Youth unemployment around the world

Youth Unemployment around the world

In the attached world map countries are coloured according to their youth unemployment rate. However, although rates can be very illustrative for comparing unemployment rates, there is always the risk of inferring the wrong conclusions from the facts. For example, the youth unemployment rates in Kazakhstan (4,6%) or Sierra Leone (5,2%) are very low. Does this mean that the economic situation is better in these countries than countries like Belgium (19,8%) or Italy (35,3%)? Not necessarily, youth unemployment depends on more factors than just the depth of an economic depression.

Youth unemployment is an indicator of economic prosperity and thus correlates with similar indicators, such as the adult unemployment or the number of bankruptcies. However, youth unemployment is also dependent on other factors because it considers a particular social group, namely young people (between 15 and 24 years old). So a first factor which helps to explain some of the results is the ‘demographic structure’ of the society in question. Not all populations are equally ‘old’: some consists mostly of old people, such as western countries, while populations in Africa and Asia are relatively young, due the high birth rates and low life expectancy. If relatively smaller groups enter the labour market, it is easier for them to find a job. On the other hand, the lack of older workers means there is less competition for young jobseekers and more open jobs.

Of course there are other factors that play a role in the youth unemployment rate as well. For instance, it is always possible that some rates might be forged or altered. Or it might depend on cultural differences that determine personal choices, because not all studies are equally rewarding on the labour market.

However, the two main factors seem to be institutional: youth unemployment depends on (a) labour market regulation and (b) the educational system. The regulation of the labour market is relevant because stronger regulations imply that employees are harder to fire, and thus lead to a greater reluctance to hire new employees (because their cost is higher). It follows that freer economies such as the U.S. and UK, are less affected by youth unemployment.

The educational system is important for two reasons: the degree to which the education systems impart specific or general skills, and the extent to which there are direct links between the educational system and the employers. Whether the education consists of specific or general skills is relevant, because specific skills imply direct signals of the suitability or productivity of the applicant. The presence of these signals comforts the employer that the applicant will do his (future) job properly. Direct links, for example by internships such as in Germany, matter because they stimulate a smooth transition between education and work.

These factors might help to explain some of the surprising rates in youth unemployment. For example, Japan has a very low youth unemployment rate because their schools have a ‘job placement function’: Japanese schools recruit directly for companies linked to the school. The same goes for Germany. And although Italy seems to have many pupils following vocational trainings, mostly low ability pupils seem to enter vocational schools, and thus Italy nevertheless has a high youth unemployment rate. This illustrates that social stigmatization might play an important role as well.

Sources

 Further reading

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