Youth Unemployment - Global Perspective - Term Paper Example

Youth Unemployment: Global Perspective Contents Summary of Chapter 2 3 Key Trends across the globe 4 Algeria: 5 South Africa: 6 USA 7 Thailand 8Korea Republic 9 Argentina 10 Brazil 11 Mexico 12 Germany 13 Italy 14 Youth Unemployment 14 Causes of Youth Unemployment 15 Role of education, trainings and skills 16 Reference List 19 Summary of Chapter 2 The book titled Jilted Generation: How Britain Has Bankrupted Its Youth by Howker and Malik (2010) has been one of the most insightful books, which have shown how political myopia and ineffective policies of Britain have constantly benefitted older generation by marginalizing the younger one. The second chapter of this book, focusing on jobs, has revealed that job search by the youth has been characterized by “exploitative” and “lengthy” unpaid internships. This chapter has clearly emphasized that youth will not value their work unless the work is valued through remuneration. This particular realization has made the government adopt changes in policy to help the youth. Although the younger generation are now being employed in return of wages, their living standard is still highly compromised. The real wages received by the youth has fallen particularly for the age group of 16-24years from 2003-2011. The toughest problem is that the younger generation in labour markets has low chances of higher prosperity and real income compared to their parents. It has been a common consensus that performance of the youth employment has been less than impressive in almost all developed nations; but, this book has pointed out that youth unemployment had been aggravating in British economy much before the crash of 2008. U.K. has also been regarded as one of the worst performers among the other G8 nations, in terms of youth unemployment. It has been estimated that 14% of the under 25 population have no jobs and authors have estimated that if conditions does not improve in the near future, then the situation is going to worsen. The authors have indicated that among the total unemployment share in U.K., proportion of unemployment under the age of 25 is the highest and it accounts about 40% of the total unemployment. The entire generation is “jilted” because if unemployment percentage under the age of 35 is considered, then this figure rises to 60%. Though the government has been able to reduce the level of unemployment as a whole, yet the segment of the “jilted” generation is degrading. The authors have identified the problem of NEET (not educated, employed or trained) among the youth (9% faces the NEET problem). This implies that a formidable section of the youth does not have the required skill set required by the nation to hire them. The authors have realized that the problems begin at schools, which later manifest in the labour market. The excessively high University fees have created two classes. The percentage that goes to University (40% of the population) and are school dropouts (again 40% of the population) are almost the same. The authors suggest that both the government and the business communities need to work hand-in-hand to deal with this crisis (Howker and Malik, 2010). The few suggestions to solve the problems are: Business leaders visiting schools. Remuneration for apprenticeship. Designing apprenticeship to suit local employment needs. Key Trends across the globe The following table shows average of the unemployment rates of various countries: Figure 1: Comparative level of unemployment A sample of ten countries has been selected; these are located across various geographies with varying levels of income. This table clearly shows that the level of unemployment is highest for the African countries. U.S.A., on the other hand, has maintained moderate levels of unemployment. The lowest level of youth unemployment is noticed among the Asian countries. Latin America has shown a widely divergent performance in terms of youth unemployment. It has been observed that level of unemployment in Argentina has been the highest; whereas, it has been lowest in Mexico. The European countries have again showed mixed results. Germany has achieved relatively better results in terms of youth unemployment. Italy, on the other hand, has been performing poorly in abating unemployment. In order to interpret the level of unemployment, a graphical method has been employed showing the trend from 2000-2012. The rationale for choosing this time frame is that it considers both the time before and after the global financial crisis. Algeria: Figure 2: Algeria trend (Source: World Bank, 2014) This graph shows that though the level of unemployment in Algeria has been one of the highest among the sample considered, yet the government of the country has been successfully bringing down the level of unemployment. Even during the period of global financial crisis, level of youth unemployment did not reflect much variation. The youth unemployment in Algeria has been unresponsive to the economic changes, which implies reduction of youth unemployment in the absolute terms will be larger in the medium term. South Africa: Figure 3: South Africa trend (Source: World Bank, 2014) Though South Africa ranks among the richest country in Africa, in terms of GDP, yet performance of the country, in terms of youth unemployment, has been a concern. It has the highest youth unemployment among the chosen sample and the trend line clearly shows absence of fluctuations over time. The problem peaked during 2004 and reached a minimum in 2009. Presently, it is seen to be rising again. USA Figure 4: USA trend (Source: World Bank, 2014) USA is one of the most developed nations of the world; yet, unemployment ratio of the youth is very high. The graph shows that the level of unemployment has been rising ever since the economy was hit by the recession of 2008. The problem had peaked in the year 2010 