youth unemployment

Article

The youth employment opportunity

Understanding labor market policies

More than 70 million young people are unemployed1. 262 million youth are not in employment, education or training (NEETS) across developing countries2 and one in five young people aged 15-24 have been out of work for more than 12 months, across OECD countries3.

 

High youth unemployment hampers economic growth and negatively impacts the health and well-being of young people, and their opportunity to lead productive and rewarding lives. It also has long term financial implications like funding retiree pensions and health care, which may be even more challenging than otherwise. How can we make a bigger impact to address this challenge?

Governments, business, and civil society are actively taking steps to address youth unemployment but it is clear that some policies work better than others. But which ones and why? This report collates the perspectives of national employer organizations in an effort to provide a more comparative and global picture of what is being implemented across countries. It is a joint initiative of the International Organization of Employers (IOE), Business and Industry Advisory Committee to OECD (BIAC), and Deloitte Global.

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Response highlights

There are four main challenges to hiring and retaining young people.

  1. appropriate training, job readiness, and skills; 
  2. availability of job opportunities and entrepreneurial enterprises; 
  3. employment costs and reduction in subsidies for employers; and 
  4. youth expectations including, in some countries, the prospect of better opportunities overseas.

Across all policy levers a variety of approaches are being taken with varied degrees of success. There is a sustained need to further analyze the programs in order to fully to understand their success (or lack hereof). It is clear though, that in some countries like Australia and the US, the decentralized nature of policy development and implementation is creating unique challenges.

Responses on policy

Benefits and incentives for hiring youth
  • Program commonalities include the need for a holistic and coherent policy framework that provides a combination of flexible efforts―while providing social protection for unemployed youth, encourages them to take a job or be in education, and provides stronger incentives (economic as well as related to flexibility) for employers to hire young people.
Job creation targeting youth
  • Internships, apprenticeships, entrepreneurial support, and statutory minimum wages are most frequently mentioned. 
  • Internships and apprenticeships are clearly perceived as the most effective program. 
  • Two somewhat interlinked tendencies are the match of skills. In countries where the target group of the specific scheme is far from the labor market, the gap between the skills needed to retain the jobs and the skills possessed by that target group is comparatively large. Schemes with a longer horizon tend to be more successful.
Bridging employment and education systems
  • None of the policies mentioned stands out as extremely successful. In some cases, resource and financially intensive programs, though being perceived as successful, have been discontinued. 
  • Policy administrators need to have a proper understanding of the skills demanded by the employers (in terms of both guidance in choice of education, as well as matching the right person with the right job), and the employers need to know how to support a candidate to obtain the right skills in the right measure.
Minimizing the skills gap
  • A lot is being done to address the skills gap in particular through job-related training and on-the-job training policies, as well as policies to promote vocational education and training (VET), work subsidies, and work study programs. 
  • There are a number of programs specifically targeting youth, which of note, have been implemented in recent years. 
  • A number of programs do not target youth specifically. It will be important to assess whether the success rate of the targeted programs is comparatively greater over time.
Promoting a dynamic labor market
  • Critical to creating a dynamic labor market are flexible time arrangements (part-time/part-year, work-life balance, remote working) and flexible layoff requirements. 
  • Other policies include flexible migration laws, promoting/funding entrepreneurship, the use of temporary and fixed term contracts, and various economic incentives.
  • The most frequently mentioned policies do not specifically target youth. If this is a general practice, consideration should be given to alternative policies and approaches that specifically target younger workers.
Future labor market policies
  • Several programs are expected to be implemented in the coming year. These range from youth wage subsidies, to revisions of national youth services programs, to entrepreneurship programs. 
G20 effectiveness
  • There are clearly a range of policies being implemented across G20, with new policies in the pipeline. 
  • What is working and why, does not appear to be clear. If the questionable usefulness of policies as identified in this survey are considered alongside the 2014 BIAC monitoring report on the implementation of the G20 commitments, there is cause for concern. The monitoring report showed that the majority of employer organizations in the G20 are not sure whether the G20 process has resulted in policy change.
  • The best way to inject more dynamism into the labor market, strengthen links between education and employment, improve job creation and skills development, and remove barriers to hiring young people, is to understand the drivers behind the successes. Without this knowledge it is difficult for the G20 to pull the right levers. 
  • It is important to understand the interconnectedness and effectiveness of policies beyond the G20 commitments, and ensure that these policies are well thought out and implemented in the right environment.

References:

1ILO, Youth Employment
2World Bank
3OECD work on youth

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