Lee-Roy Chetty
Lee-Roy Chetty

Global youth unemployment trends

Around the world, many youth are increasingly trapped in low-productivity, temporary or other types of work that fall short of their aspirations and that often do not open opportunities to move to more permanent, higher-productivity and better-paid positions. In developed world economies, youth are increasingly employed in non-standard jobs and the transition to decent work continues to be postponed. The growth of temporary employment and part-time work in the past decade, in particular since the global economic crisis, suggests that this work is increasingly taken up because it is the only option available.

As an example, in the EU, youth part-time employment as well as youth temporary employment have grown faster than adult part-time and temporary employment both before and during the economic crisis. The trend towards an increasing incidence of temporary contracts has fuelled the debate over labour market flexibility in general, and labour market duality in particular. However, evidence on the impact of employment protection legislation (EPL) remains uncertain. This form of legislation refers to all types of employment protection measures, whether grounded primarily in legislation, court rulings, and collectively bargained conditions of employment or customary practice.

EPL on aggregate employment/unemployment levels is also still inconclusive. However, EPL could affect the position of particularly vulnerable labour market groups such as young people. A partial – dual track – reform strategy of EPL which includes involving labour market reforms only at the margin and for new hires while leaving the employment security entitlements of incumbent workers unchanged could be beneficial for the youth labour market.

Conversely, youth in developing economies – such as South Africa – face strong structural barriers in their search for employment or even decent work. The share of paid employment in total employment in much of the developing world is low, and a high share of youth is likely to engage in unpaid family work supporting informal family businesses. Demographic trends are such that the youth labour force continues to grow in precisely those regions where few opportunities for paid work exist and where working poverty is widespread, particularly in sub-Saharan Africa and South Asia.

Specifically within a South African employment context, for a number of years growth in the labour force outstripped employment creation. Demographic shifts have contributed to this development, as large numbers of women and young people have entered the workforce. As a result, strict unemployment peaked at 31 percent by 2001 and accelerated job creation finally saw unemployment falling to 23.2 percent by the third quarter of 2008.

However, high rates of unemployment in our country still continue to anchor widespread poverty. Poor households tend to have high dependency ratios, with few earners supporting multiple dependants. Only 41 percent of the working age population is working, which is well below the average of similar developing world countries. South Africa’s cost of living reflects its status as a middle-income economy, and wages are comparable to those found in other middle-income countries. However, because many low-wage earners have to support so many people, many working households live near or below the poverty line.

Unemployment is mostly experienced by youth in our country. About two thirds of all unemployed are below the age of 35. Youth unemployment rates fell dramatically between 2002 and 2008. Based on a 2010 Labour Force Survey, the unemployment rate for 15–24 year olds fell from 55.9 percent to 46.6 percent over this period. These figures mask the significantly higher unemployment rates for black youth. Almost all of the job losses in 2009/10 were experienced by those under the age of 30, and with less than a grade 12 education. About half the cohort falls within this category, dropping out of school mostly after grade nine. As a consequence of this trend, young people in our country are poorly prepared for further training and work.

A possible long-term solution to this challenge include education and training. These two variables will become increasingly essential for young people to enter the labour market successfully as they increase their potential productivity and employability. In developed economies, education also serves as a shield against unemployment for many youth, and there is a strong link between educational attainment and employment outcomes. In particular, individuals with primary education or less, often have the highest unemployment rates, and fare worse than those with higher levels of education at times of crisis.

However, more human capital development and higher levels of education do not automatically translate into improved labour market outcomes and more jobs. In developing economies, available job openings are limited by small formal sectors, and youth do not necessarily possess the right skills to qualify for the existing openings. Fast structural change in these economies creates skill and geographical mismatches that pose special challenges for education and training systems and their responsiveness to labour market needs. In this respect, proper labour market information is necessary to facilitate both the role of education in meeting current labour demand and in facilitating change.

Young people that are neither in employment nor in education have become a serious concern for policy-makers, in particular in developed economies. This group, called “NEET” (not in education, employment or training), often constitutes at least 10 per cent of the youth population, and disproportionally includes youth with a low level of education in developed economies. Many countries have introduced policies to tackle this phenomenon, targeting specific subgroups of the NEET such as school drop-outs or unemployed youth.

As youth unemployment rates are projected to remain essentially unchanged in 2012, and most regions face major youth employment challenges, youth employment policies warrant the highest priority.

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