Creating Global Stability with Sustainable Youth Unemployment in Developing Nations
Author: Nikko Riazi | Project Leader 2021
Source: International Labour Organisation, 2020
Over the last decade, the global youth population has increased from 1 billion to 1.3 billion yet, the number of young people participating in the workforce has continued to decrease and currently stands at 497 million (ILO, 2020). These figures highlight the vast number of young people who are not in employment, education, or training (NEET), a large majority of whom are young women. While the global youth unemployment rate is 13.6%, there is regional variation – with the youth unemployment rate reaching around 30% in areas like Northern Africa (ILO, 2020). A considerable digital divide and non-standard work practices in developing countries have increased the unemployment gap between developed nations and their less-developed counterparts. Evidence from the United Nations suggests that vocational and digital training is more likely to lead to employment within these regions than secondary or higher education alone due to a persisting imbalance between the labour demand and supply of university graduates (UN, 2021). Better organisation, voice representation, and gender-responsible approaches are also necessary to create improved prospects for young people in developing communities.
Context
Across the globe, there are approximately 1.3 billion young people between the ages of 15 and 24 (Plan International, 2020). Their transition into the labour market has long-term impacts on their individual lives and the socio-economic development of their respective regions. Roughly 41% of the global youth population are in the labour force – with 68 million of these individuals unemployed (The World Bank, 2021). A considerable proportion of youth are NEET (267 million) – reflecting how many young people are not currently contributing to national, and by extension, global development by acquiring skills or engaging in work. Worldwide, four in ten young people are involved in the labour force but, there are marked differences across economies. For instance, participation is highest in Northern America, at 52.6% of their youth population. This statistic is in stark contrast to where the lowest rates of youth engagement are seen – in Northern Africa and the Arab states, where only about 27% of young people participate in the labour force (The World Bank, 2021).
Gender disparities play a key role in further exacerbating unemployment amongst young people, particularly in developing economies
Another key indicator in participation within the labour force is gender, with a considerable disparity in male versus female participation rates in the labour market (49.1% versus 32.8%, respectively) (UN, 2020). The gap between young men and women within the labour force differs drastically depending on the sub-region. While in Northern America, the female participation rate is only 1% lower than the male rate in the Arab States, the gender gap is significantly more pronounced, with a difference of over 37% (ILO, 2020). While there has been some progress in most sub-regions, the gender gap remains pronounced in Northern Africa (20%), Southern Asia (30%) and Latin America and the Caribbean (18.3%) (ILO, 2020). As such, improvements have been primarily in sub-regions where labour market outcomes are already relatively even for women and men (Northern America and Northern, Southern and Western Europe). By contrast, the gap has continued to widen in Eastern Asia, South-Eastern Asia, and the Pacific.
The differences in the magnitude of these gender participation disparities across geographical regions reflect social and cultural norms that limit young women’s access to employment and perceptions regarding suitable jobs for women. Holistically, differences in the total youth unemployment rate across sub-regions do not appear to be driven as significantly by differences in the female-specific rate but by the general underlying problems related to youth unemployment.
Challenges
Youth unemployment poses several challenges to global development as it prevents young people from gaining job experience, with implications for future productivity and earning potential. Additionally, such labour market conditions within these developing economies lend to labour underutilisation, which is more prevalent among youth than adults. The LU3 measure of labour underutilisation applied by the International Labour Organisation to young people currently stands at approximately 20% worldwide. Again, this percentage is much higher in some sub-regions – being Northern Africa (44.2%), the Arab States (36.1%) and Latin America and the Caribbean (26.7%). This figure demonstrates that the mismatch between labour supply and demand is more acute for youth than adults within many regions.
Job informality has heightened insecurity and cyclical unemployment for many young people within developing economies
One primary challenge young people face in the workforce is frequent exposure to jobs associated with vulnerability. The higher incidence of job informality in sub-Saharan Africa and Southern Asia partly reflects the large proportion of youth engaged in own-account work and contributing family work, commonly associated with limited income stability and social security coverage. In most cases, informality in employment arises from the lack of opportunities in the formal economy and weak mechanisms of social protection for young people (Elder and Kring, 2016). Subsequently, many young people cannot achieve the transition from the informal to the formal sector.
Much like youth unemployment, work informality is much less widespread in developed economies such as North America and Europe. The Southern African Development Community is one example where job informality has caused employment instability amongst young people. Within many of the countries in the community, young people must work in informal production units or agriculture, as these developing countries’ economies rely on the primary sector for growth. For instance, 55% of young workers in Comoros and 81% in Madagascar worked within informal fishing and forestry sectors within the last year (Junankar, 2019). These figures represent a dichotomy between the workforce opportunities for those in developed nations relative to those within emerging and developing economies.
While technology has created new efficiencies, it has widened the gap in opportunity between developed and developing nations
Although technology has transformed the labour market landscape, it has further widened the gap between opportunities for young people in first-world nations versus those in developing regions. Technological advances in automation, robotics, artificial intelligence have transformed labour market opportunities and challenges young people face. Such changes are leading to the creation of entirely new industries and productivity increases. By reducing the cost of production and delivery of services, new technologies are a potential means for low- and middle-income countries to jump to more advanced stages of development.
