What Taking a Global View of Youth Unemployment Reveals

October 9, 2015

Looking at trends in youth unemployment in high- and low-income countries makes the need for supporting youth entrepreneurship clear

Youth unemployment is a critical issue for any country. From the lifelong effect graduating in a recession can have on students’ earnings to the upheaval of the Arab spring, the headlines of the last few years have shown that the ramifications of youth unemployment are deep and far-reaching. Taking a global view of trends in youth employment reveals what’s at the heart of the challenge—and points to the change that needs to be made to address it.

While youth unemployment rates across geographies vary, they diverge in a fashion that one may not expect. The world youth unemployment rate (ages 15–24) sits at 13.9 per cent, according to the World Bank, increasing by .2 percentage points since 2006. High-income countries—including the United States, Argentina and Kuwait—average an unemployment rate of 18.2 per cent. Middle-income countries—including China, Malaysia and Mexico—average a rate of 13.8 per cent. Low-income countries—including Afghanistan, Nepal and Liberia—a rate of 9 per cent. The key to making sense of what may be a surprising disparity is to ask: What kind of employment do these numbers reflect? That in turn underscores the transformative role youth entrepreneurship can play in both developing and developed economies.

“What often goes unrecorded in the data on youth unemployment is underemployment, and the negative impact that has on income and quality of life,” says Dr. Ben Oppenheim, Visiting Scholar and Senior Fellow at New York University, whose research focuses on economic development and governance in emerging markets. “Unemployment estimates can also be unreliable, since in many emerging markets, a significant share of labor activity takes place in the informal economy.”

A dearth of legal, high-paying economic opportunities means populations, including youth, in developing countries are forced to take jobs that expose them to occupational hazards and decrease their overall well-being. A 2012 study, for example, found that people in developing countries are exposed to more than 80 per cent of global occupational hazards.

In a similar vein, workers in the developed world are witnessing an increased informalization and fragmentation of their work, putting greater strains on youth employment. “What we see today is increasingly informalized labor in wealthy countries,” says Oppenheim. “The rise of the on-demand economy creates both pressures and opportunities for workers in the developed world to piece together income streams, as many people in developing countries do.”

This global, cross-regional perspective helps to clarify where the focus of combating youth unemployment should be—not just on hitting a number of “employed,” but also on creating quality employment opportunities with a positive impact on the individual and community alike. Fostering youth entrepreneurship may provide one avenue for accomplishing this.

“Small and micro enterprises can absorb a lot of labor, and we know how to stimulate those kinds of businesses—for example, through microloans when credit bottlenecks are a critical constraint,” says Oppenheim. While no prescription for fostering youth entrepreneurial activity will be the same across borders, there may be similar through-lines that transect geographies. A key challenge, however, says Oppenheim, is that not everyone is ready to be an entrepreneur, and training and relieving constraints to entrepreneurship can only go so far.

This highlights that a combination of measures is needed to support a culture of youth entrepreneurship by choice, as opposed to labor-force participation out of hand-to-mouth necessity. While programs like social safety nets can free young would-be-entrepreneurs from subsistence work, getting to the “liftoff” point, where ideas become thriving business realities, takes more than that. That’s why training and mentoring are key. Investing in these resources for youth can have an impact on a country’s social and economic health that goes far beyond today’s topline numbers.

In the coming weeks, we’ll explore how this central insight is being turned into solutions that are unique to the challenges and opportunities of countries around the world.

 

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