Global Youth Unemployment Rate Staggeringly High: ‘Lost Generation’ Feared

 
on March 16 2012 8:13 PM

The current, unprecedented level of global youth unemployment has raised the risk of creating a lost generation, Nemat Shafik, deputy managing director of the International Monetary Fund, wrote in a blog post Thursday.

The youth unemployment rate is almost 50 percent in Greece and South Africa, according to the IMF. Meanwhile, Shafik noted, [Y]oung people account for 40 percent or more of all unemployed people in Jordan, Lebanon, Morocco, and Tunisia, and nearly 60 percent in Syria and Egypt.

Even in the United States, the youth unemployment rate is more than 18 percent.

The average unemployment rate among workers ages 15 to 24 in advanced economies is nearly 20 percent, according to the IMF.

The proportion of young workers who are unemployed is not the only cause for concern, however: The length of their unemployment is equally troubling, Hanan Morsy, an IMF economist, wrote in the fund's Finance & Development magazine.

Morsy noted that the length of unemployment is a year or longer for 20 percent of unemployed youths in advanced economies. In Spain, it is an astounding 40 percent.

Shafik listed higher crime rates, lower life expectancies, higher incidences of heart attacks later in life, and higher rates of suicide as consequences observed in conjunction with youth unemployment.

The most direct impact on unemployed youth centers on their decreased earnings over the long term: They can amount to 20 percent less compared with those of their employed peers. This earnings deficit can last as long as 20 years, according to the IMF.

For example, a high unemployment rate among Japanese youths who entered the labor market during the country's so-called Lost Decade in the 1990s persisted for years because employers -- when they were finally ready to hire more people -- preferred recent graduates.

On a societal level, recent youth unemployment has contributed to social unrest in many countries, including the Arab Spring revolts in the Middle East and North Africa last year.

Olumide Taiwo, an Africa research fellow at the Brookings Institution in Washington, calls high youth unemployment a time-bomb in Africa and a primary contributory factor in Tunisia's revolution.

Shafik wrote that youth unemployment also has long-term consequences for economic growth because of the loss or degradation of human capital.

As economies recover, the youth unemployment rate should drop in response.

To accelerate this natural process, Morsy recommended that countries, especially those in Europe, relax legal employment protections for permanent workers while enhancing them for temporary workers.

By curtailing the rights of permanent workers, who tend to be older people, governments can make it easier for businesses to replace them with temporary workers, who tend to be disproportionately young.

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