Published on May 1, 2018 | Employment| Eye Opener
Unemployment crisis amongst the educated youth [2019 Updated]
After spending a whole half-day within the halls of IT firms and software companies, Rajat heads back home in the evening only to once again open up his laptop to apply for more jobs and confirm upcoming interview dates. He has been doing this for nearly two years. Rajat’s unemployment predicament is not his alone. All around the world for the past decade there has been an ongoing global youth unemployment crisis.
To view the data for 2019, hover to the bottom of the blog.
The more educated you are, the higher are the chances of unemployment. Although, it seems controversial or against general wisdom but it’s true.
Who are the "unemployed educated" youth? Where and since when has this been an issue?
There is 1.2 billion youth in the world (between the ages of 15-24) – accounting for 17% of the world’s population. Among them, those who are not in education, employment, or training but are actively seeking work are defined as an “unemployed” youth by the United Nations.
Youth unemployment rates tend to be higher than the adult rates in nearly every country in the world. – Source
Although the global economy has fairly grown over the past two decades, youngsters today are less likely to secure a decent job than labour market entrants in 1995. Economic growth has not translated into sufficient levels of jobs creation, especially for youth all around the world. According to the International Labour Organisation (ILO) there is 71 million unemployed youth worldwide.
This crisis is prevalent in both developed as well as developing countries. Graduates and youth who have completed their secondary studies make up most of the unemployed. Among the OECD (Organisation for Economic Co-operation and Development) countries; in cities such as Britain of the United Kingdom; one in five young people can’t find work. Those that do, are predominantly hired as a temporary contractor or on an internship basis – most of which are underpaid or unpaid. Hence, many are dependent on their parents until their late twenties. As a result, many graduates are now questioning the necessity of incurring large student debts for a degree that does not give them an advantage in the job market.
Similarly, amidst developing nations such as India, the rate of unemployment increases with an increase in levels of education. But when it comes to the issue of gender bias, it becomes obvious that women face much higher rates of unemployment as against their male counterparts across all educational categories. Additionally, south Asian women do not work after secondary education due to cultural reasons.
“Those who have had below secondary education have better chances of employment than those who have had their secondary education.” – source
Those whose families are economically better off tend to stay with them until they find a suitable job that may accommodate a livelihood. Others settle for work that they are either overqualified for or work in the informal sector. Such was the case in September 2015 when PhD holders applied for the Uttar Pradesh government secretariat peon post in India. While the educated fight for jobs they are overqualified for, the impoverished face a catch-22 situation. I.e they need higher education to earn more money but they need more money for obtaining a higher education.
This is a scenario where they need better education to get paid better but require to be paid better to gain access to better education.
Scenario in 2019:
The government’s own data show that GDP growth was the slowest in five years. It fell below the 7% mark (at 6.8%) in 2018-19. In the last quarter of that year, GDP growth was only 5.8%.
In 2017-18, the government’s Periodic Labour Force Survey showed unemployment reached 6.1%, with the youth, the educated and women facing the most trouble getting jobs.
Unemployment has continued to rise in 2019 as well. According to estimates by the Centre for Monitoring the Indian Economy (CMIE), the unemployment rate in May this year was 7.17%. This was slightly better than the 7.6% in April but much higher than the 6% average in 2018.
How bad is the job scenario in India?
- The PLFS says 18.7% or every 6th urban male youth, aged between 15-29, was unemployed in 2017-18 while one in four young urban were unemployed at 27.2%.
- During 2017-18, about one in two rural men and one in six rural women were into the job.while about a little more than one in two urban men and less than one in six urban women held a job. This means that about 54.9% of rural males and 18.2% of rural females were in the labour force; about 57% urban males and 15.9% urban females were in the labour force.
- Between 2004-05 and 2011-12, for rural female, Labour Force Participation Rate (LFPR) decreased by nearly 8% points and between 2011-12 and 2017-18 it further decreased by around 7% points. Between 2004-05 and 2011-12, LFPR for urban males decreased by about 2% points and between 2011-12 and 2017-18, it remained almost at the same level. So more and more rural women are dropping out of the workforce.
- The unemployment rate for rural males and females were significantly higher compared to the overall rate, with unemployment rates as 10.5% and 17.3% respectively.
