The Eurozone youth of today | FT Alphaville

The Eurozone youth of today

Increasing unemployment disproportionately affects the young. While policymakers have been pre-occupied with sovereign and financial crises, the generation with no actual experience of holding down a job just had to wait. For how long will this spectre haunt economies?

Using statistics from the European Union Labour Force Survey for January 2012 (but November 2011 for Greece), the UBS Global Macro Team gives us the following headline unemployment rates in a note released earlier this week:

  • Eurozone unemployment at 10.7 per cent, up from 9.5 per cent a year ago.
  • Greece’s rate is 19.9 percent, up from 14.1 per cent a year ago.
  • Eurozone youth unemployment (16-24 years old) 21.6 per cent.

But, compare and contrast a few youth unemployment rates for specific countries:

  • Germany 7.8 per cent, Austria 8.9, The Netherlands 9.0, Spain 49.9, Greece 48.1.

In other words, the average masks the monumental size of the problem in some countries, particularly on the periphery of Europe. In graphical format, to get a sense of the divergence and the evolution of the increase since the crisis began:

A couple of important points from UBS on the figures (emphasis ours):

… youth unemployment rates probably understate the true level of joblessness among the young, as discouraged workers leave the labour force or accept jobs with shorter-than desired working hours.

Though we’d note that this is just as likely to be true about overall unemployment rate. There is something that has long been different about youth unemployment though:

Elevated levels of youth joblessness are, of course, not unusual in Europe or the US. Over the past decade, for example, the jobless rate of the young in Europe or the US has consistently been roughly twice the overall unemployment rate.

So it’s the norm for youth unemployment to be higher than the headline rate; but not only that, it’s also pretty normal for the rate to be especially sensitive to economic downturns:

The experience of the current cycle is not unique. Various studies (sources available upon request) have concluded that male, youth, and long-term unemployment rates are typically more sensitive to the business cycle than the overall level of joblessness.

Hence the policy recommendation given is to boost growth and jobs for the youth of Europe will follow.

At the risk of stating the obvious, those fresh out of school are presented with some tough obstacles, particularly when entering the job market in a recession:

  • They have fewer skills
  • And less experience
  • The competition is comprised of older unemployed workers with actual experience
  • They are typically rubbish at interviews
  • Their contacts are unlikely to be able to help them land a job

Or, put differently, the next time you have a day off during the week, you go to a cafe, look around and wonder, who are all these people?! Why aren’t they working? Doesn’t anyone have a job?! Chances are at least some of them they are being rendered unemployable by your generation. Just a thought…

A message for the UK government, re: unpaid internships:

From a policy perspective, therefore, it probably also makes sense to expand youth education, training, and apprenticeship initiatives. The evidence from Germany, for example, suggests that integrating youth into the labour market (e.g., via apprenticeships) tends to improve long-term employment prospects for young people. All the same, the overall track record in Europe and the US for job training and job assistance has been modest, at best. Seemingly, nothing quite works like a strong economy and strong labour demand.

Oh, and this too, re: shutting off paths for immigrant workers:

… there is little basis for believing that youth employment prospects are significantly diminished by immigration or delayed retirement of older workers. Employment, in other words, is typically not a question of which job seekers are the fortunate recipients of a fixed amount of work (‘lump of labour’). If anything, youth employment tends to be positively correlated with immigration or rising participation rates among other worker cohorts. That’s logical, insofar as faster growing economies are likely to attract and employ workers from various ‘pools’, including foreigners, delayed retirees and the young. In short, work begets work.

Anyone for some consequences of not engendering growth in order to tackle the problem?

The costs [of high levels of youth unemployment], moreover, are surely greater than simply forgone income and opportunity. Various studies, for example, have shown clear links between youth unemployment and antisocial behaviour, alcoholism, mental and physical illness, and suicide.

Related links:
The best I can do for today’s youth is quit – FT, Lucy Kellaway
Youth Speaking Out – iMFdirect