Alastair Wood and Stéphane Carcillo, OECD Employment, Labour and Social Affairs Directorate
In the 1955 film Rebel without a cause, Jim Stark (played by James Dean) is an alienated and unhappy young man in mid-1950s America. He and his friends form a trio that evokes youthful pain, torment and bewilderment. The film’s focus is on teenage rebellion and parental neglect, and it conveys an important message about listening to the needs and desires of our youth population. Today’s youth (aged between 15-29) have been hit particularly hard by the financial crisis and Great Recession; they have been struggling to make a successful start to their working lives in very difficult times. At its peak, youth unemployment reached an average of 17% in OECD countries (far higher than the rest of society) and hit an astonishing 60% in Greece. OECD’s Society at a Glance 2016 puts young people under the spotlight, looks at how they are holding up in society and shows which of their needs are not being met.
But it is not just about unemployment. Many young people are not at school and are not even looking for a job. Taking the unemployed and the inactive together shows that in 2015, about 40 million young people, a total of 15% of all OECD youth, were not in employment, education or training (the so-called NEETs). Beyond the moral dilemma, the opportunity cost of having such a large number of young people being isolated from society is estimated to have been between 360-605 billion US dollars in 2014 alone (0.9-1.5% of OECD-wide GDP, depending on the wage level used to impute income – minimum wage or median wage) – this is the income that could have been generated had they been better integrated into society.
Low-skilled youth are particularly at risk of long-term isolation and disengagement from society. Those who have not finished high-school are 3 times more likely to be unemployed or “inactive” while only one quarter of NEETs have higher education qualifications. People with low-skilled parents or unemployed parents are also more likely to be NEET, suggesting an intergenerational transmission of disadvantage. Lower educated parents may not be able to encourage higher education as much, they may not be able to help as much with homework, and they often lack social networks to help their children get their first work experience. For similar reasons, and due to language difficulties and possibly also discrimination, youth born outside their country of residence are 1.5 times more likely to be NEET than native youth. Being female adds to the NEET risk. Young women are one and a half times more likely than men to be unemployed or “inactive”, often because they are caring for children and other family members, especially in Mexico and Turkey.
Fortunately, for many young people, inactivity and unemployment is only temporary. But for a significant fraction, it is a lasting curse. About half of all NEETs experience such isolation for more than a year. The low educated account for 17% of the youth population, but represent 30% of those who spend more than 12 months as a NEET; young people with health problems are also over-represented. Taking a short time out of work to care for children or to travel can be great and have no negative effects, but longer periods risk harming future employment opportunities and earnings.
Better policies are needed to foster self-sufficiency among young people and bring back their trust in society and politics: the report shows that we need to continue fighting early school leaving; it also documents how apprenticeships are a valuable alternative to academic schooling and can help bring more young people smoothly into the labour market. Intensive second chance programmes targeted at high-school dropouts motivated to catch up on their skills are also needed. For women, ensuring access to high quality childcare helps them re-join the labour market (France, Denmark and Sweden are good examples), and improving uptake by fathers in parental leave can also help young women’s careers. Efforts are also being made at the international level. Policy makers from the G20 economies collectively committed to reduce the share of young people most at risk of being left permanently behind in the labour market by 15% by 2025. At the EU level, the Youth Guarantee is also a good opportunity to reduce the number of youth who fall through the cracks and make them an employment or training offer.
Not surprisingly, NEETs are less satisfied with their lives compared with their peers – 22% reporting low levels of life satisfaction compared to 14% overall. Feeling isolated and disconnected means that they often have no interest in society and only 18% report that they trust others compared to 29% of youth overall. Sixty years after Nicholas Ray’s film, they can probably understand Jim when he says “Boy, if, if I had one day when…I felt that I belonged someplace, you know?”
Julia Stockdale-Otarola, OECD Public Affairs and Communications Directorate
Millennials are “lazy, entitled narcissists”.
No, millennials are multi-taskers, tech-savvy and confident.
