment levels have remained persistently high across the world. Especially in countries facing budget austerity, high youth unemployment levels could stoke significant social unrest.
In addition to stability questions, there’s the obvious economic impact: Young workers facing prolonged unemployment are at risk of years of low compensation once they eventually re-join the workforce. They are even at risk of permanent exclusion from job markets.
The United Nations estimates that last year 74.8 million youth between the ages of 15 to 24 faced joblessness, with 6.4 million young people dropping out of the labor market in 2011 alone. The highest youth unemployment rates are in North Africa (27.1%) and the Middle East (26.2%). The problem there long pre-dates the global financial crisis - but certainly fed last year’s uprisings.
In the ostensibly prosperous Euro-area countries, over one-in-five young people (21.3%) cannot find a job. When this regionally-averaged figure is broken down to remove countries like Germany, the results are stark: In Spain and Greece, nearly half of all youth are without a job (48.7% and 47.2% respectively). The situation in the single currency area is very unlikely to improve in the short term.
While job-creation for young people will remain a policy priority for governments, the sorts of measures available in the policy tool-box are unlikely to reduce youth joblessness in the medium term.
Governments have tried a range of active labor market policies. These include prolonging the length of stay in education (for example, making welfare payments conditional on continued education, or raising the school leaving age); helping the school-to-work transition through apprenticeships and vocational training programs; addressing youth inactivity by creating jobs and training programs targeted at reintegrating long-term unemployed youth; subsidized wages and tax incentives; and encouraging youth entrepreneurship through easier access to credit.
The European Commission has responded by making funds available to member countries for apprenticeships. One initiative aims to address the mismatch between existing skills and what the market needs. The Commission is drawing on the experience of Germany, a country with long social traditions of apprenticeship and relatively low youth unemployment levels. However, it is far from obvious that the German export-oriented and flexible (reduced hours) model will work in other economies.
More developed countries will introduce or expand apprenticeship schemes. The success of such schemes depends ultimately on whether they provide permanent jobs. However, with little labor demand from the private sector and governments facing budget constraints limiting their space for job-creation, apprenticeships are more likely simply to postpone unemployment. One trend to watch is the reversal of traditional migration patterns: Jobless youth from European countries (like Portugal) relocating to emerging markets (like Brazil).
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