Shapovalov V. V., postgraduate student

Simon Kuznets Kharkiv National University of Economics

Analysis of the global labour market

After the period of rapid increase between 2007 and 2010, the global youth unemployment rate settled at 13.0 per cent for the period from 2012 to 2014. At the same time, the number of unemployed youth declined by 3.3 million from the crisis peak: 76.6 million youth were unemployed in 2009 compared to an estimated 73.3 million in 2014.

The youth share in total unemployment is also slowly decreasing. As of 2014, 36.7 per cent of the global unemployed were youth. Ten years previously, in 2004, the youth share in total unemployment was 41.5 per cent. While the indicator marks an improvement over time, it is still worthy of note that youth made up only one-sixth of the global population in 2014 and are therefore strongly overrepresented among the unemployed [1].

Despite some signs of “good news” presented above, the instability of the situation continues and the global youth unemployment rate today remains well above its precrisis rate of 11.7 per cent in 2007. Overall, two in five – 42.6 per cent, economically active youth are still either unemployed or working yet living in poverty. In the face of such statistics, it is safe to report it is still not easy to be young in today’s labour market.

In the Asian regions and in the Middle East and North Africa, youth unemployment rates worsened between 2012 and 2014. For the developed economies, the youth unemployment rate improved over the same period, but still in 2014, rates exceeded 20 per cent in two-thirds of the European countries and more than one in three unemployed youth had been looking for work for longer than one year. In Central and South-Eastern Europe, Latin America and the Caribbean and sub-Saharan Africa, youth unemployment rates have demonstrated a declining trend in both the medium and short-run periods. In all regions the stability of career prospects becomes increasingly tentative, but the situation could appear more degenerative in the developed countries where formal employment on a permanent contract was once the standard. In the developed economies, shares of youth involuntarily working part-time or engaged in temporary work have declined from the crisis peak, but within a longer term increasing trend as more young people take up part-time or temporary work in combination with education [4].

While the outlook for youth entering the labour market now does look slightly more positive than for those entering over the previous five years, we should not discount the lingering harm accruing to the cohorts who experienced long-term unemployment spells or were forced to take up less-than-ideal jobs during times of low labour demand. In still too many countries, the youth population continue to suffer the effects of the economic crisis and austerity measures put in place as a reaction. In these countries, finding work, let alone full-time work, as a youth with no work experience continues to be a drawn-out uphill struggle.

Youth in developing countries continue to be plagued by working poverty stemming from the irregularity of work and lack of formal employment and social protection. In 2014, more than one-third – 37.8 per cent, of employed youth in the developing world were living on less than US$2 per day. Working poverty, therefore, affects as many as 169 million youth in the world. The number increases to 286 million if the near poor are included (living below US$4 per day) [2].

In most low-income countries, at least three in four young workers fall within the category of irregular employment, engaged either in own-account work, contributing family work, casual paid employment or temporary non-casual labour. Nine in ten young workers remain in informal employment. This compares to an only slightly improved share of two in three youth in the middle-income countries.

The deficiencies in the quality of available employment in most developing countries block the successful transition of young people but also serve as a severe impediment to economic development. While development should bring gains in the shares of youth in paid employment that is neither casual nor temporary in nature, the fact that we are not there yet has consequences for measurements of youth transitions.

Results demonstrate that the transition paths of the most disadvantaged youth are often the most direct; that is, they move directly from school – if they even go to school – into the irregular and informal work that they are likely to continue doing for a lifetime. Even in developed economies, a short transition period to a first job should not be overly praised if the job does not offer a good foundation for the broader transition to a stable and satisfactory job in adulthood.

The global youth labour force and labour force participation rate continues to decline as enrolment in education increases. Between 1991 and 2014, the share of active youth (either employed or unemployed) in the youth population declined by 11.6 percentage points compared to a 1 percentage point decline in the adult labour force participation rate [7].

The global youth employment-to-population ratio – the share of the working-age population that is employed – declined by 2.7 percentage points between 2007 and 2014. The declining trends in youth EPRs are closely linked to increasing trends in educational enrolment.

After a period of rapid increase between 2007 and 2010, the global youth unemployment rate settled at 13.0 per cent for the period 2012 to 2014 and is expected to increase only slightly to 13.1 per cent in 2015. The rate has not yet recovered its pre-crisis rate of 11.7 per cent in 2007.

The number of unemployed youth has declined from 76.6 million at the peak of the crisis in 2009 to an estimated 73.3 million in 2014.

Globally, the ratio of youth to adult unemployment rates has hardly changed over time and stood at 2.9 in 2014. The youth unemployment rate has been consistently close to three times that of the adult unemployment rate since 1995 [7].

Strategies to promote youth employment should articulate the mix and interaction of macroeconomic policies, labour and employment policies and other interventions specifically targeting young people, particularly the most disadvantaged. Policies that offer fiscal incentives, support the development of infrastructure and develop enabling regulations for enterprises operating in sectors with high employment potential can help improve youth employment outcomes.

The positive effect of public investment on youth employment can be maximized by ensuring that young workers have the right skills and are supported in the job matching. In this sense, linking investment in infrastructure with labour market policies would boost both quantity and quality of jobs for youth.

Comprehensive packages of active labour market policies that target disadvantaged youth can help in the school-to-work transition.

An increase in public investment, social benefits and active labour market policies has an impact on youth employment, particularly in terms of labour market participation. Evidence shows that public spending on labour market policies is associated with significantly higher youth employment-topopulation ratios [8].

