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Why Are Youth Unemployment Rates Higher?

At the global level, the youth unemployment rate in 2009 was 2.7 times higher than the adult unemployment rate. In four of nine regions the ratio went beyond 3. Why are youth unemployment rates so much higher than adult rates? There are many likely explanations:

The last-in, first-out explanation. Youth are more vulnerable than adults in difficult economic times. They are likely to have less work experience than adults. Assuming that employers seek employees with past experience, the youth who is entering the labor force for the first time will be at a disadvantage and have a harder time finding employment vis-à-vis an adult with a longer history of work experience. In times of surplus labor competing for a limited amount of jobs, the youth will be the “last in”.

Unemployment Line
AP
Unemployment Line

Similarly, because a young worker is likely to have less tenure than an adult worker, less company funds invested in them for training purposes and to have a temporary contract, it will be considered cheaper to let the younger worker go in times of economic downturns. Thus, young workers will be the “first out”.

The lack of job search expertise explanation. A young person often lacks both labor market information and job search experience. In many developing countries, it is only through informal placement methods – typically through family and friends – that a young person finds work.

Beyond the word of mouth approach through families and friends, they simply might not know how and where to look for work. Adults, on the other hand, might have the possibility of finding future work through references from previous employers or colleagues and are more likely to know the “right” people.

The “shopping around” explanation. Another possibility is that youth might take longer to “shop around” for the right job, meaning they might wait longer to find work that suits their requirements. This, however, implies that a support structure, such as the family, exists to economically support them while they search for work.

In low-income countries, this support structure does not exist for the majority of young people and as a result, a young person simply cannot afford to be unemployed and is likely to take whatever work becomes available, regardless of working conditions or whether or not the job fits his/her education or skills-base.

The lack of mobility explanation. Young people just starting out in the labor force are unlikely to have the financial resources to re-locate, nationally or internationally, in pursuit of work. Because many will continue to depend on household incomes, their job search threshold will be limited to the nearby vicinity of the family home.

The explanations given above are a mixture of demand-side causes and supply-side causes. None of the explanations is likely to explain in full the difference between youth and adult unemployment rates. What is most likely is that the different factors work together to result in the proportion of unemployed youth in the youth labor force being significantly higher than the proportion of unemployed adults in the adult labor force.

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Jose Manuel Salazar has been Executive Director of the International Labor Organization's Employment Sector since August 2005.

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