The media has offered various contradictory views regarding the characteristics that best define the millennial generation and the labour situation they face.
So, who are they? Simply put, the term millennial refers to anyone born between the 1980s and the early-mid 2000s. No doubt you know some of them well. They might be a family member or perhaps a colleague. Maybe you’re one yourself. I’m a millennial.
And what do we know about their struggle to enter the labour market? There is growing concern that millennials are a “scarred generation”. That is to say that today’s poor labour market performance and un- and underemployment will negatively impact future labour market outcomes. In other words, this means that if you were to graduate without a job or in a low-wage job you are more likely to be affected by unemployment and lower earnings later in your career.
Following the 2008 crisis, youth, particularly those with low educational qualifications, have struggled more than adults to bounce back. Between 2007 and 2012 the number of employed youth fell by more than 7.5 million in OECD countries. Indeed, youth increasingly confront inactivity, precarious work, under-employment – and youth unemployment remains above its pre-crisis levels in numerous OECD countries. The term NEET (not in employment, education or training) continues to come up in the headlines. Approximately 22 million young people are NEET and more than one in five young people aged 15-24 have been out of work for more than 12 months. The persistence of this problem can also be seen when the NEET population is broken down by age, as most NEETs in OECD countries are in their 20s, with 45% of NEETs aged between 25 and 29. Those who are able to find work also voice concerns regarding job quality. Unpaid internships, short-term contracts and temporary unemployment seem to be the norm. This offers youth limited stability and social protection. Even highly-educated youth are more likely to take temporary positions, resulting in under-employment and contributing to the exacerbation of labour market segmentation in some countries.
So how are millennials coping? Despite varying situations within and across countries, one theme persists in my discussions with other young professionals and students. Millennials are worried about their futures and those of their families. Uncertainty is the mot du jour. After checking all the boxes: continuing education, getting good grades, volunteering, interning, working, and being involved in student life, they’ve joined the ‘real world’. But for many it isn’t living up to expectations. The future seems burdened with crippling student debt, little to no savings, and you can forget about pensions in retirement. Millennials have observed how Generation X struggles to make ends meet and achieve work-life balance. And so, they question what’s in store for them. Increasingly risk adverse, many are delaying major life decisions. Buying a home, going back to school or having children just doesn’t seem worth it or even possible… At least not yet.
But millennials aren’t alone. Real wages have slowed in 25 out of the 30 OECD countries which had available data and are declining in more than one third of countries. Though unemployment is slowly declining, it remains high at above pre-crisis levels in the OECD. Many workers believe the labour market offers minimal wage growth, lacking opportunities for training and progression, excessive overtime hours, and limited flexibility. Millennials and young parents are simply the most dissatisfied. To ease the strain workers are seeking greater flexibility, paid parental leave, and onsite or subsidized child care. Changes to the employment contract, an ageing and an increasingly multigenerational workforce, and changing family dynamics mean we need to rethink policy. We need better options.
Many governments have made significant efforts to support youth. The OECD has an Action Plan for Youth and youth employment initiatives are sprouting around the globe. The European Union has made youth employment a priority with the Youth Guarantee, committing member states to offering all NEETs training or work within a few months of graduation or becoming unemployed. Individual states have also invested in youth to facilitate school-to-work transitions. All these efforts play an important role in improving the current situation but there’s still more work to do. Pension, family and labour policies can all have an impact to provide greater stability for youth throughout their careers and ensure that the challenges of today do not dictate the future.
We need to work together to support policies that consider all generations and move towards greater intergenerational solidarity. So strike up a conversation with your grandparents, your colleagues, or that Master-educated barista – there’s something to learn from everyone.