after which it has shown signs of improvement. Thailand Figure 5: Thailand trend (Source: World Bank, 2014) Thailand, commonly known as one of the Asian Tigers, had performed excellently in combating youth unemployment. Although the problem had aggravated during the global crash in 2008-09, the country is still on its way to recovery and the unemployment rate is lowest among the entire sample. Korea Republic Figure 6: Korea trend (Source: World Bank, 2014) The trend line for Korea Republic has shown that overall level of youth unemployment has been falling. However, there are wide fluctuations in the performance level. As of early 2000, the level of youth unemployment has been very low, but the country has failed to maintain the same. On the whole, the performance is impressive. Argentina Figure 7: Argentina trend (Source: World Bank, 2014) The overall level of unemployment in Argentina has been quite high. Even so, policies undertaken by the government over the last decade has been successfully combating the problem of youth unemployment. The level of youth unemployment has been quite stable even during the financial crisis and the trend is declining presently. Brazil Figure 8: Brazil trend (Source: World Bank, 2014) Studies from various independent organizations identify Brazil as the most promising country of Latin America, in terms of economic development, in the near future. This idea is also reflected through Brazil’s performance, in terms of youth unemployment abatement. The trend line shows constant fall with slight fluctuations during 2008. Mexico Figure 9: Mexico trend (Source: World Bank, 2014) The average level of unemployment in Mexico has been relatively small compared to other Latin countries. Yet, the level of unemployment in Mexico has been constantly rising over the last decade. If authorities are unable to arrest this trend in the coming years, then youth unemployment will pose a severe problem of Mexico, like, most of the developed countries. Germany Figure 10: Germany trend (Source: World Bank, 2014) The problem in Germany regarding youth unemployment had begun much before the financial crisis, which had peaked during 2005. The government had since then prioritised the problem and in recent times, Germany is treated as an exemplary country for negligible youth unemployment (United States Bureau of Labor Statistics, 1970). The government has been highly successful in reducing youth unemployment. Italy Figure 11: Italy trend (Source: World Bank, 2014) The youth unemployment in Italy has been quite high and the trend line shows that the problem is simply aggravating. The rate of youth unemployment has been constantly rising after 2007. Youth Unemployment Youth unemployment is one of the most pressing problems in the current context. The United Nations has defined youth unemployment as the level of unemployment among the age group of 15-24years. Various authors have subdivided the age group of 15-19 years as teenagers and 19-24 years as young adults. Despite the difference in definitions and process of data collection, various research works conducted in this field have made cross-country comparisons and deduced accordingly. It has been observed particularly for developed nations that unemployment has been skewed towards the younger workers (Giles, 2012). A variety of reasons has been identified for this, like, inadequate work experience and entry skills and higher rates of job changes. The overall structure of youth unemployment in developing countries is also quite similar and is higher than adult unemployment. Poorest countries show very low youth unemployment rates, but high rates of employment (Jimenez, 2006). This implies that as the level of income of the country increases, incidence of youth unemployment rises too; given that, alternative sources of income and safety nets of government are available. The following graph depicts this: Figure 12: Youth unemployment and employment (Source: Jimenez, 2006) Causes of Youth Unemployment The problem of youth unemployment is more sensitive than that of adult unemployment. This is because young workers are found to have higher turnover rates while seeking employment opportunities. This natural work sampling process is not over-sensitive in the macro economic climate. This insensitivity of youth unemployment tends to worsen conditions of the youth, when overall unemployment rises with a longer duration. This is primarily the reason why youth unemployment is considered super-cyclical compared to adult unemployment. The existing literature on causes of youth unemployment can be broadly segmented in two parts. The first category is of the notion that youth will be more severely affected during recession because they are relatively new in the labour market (Petersen and Mortimer, 2006). This is the reason why organizations first curtail the younger workers from employment, while downsizing the workforce. It has been observed that younger workers are in a weaker competitive position than older ones because of structural unemployment factors. The following factors can be identified as the causes of rural unemployment (Petersen and Mortimer, 2006): Changing Demography: Over the past few decades there has been a huge surge in the number of workers entering the labour market. This is however not the single biggest cause. The main problem lays in the fact that majority of the youth face unequal employment opportunities. Minimum Wages: The provision of minimum wages have created much distortion in the labour market as employers think that inexperienced workers are unworthy of high wages that needs to be. This has made employers in the developed countries hire lesser number of young workers than their actual supply. This creates a tendency among employers to hire more productive adult workers or invest in capital intensive employment, rather than hiring the youth. Inadequate education