ADDRESSING THE ISSUE OF YOUTH UNEMPLOYMENT: ISSUES AND THE CAUSES. Samuel Freije World Development Report 2013 Team, World Bank

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1 ADDRESSING THE ISSUE OF YOUTH UNEMPLOYMENT: ISSUES AND THE CAUSES Samuel Freije World Development Report 2013 Team, World Bank

2 A growing concern about jobs The global financial crisis resulted in massive job losses in both emerging and industrial countries. The Arab uprisings highlighted the discontent of educated youth whose job opportunities fall short of their expectations. Around the world, there is anxiety about the pace of job creation and the prospect of a global fight for jobs.

3 Main messages from the report Jobs are transformational. We tend to neglect jobs when thinking about growth, while in reality they are at the center of development. Jobs connect improvements in living standards, productivity gains and social cohesion. What is a good job? Some jobs do more for development than others, because they reduce poverty and inequality, strengthen production chains and clusters, or help build trust and shared values. Policies through the jobs lens. Understanding how labor markets interact with equity considerations, market imperfections and collective action is the key to identifying and evaluating policies for good jobs.

4 Jobs as the hinge of development Living standards Jobs Productivity gains Social cohesion

5 Good jobs in practice Living standards. Jobs that make a greater contribution to poverty reduction; female employment; jobs with greater potential for growth in earnings and satisfaction. Productivity. New jobs whose productivity is above the country s average; jobs with greater productive externalities; jobs with potential for productivity growth. Social cohesion. Jobs that convey a greater sense of dignity and belonging in society; jobs that do not conflict with human rights; jobs providing voice and encouraging participation. 5

6 Youth not in education, employment or training (NEET) Youth neither in education nor in employment has become an important policy concern in recent years. Youth unemployment is very important and raises valid concerns. The expansion of the focus from unemployment to the broader concept of NEET responds to the need to consider youth who are discouraged or unwilling to join the labour market Little is known, especially for developing countries, about the size of NEET youth population, its characteristics, relationship with the characteristics of the economy and its impact on future labour market outcomes

7 Different definitions and measures of youth labour force disadvantage and disengagement have been used by scholars. We employ here the most comprehensive one that includes unemployed youth and youth not in education and not in the labour We will, however, look also at both the components of NEET separately Level of youth NEET is relatively large in most regions and countries; there are however substantial variations The incidence ranges around 30% with lower and upper bounds ranging from 5% to 50% 7

8 NEET rates in different countries (circa 2005) Sub-Saharan Africa ZAR ZAF TZA RWA MWI LBR GHA ETH CMR CAF BEN Latin America and the Caribbean URY PRY NIC MEX GTM DOM CRI CHL BRA ARG South Asia Middle East and North Africa YEM SYR LBN JOR IRQ IRN EGY Europe and Central Asia UKR TUR TJK MNE MKD MDA KAZ CYP BIH ALB East Asia and the Pacific PAK NPL LKA IND THA PHL LAO BTN IDN BGD KHM not in education nor in labor force unemployed Source: Rosatti, Furio et al. for WDR 2013 (preliminary figures) 8

9 In all regions there is a large gender divide. The gender difference is the smallest in Africa and the largest in MENA and Asia This is not surprising, as female youth specializing in domestic chores are included in NEET. In SAA, NEET is mainly an urban phenomenon In the other regions, differences by residence are less marked and depend mainly on country circumstances and on the rural urban divide in female labour supply. 9

10 NEET as a percentage of youth population, by sex, Latin America and the Caribbean ARG Female Male Not in education or labour force Brazil Unemployed CHL CRI DOM GTM Mexico NIC PRY URY Percentage Source: Rosatti, Furio et al. for WDR 2013 (preliminary figures) 10

11 NEET as a percentage of youth population, by residence, Sub-Saharan Africa ZAR Zambia UGA TZA TGO RWA NER MWI MOZ LBR KEN GHA GAB COG CMR CIV CAF BFA BEN Rural Urban Not in education or labour force Unemployed Percentage Source: Rosatti, Furio et al. for WDR 2013 (preliminary figures) 11

NEET: correlates of cross country variation There does not appear to be any

negatively correlated with household poverty 60 50 NEET and GDP per capita growth

10 GDP pc growth (annual %) 0 0 20 40 60 80 100 Poverty headcount ratio at $1.

12 NEET: correlates of cross country variation There does not appear to be any evident correlation between the NEET rate and GDP per capita growth NEET appears negatively correlated with household poverty NEET and GDP per capita growth NEET and poverty % NEET % NEET GDP pc growth (annual %) Poverty headcount ratio at $1.25 a day (PPP) (% of population) Source: Rosatti, Furio et al. for WDR 2013 (preliminary figures) 12

13 Some preliminary econometric results Higher HH education level reduces the probability of being absent from education and labour force, but only for female youth Greater household wealth reduces probability of being absent from education and labour force; again this result is more significant for female youth Higher HH education level increases the probability of unemployment, especially for male youth Household wealth is not significant for explaining the probability of youth unemploymetn 13

14 More research is pending NEET rate in the developing world are mostly explained by low school attendance and strongly associated to low levels of income Higher unemployment rates are seen among the non-poor Some additional research is ongoing NEET incidence by education levels and by poverty status Persistence and cyclicality of NEET status among the youth 14

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