For India’s current jobs situation, much of the blame can be attributed to the inherent nature of the job economy of the country. Labour-intensive sectors like agriculture, construction and small enterprises account for more than 75% of the working-age population.
The demonetisation greatly added to the problem of joblessness when the economy was suddenly stripped of Rs 500 and Rs 1,000 notes. Small-scale industries, who conduct their daily transactions in cash, were the worst hit. With employers unable to deal with the sudden lack of cash, many workers had to be laid off.
GST, which came a few months after demonetisation, added further fuel to the fire. It led to the closure of numerous small businesses and rendered lakhs of people jobless in the unorganised sector. The complexity led to the shutdown of a huge number of small enterprises as small traders were unable to deal with the technicalities.
Causes of unemployment
There are multiple causes of this crisis. The quality and relevance of education, an inflexible labour market and regulations, which create a situation of assistance and dependency, the significant economic slowdown in major emerging countries to name a few.
The skill crisis
The independent universities and institutes are given autonomy so that they may create courses and skills that cater to the demands of industries – however, that is not the case. In almost every country, education is not tailored to the needs of the labour market. This leads to the inability for young people to find jobs and the inability for employers to hire the skills they need. Combined with the economic crisis and the lack of sufficient job creation in many countries this has resulted in high unemployment rates around the world and the development of a skills crisis. You can check out our previous article on unemployable engineers which highlights this skill gap very evidently in the case of India.
As the International Commission for Financing Global Education Opportunities reported last year, about 40% of employers worldwide find it difficult to recruit people with the skills they need.
Inefficient labour markets and regulations
Employers are cautious about hiring full-time employees as they cannot be easily laid off later if found to be incompetent due to a high level of employment protection.
This has led to the upcoming boom of temporary forms of work such as internships, short-term contracts, and seasonal jobs which has created a precarious situation for young workers. This is because their jobs are temporary contracts and these youth would often be the first to be laid off when a company downsizes. And if they are laid off, they are not eligible for redundancy payments because of their short period of time working for that company. Hence once that work ends, they’d find themselves unemployed and disadvantaged in the job search. Only to start over once more. However, some youth are entering work on a part-time basis during tertiary education. This rate is low in countries like Italy, Spain, and France but in the United States, almost one-third of the students combine education and work.
This has although brought forth the legitimacy of an internship. The purpose of internships is to allow students or recent graduates to acquire work experience and a recommendation letter to add to their curriculum vitae, so that it may increase their chances of gaining a full-time employment offer. Many interns have however complained that they are simply performing basic grunt-work, rather than learning important knowledge and skills. With little to no job growth occurring, it remains the only viable alternative to job placement for the young individual.
Assistance and dependency
In some parts of the world, young people’s ability to engage and become economically independent has been affected by the 2008/09 economic crisis and, more recently, by a slowdown in global economic growth. Hence to support unemployed youth income assistance is provided by countries around the world. This is done until the labour market and economic conditions improve. But this has faced severe flack as it might increase dependency on government assistance. Hence, certain governments are redirecting funding to targeted programs for increased learning and training opportunities. Also, many governments are encouraging youth to be job providers rather than job seekers by creating a nurturing environment for entrepreneurs and start-ups.
Battling educated unemployment
The crisis has resulted in political unrest and increased public spending, a lack of innovation due to lack of talent influx and a lost generation. Several possible solutions have been/can be implemented.
A shift from traditional methods and means of teaching is necessary. Reforms in Labor market policy and institutions to facilitate employment for youth: First, a more balanced employment protection for permanent and temporary workers is needed. It will ensure that young people who lack work experience can prove their abilities and skills to then progress to regular employment. Equal treatment between permanent and temporary workers should be encouraged.
Second, some countries consider shifting their support from direct financial assistance to funding apprenticeship. Others are increasing their support tying it back to stricter obligations of active search and training.
Vocational education or technical training of youth prepare them for a specific job. Several countries and organizations are also focusing on entrepreneurship amidst the OECD countries as well as in G20 countries. Thus making the youth job creators rather than job seekers through small and medium enterprises. Additionally, assistance to youth in transition to the work world by organizations such as United Nations, etc as well as an active participation and involvement of youth in political, community and economic fields have emboldened and empowered the educated youth to rise above their predicament.
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If you are interested in reading deeper into the matter here are a few links to reports that we’ve referred to in this article.