The OECD Skills Outlook 2015 focuses on “Youth, Skills and Employability”
Marianna Georgallis, Policy & Advocacy Coordinator at the European Youth Forum
One month ago, all eyes turned to the Greek drama playing out in Europe. It has been a month of fraught negotiations, a shock referendum and a European Union and its leaders put under the spotlight, with European values of solidarity and unity questioned and, some might say, threatened. The focus has been largely on numbers – on the billions needed to avoid a Grexit, on the daily €60 cash withdrawal limit currently in place. But the ultimate reason for the past weeks of drama has not been figures – it has been people. The Greek government’s actions, right or wrong, are attempting to reverse the trend of years of wage cuts, welfare cuts, growing poverty, inequality and dire levels of unemployment. Undercutting all talk of currencies, of bailouts and banks has been the grave social impact of the economic and financial crisis and Europe’s response to it.
The statistics are there and are by now well known. The OECD Employment Outlook 2015, published earlier this month, highlights what has been mentioned in countless political speeches over the past years: Europe is suffering a social crisis. Unemployment rates give the first indication of this: Whereas unemployment has fallen below 6% in the United States and is under 4% in Japan and Korea, in the euro area the unemployment rate remains above 11%. It is clear that Europe is still lagging behind the rest of the world when it comes to employment.
These statistics are higher and more shocking when it comes to young people specifically. The share of young people neither employed nor in education or training, the so-called NEETs, has reached a staggering 40 million across OECD countries – with 27 million of these NEETs totally off the radar – a disappeared mass of young people, registered nowhere.
The enduring effects of this are a serious cause for concern. More than one in three jobseekers in the OECD has been out of work for 12 months or more. Long-term unemployment has serious consequences, ranging from deterioration of skills, lack of confidence which can lead to mental health issues and an impact on the economy through inactivity and costs of welfare provision such as unemployment benefits. However, the new finding of this year’s Employment Outlook is that a person’s long-term career prospects are largely determined in the first ten years of their working life. Long-term spells of unemployment can have an influence well into one’s career in terms of earnings – meaning that upward earnings mobility can be reduced having been long-term unemployed as a young person. This in turn raises income inequality and thus impacts economic growth through, amongst others, perpetuating under-investment and lower aggregate output.
However, it’s not just about having a job. The European Youth Forum has been calling for an end to the ‘any-job-will-do’ approach which has persisted since the onset of the crisis, with no real attempt from European policy-makers to address this. The Outlook shows that youth, alongside low-skilled and informal workers, typically hold the poorest quality jobs. The disproportionate increase of young people on temporary contracts over recent years is not a case of voluntary temporary employment – it is clearly a situation of forced, precarious work. Unpaid internships are a clear example of this – you would be hard pushed to find a young person, fresh out of their studies, willing and happy to work for free for 6 months – yet the 5 million interns in Europe, almost half of whom are unpaid, show that this is unfortunately the current reality.
Quality employment is a right, enshrined in several universal legal frameworks. Unfortunately this has been ignored by too many governments and EU leaders; focusing on job quality is perceived as a drag on job creation. The Employment Outlook disproves this, however, showing that the best performing OECD countries in terms of employment rates are also the ones that have the highest level of job quality. This is why the clear message of the Outlook is that governments must take action to foster stronger employment growth, implementing direct measures to improve workers’ access to productive and rewarding quality jobs.
The European Youth Forum views the new Investment Plan for Europe as an opportunity to do this. If the focus is on investment in quality job creation, particularly in emerging sectors with great potential such as the green economy and ICT, there is hope yet that the social crisis, experienced in Greece but also across the board, can begin to be reversed. Governments need to fulfil their duty of ensuring that all young people are able to access their social and economic rights, in order to achieve independence and autonomy, and thus contribute to a healthy economy and an inclusive society in Europe and the world.
Employment Outlook editor Paul Swaim writes about this year’s edition here
Glenda Quintini and Stéphane Carcillo, OECD Employment, Labour and Social Affairs Directorate
Agnès attended a French High School but left at 16 with poor qualifications. She had not enjoyed school and was pleased to leave but now she would be pleased to go back as work has not been as pleasant or easy as she had expected. She found a job at a local burger company but hated it and felt that she had been very badly treated. She then got into restaurant work with some basic training which was much better but had then been laid off because they were cutting back on staff. She is living with her boyfriend who is also unemployed.
