Youth Unemployment

Tackling youth exclusion from the labour market is a well-studied problem but with no easy solutions. There are no quick fixes to ensuring that all young people can get off to a good start in the labour market. Some countries are doing a better job than others but they all face the challenge of dealing with a hard-core of youth who risk being excluded from the labour market.

In the context of a weak jobs recovery, a significant and growing proportion of youth, even among those who would have found jobs in good times, are at risk of prolonged unemployment or inactivity, with potentially long-term negative consequences for their careers, or so-called “scarring effects”. These risks include long-term difficulty finding employment and persistent pay differentials with their peers. Young people leaving school in the coming years are more likely to struggle to find work than previous generations.

Essentially, a two-pronged approach is required to tackle, on the one hand, the underlying structural barriers to a better insertion of youth in the labour market and, on the other hand, the crisis-driven rise in the number of youth who are not in work or in school.

As many countries are facing mounting pressures for fiscal consolidation, it is important that governments give priority to cost-effective interventions to improve youth labour market outcomes. Thus, policies should focus on the most disadvantaged, including the long-term unemployed and those at high risk of exclusion.

Job-search assistance programmes have been found to be the most cost-effective early intervention for young people who are assessed as ready to work.

Temporary extensions of the social safety net can also be vital to prevent poverty among unemployed youth.

Earnings volatility is particularly high among younger workers. Some countries have also introduced wage subsidies to encourage employers to hire low-skilled unemployed youth. However, in order to avoid the well-known deadweight effects entrenched in these subsidies (i.e. hiring that would have taken place without subsidies), they should be adequately targeted, for example on small and medium-size enterprises or on apprenticeship contracts.

There may also be a need in many countries to expand opportunities for “study and work” programmes such as apprenticeships and other dual vocational education and training programmes.

More intensive, remedial, assistance should be targeted on those youth at greatest risk of social exclusion. While back-to-the-classroom strategies might prove counterproductive for them, training programmes taught outside traditional schools, combined with regular exposure to work experience and adult mentoring, are often better strategies for the disconnected young people.

*Excerpts from OECD Employment Outlook 2011, Editorial Unfinished Business:

Investing in Youth by John P. Martin Director, OECD Directorate for Employment, Labour and Social Affairs