The Youth Unemployment Bomb

Peter Coy has written an important Bloomberg Businessweek cover article on youth unemployment. Here are some highlights:

➢ In Tunisia, the young people who helped bring down a dictator are called hittistes—French-Arabic slang for those who lean against the wall. In Egypt, shabab atileen, unemployed youths; in Britain, NEETs—"not in education, employment, or training;" in Japan, freeters, the English word freelance and the German word Arbeiter, or worker; Spaniards call them mileuristas, those who earn less than 1,000 euros a month; in the U.S., they're "boomerang" kids back home after college; in China, the "ant tribe" are recent college graduates who crowd together in cheap flats on the fringes of big cities.

➢ the common element is failure—. . . of society . . . to harness the energy, intelligence, and enthusiasm of the next generation. . . extra-worrisome: The world is aging. . . the young are being crushed by a gerontocracy of older workers . . . determined to cling to the better jobs . . . and then, when they do retire, demand impossibly rich private and public pensions [youth must] shoulder.

➢ The highest rates of youth unemployment are found in the Middle East and North Africa, at roughly 24%. Most of the rest of the world is in the high teens—except for South and East Asia. . . with single-¬digit youth unemployment. Young people are nearly three times as likely as adults to be unemployed.

➢ A demographic bulge is contributing to the tensions in North Africa and the Middle East, where people aged 15-29 make up the largest share of the population ever. [15]- to 29-year-olds account for 34% of the population in Iran, 30% in Jordan, and 29% in Egypt and Morocco. (The U.S. figure is 21%.)

➢ the failure to launch has serious consequences for society—. . . "Educated youth have been in the vanguard of rebellions against authority certainly since the French Revolution and in some cases even earlier," says Jack A. Goldstone, a sociologist at George Mason. Goldstone [talks of] the "paradox of autocracy: any authoritarian ruler who wants to modernize his country has to educate the workforce. But when you educate the workforce you also create people who are not so willing to follow authority. Thus you create this threat of rebellion and disorder."

➢ rich democracies [also] ignore youth unemployment at their peril. In the 34 industrialized nations in the Organization for Economic Cooperation and Development, at least 16.7 million young people are not employed, in school, or in training, and about 10 million of those aren't even looking. . . the job market has split between high-paying jobs that many workers aren't qualified for and low-paying jobs that they can't live on.

➢ In the U.S., 18% of 16- to 24-year-olds were unemployed in December 2010. . . For blacks of the same age it was 27%. . . many teens have simply given up. . . The percentage of American 16- to 19-year-olds who are employed has fallen to below 26%, a record low.

➢ more education is not always better. . . [In] the Chinese labor market, newly minted technical-school graduates are earning as much or more than new university graduates, with monthly pay of 2,000 to 4,000 renminbi a month, and in some cases 6,000 renminbi, vs. 2,000 to 2,500 for the university grads. (Monthly pay of 2,000 renminbi equals $3,600 a year.)

➢ Germany and Austria experienced milder youth unemployment . . . partly because of blue-collar apprenticeship programs. . . Last year. . . Germany's youth unemployment rate was 13.9%, compared with a Europe-wide average of 21.2% and 21% in the U.S. In . . . the Netherlands . . . university students . . . gain work experience while enrolled. . . 70% of Dutch youth ages 20-24 are getting some work experience. By contrast in Italy and Portugal only about 10% work while in school. The Netherlands' youth unemployment rate is just 11.2%.

➢ The only surefire cure for youth unemployment. . . is strong, sustained economic growth that generates so much demand for labor that employers have no choice but to hire the young.