At the same time, continued advances in technology may also dislocate labour markets and disproportionately benefit countries that already have a technology base, resulting in even greater inequality. For instance, younger people in developing countries are less likely to access such digital technologies than those in developed countries. In the United Republic of Tanzania, only 30% of those in the 18–35 age group report using the Internet and/or owning a smartphone, compared with 100%in several advanced economies (Junankar, 2019). Also, young workers face the highest automation risk - mainly due to their sorting into more automatable occupations. This factor is as well as entry-level jobs involving more automatable tasks. Since automatable occupations involve low-skilled labour, involved youth are at the highest risk of being displaced by automation. They also lack the essential transferrable skills to gain employment or upward mobility. Specifically, current forms of vocational training are associated with more automatable jobs. In low- and middle-income countries, young people work more automatable jobs than their counterparts in OECD nations (OECD, 2020). Young people in automatable jobs face a higher likelihood of subsequent transition into unemployment and inactivity.
Solutions
The challenges posed by increased casualisation and technological advancement demonstrate several implications for future policymaking. In the case of young workers, to realise their potential, it is vital to create new jobs in growing and dynamic sectors by combining an appropriate macroeconomic framework with specific industrial and sectoral policies. Within developing nations, investments in digital infrastructure are necessary to increase connectivity and improve access to technologies that can boost job creation. Ensuring coherence between macroeconomic and demand-side policies that spur enterprise growth and productivity can promote inclusive structural transformation. Productive development policies and enterprise development policies would lead to an enabling environment for labour-intensive industries, thereby creating more jobs.
Sufficient technology-based education and training for young people is integral in decreasing the youth unemployment rate in developing nations
There should also be coherence with investments in education and skills development seeking to promote sustained economic growth and decent work. Achieving this would involve updating education and training curricula at all levels to keep up with the rapid pace of technological change. While young people in low-and-middle-income countries are more educated, the decreasing returns to post-secondary education demonstrate the imbalance between the supply and demand for this type of education. As such, for young people to benefit from the employment potential of new technologies and new jobs, they must be equipped with skills relevant to the labour market from their early school years. Adapting education and skills development policies will ensure that young people achieve a successful school-to-work transition and cope well with working life. Ensuring inclusive growth is also necessary to help young people benefit from the opportunities of new career paths and technological change and managing the risks of such change. Within middle- and low-income countries, with high levels of informality and sometimes weaker labour market institutions, these countries provide insufficient support to youth entering the labour market for the first time.
Also, the impact of automation in high-income countries may spill over to the labour markets of middle- and low-income countries, as it potentially reduces the relative cost of domestic production in developed countries (Faber, 2018). As such, policy interventions should firstly focus on young people transitioning from education to the workforce. Such policies should also focus on young people within the workforce and those already displaced by new technologies.
Education and training can help young people acquire skills relevant to the labour market, including technical and soft skills. Research indicates that the impact of new technologies on occupations requiring soft skills will be lower than the impact on jobs based on performing repetitive tasks (OECD, 2020). Equipping young people with digital skills is essential due to their intrinsic value to a specific occupation and can open doors to acquiring additional knowledge, skills, and qualifications. Such examples have already been seen in economies historically struggling with youth unemployment – for instance, the “One Million Arab Coders” initiative, launched in the United Arab Emirates in October 2017, seeking to provide free training in coding and web development to 1 million young Arabs (ILO, 2020). Another example is Chile, where the National Training and Employment Service (SENCE) launched the “Elige Mejor” (Choose Better) programme, to ensure young people utilising the service have better information when deciding what additional job-related training to undertake (ILO, 2020). These initiatives demonstrate economies capitalising on technology to close the education and training gap for young people attempting to enter the workforce, as is necessary for lower unemployment.
Without young people actively involved in employment policy dialogue, nations cannot maximise the effectiveness of their proposed solutions
Finally, the involvement of young people in social dialogue is crucial for socio-economic progress. Key concerns such as new technologies, access inequalities, social protection, and the absence of labour market institutions, can only be addressed with the active engagement of young people. Young people must be included and represented in dialogue on the future of work, ideally as members of decision-making bodies, to secure a more inclusive and fair future. There is already evidence of this happening globally, including Paraguay with the National Roundtable for the Generation of Youth Employment created in 2008 (UN, 2021). Also, in Peru where the Tripartite Social Dialogue Roundtable on Youth Employment began in 2011 (UN, 2021). Essentially, policymakers should establish representation for young people within the consultation process for employment policy discussion.
Conclusion
Many young people are delaying their entry into the labour market, suggesting that the future adult labour force is likely to be better-skilled, leading potentially to a positive effect on socio-economic development. However, young people who have entered the labour market face numerous challenges, namely the number and quality of jobs available. Youth unemployment rates are over three times those of adults’, informal and vulnerable forms of employment are widespread, and many young workers remain unable to lift themselves and their families out of poverty. Furthermore, much of the potential of young people remains untapped, as evidenced by the high combined rates of unemployment and potential labour force (an indicator of labour underutilisation), as well as high NEET rates. Effective youth employment policies should generate decent jobs, equip young people with the required skills, ensure work rights and encourage representation in tripartite dialogue. Failure to act will continue to discourage young people in many countries and ultimately undermine socio-economic development.