One of today’s top policy priorities around the world is to help people like Agnès and reduce extremely high youth unemployment while easing young people’s access to good quality jobs. As the first edition of “Youth Skills day” unfolds, about 40 million youth aged 15-29 in OECD countries are either looking for work or entirely disconnected from the labour market and from education and training. For the young people affected, this is a major setback that could have long lasting negative implications. For countries, not only does this represent human capital that is not being productively used but it also constitutes a financial cost as marginalisation from the labour market at such a young age is likely to bring about benefit dependency for life.
The so-called NEET rate (the share of youth neither in employment nor in education or training) currently stands at 14% in the OECD on average, up from 12.5% before the Great Recession. But in some countries, the problem is much bigger and has been exacerbated by the crisis. For example, the NEET rate rose by about 10 percentage points to exceed 20% in Greece, Italy and Spain.
The lack of skills is a major factor behind being NEET, along with a number of other barriers to employment – poor health, substance abuse, housing – that put NEETs at high risk of social and economic marginalisation. In Spain and England and Northern Ireland, 40% of NEET youth score at level 1 or below in literacy in the Survey of Adult Skills (PIAAC) – the lowest level of proficiency. And about a third do so in Canada and Norway. In addition, many have dropped out of general education – 40% of NEETs on average only have lower secondary qualifications – and have no recognised qualification to show for in the labour market.
To bring down this alarmingly high rate, the OECD Action Plan for Youth proposes a set of policies to tackle the current youth unemployment crisis and strengthen the long-term employment prospects of youth. It encourages countries to act fast to strengthen and expand cost-effective active measures such as short-term training, job search counselling or hiring subsidies – all crucial to prevent unemployed youth from disconnecting from job search, particularly in times of poor job creation. It also suggests acting now in areas that may take a while to bear fruit. For instance, prevention is better than cure and the accent is put on ensuring that the education system provides youth with the skills needed for the labour market.
A major challenge is how to deal with those young people who are not even looking for work. These youth typically fall through the cracks of safety nets. Reaching out to them and (re)motivating them in participating in education, training or any form of active programmes is challenging and requires frequent contacts as well as a good cooperation and information sharing between social and employment services.
Some programmes have been successful in helping NEETs get back into learning or employment – such as YouthBuild or JobCorps in the United States. They tend to have a significant hands-on learning component and often partner with employers to provide in-work learning modules. However, all this tends to be rather costly – often in excess of $10,000 per participant. Acting early, to prevent disengagement in the first place is therefore crucial. Apprenticeships and VET programmes, if available to all youth in education, can help prevent dropping out without qualifications in the first place, reducing the likelihood of becoming NEET.
Effective action to reduce NEET rates requires coordinated measures across all relevant ministerial portfolios and at the national and local level to ensure that youth acquire the right skills, bring those skills to the labour market and are able to utilise them effectively.
The OECD Action Plan for Youth is intended to build on and support existing national and local initiatives as well as the ILO Resolution on “The youth employment crisis: a call for action”, the G20 commitments on youth employment and the EU Council’s agreement on the Youth Guarantee.
Stéphane Carcillo et al. (2015), NEET Youth in the Aftermath of the Crisis : Challenges and Policies, OECD Social, Employment and Migration Working Papers, No. 164
The OECD’s Employment Outlook argues that time is running out to help workers move up the jobs ladder
Paul Swaim, Senior Economist in the OECD Employment, Labour and Social Affairs Directorate and Editor of the OECD Employment Outlook
The recovery is underway, but millions of workers risk being trapped at the bottom of the economic ladder. While unemployment is on a downward trajectory in most countries, about one-half of the crisis-related increase in joblessness in the OECD area still persists more than seven years after the crisis began. Around 42 million persons were without work in May 2015 across the OECD, 10 million more than just before the crisis. Long-term unemployment is a particular concern. The number of persons who have been unemployed for a year or longer is 77% higher than then it was just before the crisis struck in 2007. Young people in the OECD are twice as likely to be unemployed as prime-age workers. More than 40 million 15-29 year-olds (or 1 in 6 youth) across OECD countries are neither employed nor in education or training, the so-called NEETs. More than half of all NEETs –27 million young people – have dropped off the radar completely. They have literally disappeared from their country’s education, social, and labour market systems. Whatever their age, the long-term jobless can become demoralised and are sometimes stigmatised by potential employers, so there is a real risk that some members of this group will become permanently disengaged from the labour market.
