Youth unemployment has been linked to everything from riots to revolutions in recent times.  An examination of economic literature shows it to be a perennial rite of passage each generation suffers through to some degree on its path to maturation.  However, dismissing it as such is not an answer due to the far-reaching implications of prolonged youth unemployment early in one’s career.  This issue has been festering for some years now, and every new day of rejection for the many millions of jobless young makes this trend increasingly worrisome.

The Global Picture of Youth Unemployment

According to the International Labour Organization (ILO), there are 75 million unemployed youths worldwide.  Some regions such as the Middle East, North Africa, and the European Union are faring far worse than others with youth unemployment rates of 25.5%, 23.8%, and 22.4% respectively.  Being young and female is even more daunting in such areas, with female youth unemployment rates of 39.4% in the Middle East, and 34.1% in Africa.  At the other end of the spectrum, even the lowest youth unemployment rates found in the world are unacceptably high at 9.3% in East Asia.  The global picture of employment opportunity for youths today is a far cry from the story age-earnings profiles paint to explain the expected trajectory of a career.

The typical age-earnings profile, where Curve 3 represents elementary educational attainment, Curve 2 represents a high school diploma, and Curve 1 represents a university education.

The Ultimate Paradox of Youth Unemployment

Firms hire workers based on their projected marginal revenue product of labour (MRP), both at the extensive and intensive margins.  Young workers are perceived to have a lower MRP due to a combination of lack of training and experience.  It leads to the trend where youth are the last to get hired by firms, and often the first to get fired.  This is particularly true during economic downturns, when firms are further incentivized by the lack of certainty about current and future profitability to either wait before making labour decisions, or substitute capital investment for labour.

Therein lies the paradox: firms are unwilling to hire workers without training and experience, and young workers are unable to gain that training or experience without being hired or going into debt.  This is just one of the many factors, such as baby boomers extending their careers and putting off retirement, contributing to the development of this issue into a global problem.

Due to the cunning nature of the youth unemployment beast, there are unfortunately no “one-size fits all” solutions for this growing issue.  Each region must pursue a unique combination of policy measures in accordance to its economic advancement.

Stabbing In The Dark

Worldwide, countries have been struggling to expand aggregate demand while controlling sovereign debt and putting on a brave face for investors.  While pursuing the necessary monetary and fiscal policies to do so is a crucial first step in increasing employment, it is also necessary to target youth unemployment specifically.

One such method is ensuring that Millenials are receiving adequate education.  Making high school graduation mandatory for everyone, instead of allowing individuals to legally drop out once they reach a certain age, could do this.  While the employment landscape is rough, it is even harder for those without baseline levels of education, a trend that will continue on in the future.

Secondly, governments need to do all they can to encourage the growth of small and medium sized enterprises (SME’s) in their economies.  Statistics show that youth are the most likely demographic to start new businesses.  Estimates from the Global Entrepreneurship Monitor show that 17.3% of individuals aged of 25-34 are involved in either starting or managing a new business.

SME’s are key drivers for growth and recovery, and can be encouraged through means such as grants and tax breaks.  Programs providing resources on how to secure funding, run a business and seek out mentors would further encourage the young and unemployed to create their own jobs rather than begging for them.  Further, governments could subsidize social businesses that connect people with the opportunities they seek as a supplement to their own employment services for citizens.

Yet another method of getting youth employed is to incentivize firms to hire them.  One such technique would be to subsidize the salaries paid to those under the age of 30 for the first three to five years of their careers.  This method takes after Milton Friedman’s “Negative Income Tax” scheme, which is meant to get people out of the so-called welfare trap.

Basically, this would work by compensating firms for the lack of experience and training of the young workers they hire.  They would receive a decreasing scale of tax breaks for each year a young worker is on their payroll.  For example, the firm would receive a tax break of 20% of the worker’s salary in the first year, 15% in the second, 10% in the third and so on for three to five years, at which time the worker should have enough experience and training to be desirable to employ based on his or her own acquired experience.

Wanted: Custom Tailoring

As previously mentioned, the ideal policy responses will vary depending on the economic profile of a region.  While the above-mentioned policies would work in an economy with the proper institutions to implement and uphold them, there is also the need for a customized regional approach.

For instance, in some regions there exists the need to address basic educational attainment and gender equality, something which require their own host of policy solutions.  An example of such a solution is the “craft village” project in Katsina, Nigeria, which is aimed at educating youths of both sexes in the trades and artisanship.  This equips youths with the skills needed to enter the labour force, network, and perhaps create businesses of their own.

Creative approaches such as these not only help in reducing youth unemployment, but would also be a huge step forward in poverty reduction and strengthening existing institutions.

Youth Unemployment Is Everyone’s Problem

With targeted tactics such as these, there is much governments can do to break the spiral of unemployment for those entering the labour force for the first time.  After all, from the most altruistic to the most selfish of us, everyone has a stake in lowering youth unemployment. Governments need to encourage a productive base of taxpayers to bleed dry in the future.

Companies of every size need consumers with lots of expendable pocket change.  Individuals require steady income to meet their basic needs and wants.  And most importantly of all, the youth of this world – the bright, idealistic, passionate young minds just waiting to be ignited – deserve a chance to rise up, to lead, to inspire, and to live their lives to their fullest capacities.

Anything less is a tragedy of epic proportions.