This article appeared originally in Gulf News: link to original article
It used to be unemployment … and the sentence would end there. It’s now all about youth unemployment.
So whenever unemployment percentages are quoted, it shouldn’t matter much in comparison to youth unemployment — youth here being between the ages of 15 and 24. And you could point out, quite easily, the discrepancy between the two whenever unemployment is now quoted in different reports.
Are the two correlated in any way? And regardless of what the answer is; where is the discrepancy coming from? That will be the first point to look at.
By considering the Top 10 countries with the lowest unemployment rates, and the ones with the lowest youth unemployment, eight out of 10 are present in both lists in the same rankings, with a couple of exceptions. I am not surprised to see Thailand there as Thailand has maintained low unemployment rates for the past few years.
In matter of fact, Thailand managed to reduce the unemployment rate from 2.7 per cent in 1991 to 0.6 per cent in 2016, and youth unemployment from 6.8 per cent to 3.1 per cent (based on World Bank estimates). You may argue that the reduction is not that fancy, but then have another look at both unemployment rates in contrast to worldwide’s average — 5.7 per cent and 13.6 per cent among the youth.
The rest of the list includes Asian and African countries only, with Belarus being the exception. A correlation between unemployment and youth unemployment can be traced; however, each country is a different case.
For instance, countries such as Myanmar, Cambodia, Lao’s Benin, and Burundi have low unemployment rates because:
1. They are starting from a very low base;
2. agriculture is still a major contributor to their economies and employ more youth;
3. Minerals extraction, raw materials exporting, and basic manufacturing industries such as textiles also employ youth.
So how did these countries manage low youth unemployment rates while countries in the Arab world and Europe struggle with that issue? There must be a clear line drawn between the least developed countries, all of those listed above except Belarus, and developing as well as developed countries — countries in the Arab world and Europe.
The case for the Arab world is slightly different though. When you look at the economic cycles they have been through, it’s almost impossible to find a country that has successfully transitioned from exporting raw materials and food commodities to basic manufacturing, to more sophisticated manufacturing and the export of financial and other services.
The ambiguity in determining and comprehending those economic cycles, and which cycles countries are in, further exacerbates the youth unemployment problem in the Arab world. The figure stood at an average of 29.2 per cent in 2016 for all Arab countries, rising from 28.2 per cent in 1991 — go figure why. Factors such as the inadequacy of the education system; mismatch with current job market requirements; and failure to predict future patterns of employment should not be eliminated.
As for European countries, where youth unemployment is at an average of 23.8 per cent for 2016 from 18.5 per cent in 1991, the issue is more complex. In addition to a possible mismatch in job markets, there is an integration problem directly associated with immigration patterns.
Also, many European countries have reached a somewhat economic saturation point, where the issue of insolvent and underfunded pension funds increased the retirement age, thus subsequently inflating youth unemployment. For that to be resolved, the easiest way out is that of SMEs, with Germany and its trade surpluses being the example.
The general trend in youth unemployment between 1991 and 2016 is an increasing one, which means that as countries move from least developed to developing and developed, they would first face issues similar to those of Arab countries, and then issues similar to those of European countries.
The solution? Fix pension funds and SME-driven growth. The last thought that I want to leave you with is: what countries listed above are benefiting from China’s OBOR (one belt one road)?