and training: This has been identified as one of the most significant causes that have resulted in high levels of youth unemployment. The youth does not have the required skill set for productive employment in large organizations. Moreover, rising costs of education have also deterred several youth from attaining higher education as overall job markets remain depressed. Poor economic conditions: Macro economic status of a country is the most significant aspect that can determine the level of employment among both youth and adult. If overall economic conditions remain poor and societal unemployment remains high, then youth unemployment is affected most severely. All these factors act as high barriers for entry for the youth in entering formal labour markets. Apart from these basic reasons, there may be additional psychological factors like, boredom and exploring new opportunities, which can make young workers voluntarily retire from their jobs (Pedersen and Lund, 1987). Role of education, trainings and skills After analyzing problems that are faced by young workers in different labour markets, a clear pattern to emerge is that problems of each country segment in the global economy can be categorized according to their level of development and income. However, there are certain common solutions, which can be achieved by relying on the following parameters (Department for Business and Innovation Skills, 2013): Increased expenditure on education: The low income countries need to ensure that the level of primary and secondary education is high and that of school dropout rates is low. The developed countries also need to assure that the level of university level education is attained by majority of students. This is because education can facilitate a smooth transition from school to work and this can be done by arresting school dropout rates. Formal education must be linked with broader vocational training to offer better job assistance to school goers (World Economic Forum, 2014). Role of Training: Improved training can provide a major boost to the job search process and result in creation of better jobs. It has been observed that training programs in the bigger picture has not been very efficient in creating jobs. Researchers have suggested that programs that combine training with short periods of job experiences can greatly enhance the employment level (ILO, 2013). This is because employers are able to be in touch with the trainees and prepare them properly for the job requirement. Importance of skills: It has been observed in a survey conducted among OECD countries that U.K., in particular, has very low numeracy and literacy skill. It is a common consensus that these skills are required for better quality jobs (Department for Business and Innovation Skills, 2013). Skills can be enhanced only by employing proper vocational and training programs. There is a need to coordinate academic education with internships as this will provide young workers with a vivid idea about what is expected from them. In countries where university graduates find it difficult to enter the formal job markets, making the academic training more labour-market oriented can be useful. In developing countries, where reliance is on the informal sector, vocational training must be integrated with traditional occupation right from the time of schooling. This can improve productivity of their operations. U.K. had introduced the minimum wage law in the late nineties, which fixes the wage rate that is legally to be paid to employees in skilled, unskilled or semi-skilled labour markets. After a decade, living wages have hardly improved the plight of youth unemployment in U.K. This is because higher wages discourage employers to hire the younger workers, who lack required training and skills for the tasks. From the current evidence, it can be said that living wages has not been able to contribute to the level of youth unemployment positively. One thing can, however, be established very clearly that if living wages are increased in future, then this will surely raise the level of youth unemployment. It was observed that for 1% increase in the minimum wage, teenage employment was reduced between 1% and 3% (Bell and Blanchflower, 2010). Reference List Bell, D. N. F. and Blanchflower, D. G., 2010. U.K. unemployment in the great recession. [pdf] National Institute Economic Review. Available at: < http://www.dartmouth.edu/~blnchflr/papers/Bell-Blanchflower.pdf > [Accessed 5 March 2014]. Department for Business and Innovation Skills, 2013. Government evidence on EU action to tackle youth unemployment. Crown Copyright. Available at: < https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/262817/bis-13-1315-government-evidence-on-eu-action-tackle-youth-unemployment.pdf > [Accessed 5 March 2014]. Giles, C., 2012. Soaring youth unemployment stokes fears. Financial Times, [online] 2 July. Available at: [Accessed 5 March 2014]. Howker, E. and Malik, S., 2010. Jilted Generation: how Britain has bankrupted its youth. London: Icon Books. ILO, 2013. Global employment trends for youth 2013. [pdf] International Labour Organization. Available at: < http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_212899.pdf > [Accessed 5 March 2014]. Jimenez, E., 2006. Development and the Next Generation. Geneva: World Bank Publications. Pedersen, P. J. and Lund, R., 1987. Unemployment: Theory, policy, and structure. New York: Walter de Gruyter. Petersen, A. C. and Mortimer, J. T., 2006. Youth unemployment and society. Cambridge: Cambridge University Press. United States Bureau of Labor Statistics, 1970. Youth unemployment and minimum wages. Michigan: U.S. Bureau of Labor Statistics World Bank, 2014. The Data Bank. [online] Available at: [Accessed 5 March 2014]. World Economic Forum, 2014. Global agenda council on youth unemployment 2012-2014. [online] Available at: [Accessed 5 March 2014]. Read More