Specific policies and targeted interventions to support the transition of young workers to the formal economy yield better results if designed as part of macroeconomic policies and include interventions to improve legal and administrative requirements for entrepreneurial activity, reforms to advance the quality of youth employment through access to rights at work, better working conditions and social protection.

Coordinated responses and partnerships are required to scale up policies and strategies that have had an impact on the quantity and quality of jobs for young people.

After a period of rapid increase between 2007 and 2010, the global youth unemployment rate settled at 13.0 per cent for the period 2012−14 and is expected to increase only slightly to 13.1 per cent in 2015. While this rate is now on par with rates of the early 2000s, the number of unemployed youth has shown a significant decline over the same period: 78.7 million youth were unemployed in 2005, 76.6 million at the peak of the crisis in 2009 and then descending to an estimated 73.4 million in 2015. That the youth unemployment rate has not decreased with declining numbers of unemployed youth is a signal of the longer-term trends in the declining youth labour force, the denominator of the rate. In the ten-year span between 2005 and 2015, the youth labour force declined by as much as 46 million while the number of unemployed youth dropped by 5.3 million [6].

Figure 1 reflects well the cyclical nature of youth unemployment and reminds us of the often repeated tenet that youth are among the most severely impacted by economic crises; youth are the “first out” as economies contract and the “last in” during periods of recovery. Evidence from previous crises suggest that it takes an average of four to five years from the resumption of economic growth before overall employment returns to its pre-crisis levels. Recovery of youth employment can take even longer. In fact, at this point in time, nearly ten years after the onset of the global economic crisis, the global youth unemployment rate remains well above the pre-crisis rate of 11.7 per cent in 2007 [7].

Policies that promote employment-centred and inclusive growth are vital if young people are to be given a fair chance at a decent job. Youth labour market outcomes are closely related to overall employment trends but are also more sensitive to the business cycle as demonstrated in earlier chapters of this report. A boost in aggregate demand is key to addressing the youth employment crisis as this will create more job opportunities for young people.

Keeping youth employment strategies anchored to macroeconomic and sectoral policies is therefore critical. Far too often, however, interventions that aim to increase labour demand remain underutilized. It is quite uncommon to find a comprehensive set of policy priorities, targets and outcomes for youth employment, let alone with sufficient funds and resource allocations.

Macroeconomic and growth policies can support youth employment if investments are sufficient and well placed. Job growth can be spurred by encouraging economic diversification and structural transformation. Rural non-farm economic activities are currently the source of 40 to 70 per cent of rural households’ income in Africa, Asia and Latin America. A recent analysis of the results of the SWTS concluded that many countries – especially the low-income countries in sub-Saharan Africa – need to move beyond low-productive agriculture and petty trades in rural areas [3].

In these countries the promise of rural diversification and structural transformation has not yet resulted in better jobs for significant shares of young people living in rural areas.

Strategies to promote agricultural diversification and expand the productive segments of the industrial and services sector are required to harness gains from structural changes and boost labour demand for youth in developing countries. There are multiple and diverse pathways to structural transformation as highlighted [5].

Regardless of the policy choice, the State must play an active role, be it in building markets, nurturing enterprises, encouraging technological upgrading, supporting learning processes and the accumulation of capabilities, removing infrastructural bottlenecks to growth, modernizing agriculture and providing access to finance. Positive employment outcomes can be encouraged by reducing macroeconomic volatility by engaging in timely and targeted counter-cyclical policies. Through fiscal and monetary policy, central banks and financial authorities can encourage high levels of investment, enhance financial inclusion and ensure access to credit, particularly by granting credits to priority sectors with high potential to create quality employment [4].

The impact of expansionary fiscal policy on employment outcomes has been the subject of research and analysis over the last decade, and, more particularly, during the economic and financial crisis. In the realm of youth employment, a argues that counter-cyclical fiscal policy can help to curb youth unemployment. This instrument is more effective if preceded by a relatively conservative fiscal policy in non-recessionary periods, by increasing expenditure and reducing taxes during recessions and doing the opposite during economic expansion.

References:

1. Behrendt, C. 2013. “Investing in people: Extending social security through national Social Protection Floors”, in I. Islam and D. Kucera (eds): Beyond macroeconomic stability: Structural transformation and inclusive development (Geneva, ILO/Basingstoke, Palgrave Macmillan).

2. Divald, S. 2015. Comparative analysis of policies for youth employment in Asia and the Pacific (Geneva, ILO).

3. Elder, S. 2014. Labour market transitions of young women and men in Asia and the Pacific, Work4Youth Publication Series No. 19 (Geneva, ILO).

4. Islam, I.; Kucera, D. 2013. Beyond macroeconomic stability: Structural transformation and inclusive development (Geneva, ILO/Basingstoke, Palgrave Macmillan).

5. Islam, R.; Islam, I. 2015. Employment and inclusive development (London, Routledge Studies in Development Economics).

6. Lieuw-Kie-Song, M.; Puerto, S.; Tsukamoto, M. (forthcoming). Improving labour market outcomes of youth: A review of evidence from public works programmes (Geneva, ILO).

7. Report: Global employment trends for youth 2015: scaling up investments in decent jobs for youth / International Labour Office. - Geneva: ILO, 2015

8. Scarpetta, S.; Sonnet, A. 2012. “Challenges facing European labour markets: Is a skill upgrade the appropriate instrument?”, in Intereconomics, Vol. 47, No. 1.