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G20 countries — Governments must tackle rising youth unemployment, says OECD

19 April 2010

A new working paper by the Organisation for Economic Co-Operation and Development (OECD), published in advance of the G-20* Labour Ministerial in Washington D.C. (20-21 April 2010), states that "the short term prospects for youth unemployment in the OECD countries remain rather gloomy."

Unemployment among young people is set to keep rising in the months ahead and stay at the same high double digit level across the OECD to the end of 2011. "Many unemployed youth are likely to experience a prolonged period of joblessness."

Youth unemployment rates in Europe will remain close to 20% well into 2011, according to forecasts based on the OECD's November 2009 Economic Outlook.

Across the OECD area, the unemployment rate among the young (15-to-24-year-olds) has historically been just over double that of people aged over 25. In 2008, the ratio rose to 2.8 on average but with large differences between countries: Germany has the lowest ratio (1.5), largely because its apprenticeship system works well in helping most young people find work after school. The ratio was between 2 and 3 in most OECD countries and between 3 and 4 in seven (Denmark, Finland, Italy, Korea, New Zealand, Norway and the United Kingdom). Only in Iceland and Sweden was it above 4.

The report's message is that governments need to do much more to help young people. Some have benefitted from broader efforts to help the unemployed. But more policies are needed that target young people, especially those with poor education and skills. These 'at-risk' youngsters now account for between three and four out of ten of all young people in the OECD and are at risk of long-term joblessness and reduced earnings.

In the short term, a priority must be to provide income support to unemployed young people. In two-thirds of OECD countries school-leavers are not eligible for unemployment benefits unless they have worked a certain period of time (from four months in France to one year more generally).

Another promising avenue is apprenticeship contracts for low-skilled young people. These could pay a 'double dividend', securing the transition towards employment and lowering labour costs compensated by a training commitment from the employer. Governments could provide subsidies to promote apprenticeships and help apprentices made redundant to complete their training.

The paper also looks at the number of young people on temporary contracts and finds they are over-represented among workers. Temporary employment among workers aged 15-24 was 35% according to the paper and was higher than 50% in Poland, Spain, Sweden, Portugal, France, Germany and Switzerland. On a positive note, among the nine European countries where data is available, the probability for youth of getting a permanent job one year after being on a temporary job is higher than after being unemployed, especially for those with tertiary education.
However, whilst for many these contracts are stepping stones into permanent jobs, for others they can be dead ends. The OECD goes on to claim that reducing the gap between regulations for temporary and permanent contracts would help, together with lowering the cost of employing low-skilled youth in their first job.

*G-20 is the group of 19 countries plus the European Union. Collectively, the G-20 economies comprise 85% of global gross national product, 80% of world trade and two-thirds of the world population.
To read the full OECD working paper please click here



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