Not only is the labour market recovery still far from complete, but the OECD Employment Outlook 2015, released today, argues that time is running out to prevent millions of workers from being left trapped at the bottom of the economic ladder. Many of the youth who finished their schooling during the crisis years and have struggled to gain a secure toe-hold in the labour market may be approaching the “make or break” point so far as being able to ascend the career ladder. Indeed, one of the striking findings in this edition of the OECD Employment Outlook is that long-term career prospects are largely determined in the first ten years of working life. Some of the experienced workers who have lost their jobs during the crisis are also having a difficult time putting their careers back on track. For example, a number of those who lost jobs in the manufacturing or construction sectors will need to make a career switch to growing service industries and often to adapt their skills if they are to avoid becoming trapped on the margins of the labour market.
The scarring effects of the crisis on the hardest hit groups are compounded by longer-run trends that are making it more difficult for low-skilled workers to move out of precarious, low-paid jobs into jobs that offer opportunities for career advancement. If the missing rungs are not put back into the jobs ladder, the legacy of the crisis is likely to include a further permanent increase in economic inequality above the already record high levels that had been reached before the crisis in many OECD countries. Governments need to take action now if they are to avoid a permanent increase in the number of workers stuck in chronic unemployment or cycling between unemployment and low-paid jobs.
Polices to support upward mobility in the labour market are a priority
The Employment Outlook underlies the high social costs resulting from earnings inequality by showing that a substantial portion of the persons who are unemployed or in low-paid jobs at one point in time are at a high risk of becoming trapped at the bottom of the earnings ladder. Policy makers should thus place a high priority on assuring that the crisis does not leave additional workers permanently excluded from work or trapped in low-paying and insecure jobs, thereby ratcheting inequality up another notch.
Concerns about a possible increase in inequality are heightened by the fact that most OECD economies had already become significantly more unequal in the distribution of income during the decades preceding the crisis, reflecting a large rise in earnings inequality. It follows that the challenge to promote upward mobility at the bottom of the jobs ladder is much more than a cyclical issue related to the global crisis. It is also a key to helping all workers to participate successfully in a rapidly evolving economy. Technological change and the digital revolution in particular have been important drivers of this trend by skewing job demands towards high-level skills and putting downward pressure on the pay of less skilled workers. These structural changes in the economy are part of a continuous process of adaptation to new technologies and processes, as well as globalisation. In this context, workers must have the opportunity to build the skills needed by employers, but also to adapt them to changes in labour demand and to use their skills fully on the job. This is of crucial importance to ensure human capital plays its expected role in boosting innovation and productivity, but also to make growth inclusive.
Governments need to begin restoring the missing rungs back in the jobs ladder and help workers to climb them
The Employment Outlook analyses in detail three types of policy measures that are particularly important for improving the labour market prospects of the workers who are currently stuck at the bottom of the economic ladder. First, effective activation measures are needed that connect jobseekers with suitable jobs. Second, skill deficits in the workforce must be addressed since one of the strongest predictors of poor career outcomes is a low level of skills. Finally, direct measures to raise job quality have an essential role to play, especially in shoring up the earnings of low-paid workers. The importance of these types of measures has long been apparent, but their importance has been magnified by the crisis and by the increase prevalence of temporary and other atypical jobs in a number of countries. Career advancement opportunities are often limited for workers in these types of jobs.
