I want to highlight this piece in The Economist, as it points out a not that often discussed issue - that of the massive youth unemployment problem in the west. There was an excellent piece on this topic in Businesseek I highlighted a few months ago. [Feb 7, 2011: BW - The Youth Unemployment Time Bomb] Sometimes I wonder if Marc Faber is correct that eventually this all leads to war, as we have so many disaffected and not employed young people who we need to 'find a role for'. Specific to the U.S. I heard (or read? can't remember the source) this weekend that the % of people working over the age of 55 is at its highest level ever. Obviously this is due to necessity but with a shrunken pool of jobs available, that leaves even less jobs than normally would be available for young adults - especially when many of these over 55 are now willing to do the entry type of work normally reserved for 18-24s.
There continue to be many outsized effects by the structural changes we are seeing these past few decades: the migration of jobs from west to east, along with the efficiencies of automation and technology.
Some snippets from the story:
- MARIA GIL ULLDEMOLINS is a smart, confident young woman. She has one degree from Britain and is about to conclude another in her native Spain. And she feels that she has no future.
- Ms Ulldemolins belongs to a generation of young Spaniards who feel that the implicit contract they accepted with their country—work hard, and you can have a better life than your parents—has been broken. Before the financial crisis Spanish unemployment, a perennial problem, was pushed down by credit-fuelled growth and a prolonged construction boom: in 2007 it was just 8%. Today it is 21.2%, and among the young a staggering 46.2%. “I trained for a world that doesn’t exist,” says Ms Ulldemolins. (if we took out the word Spain and changed some of the figures, that paragraph could sound like the United States)
- Spain’s figures are particularly horrendous. But youth unemployment is rising perniciously across much of the developed world. It can seem like something of a side show; the young often have parents to fall back on; they can stay in education longer; they are not on the scrapheap for life. They have no families to support nor dire need of the medical insurance older workers may lose when they lose their jobs. But there is a wealth of evidence to suggest that youth unemployment does lasting damage.
- In the past five years youth unemployment has risen in most countries in the OECD, a rich-country club. One in five under-25s in the European Union labour force is unemployed, with the figures particularly dire in the south.
- In America just over 18% of under-25s are jobless; young blacks, who make up 15% of the cohort, suffer a rate of 31%, rising to 44% among those without a high-school diploma (the figure for whites is 24%). Other countries, such as Switzerland, the Netherlands and Mexico, have youth unemployment rates below 10%: but they are rising.
[click to enlarge]
- In much of the OECD youth-unemployment rates are about twice those for the population as a whole. Britain, Italy, Norway and New Zealand all exceed ratios of three to one; in Sweden the unemployment rate among 15- to 24-year-olds is 4.1 times higher than that of workers aged between 25 and 54.
- The number of young people in the rich world who have given up looking for work is at a record high too. Poor growth, widespread austerity programmes and the winding up of job-creating stimulus measures threaten further unemployment overall.
- Research from the United States and Britain has found that youth unemployment leaves a “wage scar” that can persist into middle age. The longer the period of unemployment, the bigger the effect. Take two men with the same education, literacy and numeracy scores, places of residence, parents’ education and IQ. If one of them spends a year unemployed before the age of 23, ten years later he can expect to earn 23% less than the other.
- The scarring effects are not necessarily restricted to the people who are actually unemployed. An American study shows that young people graduating from college and entering the labour market during the deep recessions of the early 1980s suffered long-term wage scarring. Graduates in unlucky cohorts suffer a wage decline of 6-7% for each percentage-point increase in the overall unemployment rate. The effect diminishes over time, but is still statistically significant 15 years later.
- Employers seeking new recruits for quality jobs generally preferred fresh graduates (of school or university) over the unemployed or underemployed, leaving a cohort of people with declining long-term job and wage prospects: “youth left behind”, in the words of a recent OECD report. Japan’s “lost decade” workers make up a disproportionate share of depression and stress cases reported by employers.
- Unemployment of all sorts is linked with a level of unhappiness that cannot simply be explained by low income. It is also linked to lower life expectancy, higher chances of a heart attack in later life, and suicide. A study of Pennsylvania workers who lost jobs in the 1970s and 1980s found that the effect of unemployment on life expectancy is greater for young workers than for old. Workers who joined the American labour force during the Great Depression suffered from a persistent lack of confidence and ambition for decades.