Youth Unemployment Reconsidered

We have all read the alarming headlines: Half of all young people in Spain and Greece are unemployed. So are around a quarter of all young people in Italy, France and the UK. But it turns out there is a problem with the way youth unemployment rates are calculated. We wonder: Which number below is a truer reflection of the level of youth unemployment in Spain?

A. 48.9%
B. 30.5%
C. 19.0%
D. 13%

A. 48.9% is not correct.

The oft-cited number of 48.9% for the youth unemployment rate in Spain leads virtually everyone to the conclusion that one in every two young people there are unemployed. Thankfully, that overstates the problem significantly.

The unemployment rate is calculated on the basis of those who are seeking employment and cannot find it and are not in school or training. That methodology works well for adults, where the pool of those in training and education is generally quite small.

But this statistical convention creates a big distortion when applied to young people, those aged 16 to 24 years. The pool of young people in each country who are attending school or university, or are in vocational training, is very large. As a consequence, often well over half of all young people are not included as part of the labor force. They are invisible to statisticians, as researcher Steven Hill has pointed out.

B. 30.5% is not correct.

In Italy, 30.5% of young people were reported as "unemployed" as of the last quarter of 2011, according to Eurostat. However, calculated as a percentage of all young people aged 16 to 24 years, thus including all those in education and training, only 8% of young Italians are actually out of work.

This number is called the unemployment "ratio" — as opposed to the commonly cited unemployment "rate." The former measure more adequately conveys the true level of joblessness since it is based on the entire pool of young people.

On an EU-wide basis, the commonly referred to unemployment rate is 22.1% for the 27 member countries. In contrast, the unemployment ratio is 9.1% — or close to one in every ten young people.

C. 19.0% is correct.

As alarmingly high as the 48.9% rate of unemployed young people in Spain sounds, the more accurate rate — the unemployment ratio, which reflects the pool of all young people, including those in education — is 19.0%. To be sure, a rate of one in every five young people being unemployed is still very high and needs to be addressed urgently.

When young people don’t find regular employment opportunities, a lot of human and economic development potential is wasted. It not only leads to diminished earnings prospects for those affected in the future, but also a weaker GDP and lower productivity level for the country as a whole.

D. 13% is not correct.

The number of young people attending university is even higher in Greece than it is in Spain. Accordingly, if one looks at the total pool of young people, including students, the level of youth unemployment in Greece is cut by nearly three-quarters — from 49.3% to just 13%.

In quite a few countries well beyond Europe, including the United States, China and Northern Africa, governments have actively encouraged young people to attend university. That has softened the immediate pressure on policymakers to provide employment opportunities for job market entrants after high school (the U.S. youth unemployment rate is 16.3%). But it only delays the ultimate day of reckoning.

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