Turning the recovery into an opportunity to promote inclusive growth
Going forward, the most general lesson for labour market policy makers is that more attention should be paid not only to the number of job opportunities available, but also to the quality of these jobs and who requires targeted assistance to access them. In order to promote full recovery from the crisis and help workers to thrive in an ever-changing economy, governments must take action to foster stronger employment growth and improve workers’ access to productive and rewarding jobs. Doing so will help to repair the broken rungs of the jobs ladder and reverse the long-run increase in inequality. It will also strengthen the sustainability of economic growth, another key requirement for promoting inclusive growth.
Youth unemployment is reaching crisis point in many countries. The financial collapse of 2008/9 and the weakness of the subsequent recovery have made it harder for young people to make the first step into the labour market. Unemployment rates have risen across the OECD. Some in the media have claimed that there is a crisis in graduate unemployment, and that education may not be worth the cost. And a cursory glance at the statistics would seem to support this point of view: across the OECD, unemployment rates have increased for those with higher education from only 3.3% to 4.7% between 2008 and 2010.
Yet if the labour market is difficult for those with higher education, it is far worse for those without. As the OECD’s Education at a Glance report – released last week – makes clear, education is more valuable than ever. For those without an upper secondary education, unemployment across the OECD has increased from 8.8% to 12.5%. Education matters, and increasingly so.
Given that the supply of highly educated workers has increased hugely over the past 30 years, why hasn’t the demand for educated workers declined? One answer is structural change in the economy. As we move to an economy based on knowledge rather than physical production, the demand for workers who can create, use and disseminate knowledge has increased. The economic crisis accelerated structural change, with weak industries closing and marginal jobs reduced.
Alongside this is the related issue of technological change. Skilled workers who can use and – to a lesser extent – produce technology are increasingly in demand. And globalization, or the increase in trade between countries, is also a partial explanation, meaning that low-skilled workers in advanced economies have fewer job opportunities – but that workers in other parts of the world often have more.
Young people without education have been caught between these trends. And where low-skilled employment has increased, it has been in low-waged service work. While manufacturing has declined as a source of employment, services have become more important, with the result that even the skill requirements for entry level work has changed. Large plant manufacturing gave young people opportunities to ‘learn on the job’, meaning that it mattered less if young people lacked the soft skills to work – they could enter the labour market and develop them.
Yet in service based economies, young people without soft skills are caught in a “Catch 22”: it is hard to develop soft skills without experience of work, but they cannot find employment without soft skills. In many countries, including the UK, these two processes have led to long-term increases in youth unemployment, particularly for those with less education.
So what are the answers?
Firstly, the public debate needs to abandon the myth that there are too many graduates, or that education is not worth it. The facts directly contradict this and it is vital that neither policymakers nor young people themselves begin to believe it.
Secondly, it is important to provide young people with a ‘soft landing’ into the labour market – the opportunity to develop workplace skills alongside formal education. Countries with low levels of youth unemployment, such as Germany or the Netherlands, are often good at this. In the Netherlands, many young people work part-time whilst still in education. This allows them to develop workplace skills in the areas of teamwork, punctuality and customer service without getting caught in a ‘Catch-22’.
Thirdly, we need continued efforts to ensure young people from any background have the chance to gain higher education. The OECD’s Education at a Glance report contains some startling findings on differences in attainment for young people of different backgrounds. On average across the OECD, young people whose families have low levels of education are less than half as likely to be in higher education compared to the average.
However, some countries perform better on this measure than others – chances are better for a young person from Australia than the UK. And one of the key drivers of this is attainment while at school: countries that are better at educating children in school fare better when it comes to translating this into higher education.
Youth unemployment is a major challenge across the OECD, with rates especially high for those with fewer qualifications. Governments need to respond across a number of fronts, but at the heart of the problem is education. Increasing educational attainment, particularly amongst disadvantaged groups, will be the key to addressing the long-term challenge of youth unemployment.