Aug 13, 2010

The impact of the recession on young people


The International Labour Organization published a report this week on world youth unemployment that seems to have some relevance here in British Columbia.

The study, Global Employment Trends for Youth, outlines the devastating impact the recession has had on young people worldwide.  More than 80 million people aged 15 to 24 were unemployed at the end of 2009, the highest number ever recorded.

The impact of this is felt differently in the developed and the developing world.  Here in British Columbia the August 6, 2010 Labour Force Report from Statistics Canada shows young people have not escaped the ravages of recession.

The Stats Can report describes British Columbia as a good news story saying:

British Columbia posted gains [in employment] of 16,000 in July, bringing the province’s unemployment rate down 0.3 percentage points to 7.5%.

However, reading along further in the report shows that since 12 months ago while employment has gone up by 3 per cent for the whole population, it has gone down by 1.8 per cent for people between 15 and 24.  Although many young people are school age, as a group they are more than twice as likely to be working part-time.

Happily, unemployment has fallen among young people but in spite of this “recovery” while the population of young people has gone up by 3,400 there are still 6,000 fewer young people working now than a year ago.

The ILO report suggests there are long term consequences for coming of age during a recession:

Given the possible transition mechanisms between business cycles and youth employment, what are the potential costs in terms of future consequences for the youth who are unlucky enough to reach maturity at a time of economic crisis? A body of literature now exists on the topic of “scarring”. The premise is that there are longer-term consequences for young people whose first labour market experience is one of unemployment. Presumably, the unemployed youth will lower his reservation wage with the passage of time, and accept poorer quality jobs that are less secure, and thus, be more vulnerable to future spells of unemployment (the disorderly transition mentioned above). Results are mixed in terms of the existing analyses, with stronger evidence to support wage scarring than the unemployment scarring argument; for example, a recent study by Kahn estimated that a 1 percentage point increase in unemployment in the United States results in a 6 to 7 per cent decrease in the wages of college graduates and that, while the wage cost lessens with time, it still remains statistically significant 15 years later. The effects are believed to be more severe for youth entering the workforce with an education level below the tertiary level.

 What surprises me is how remarkably little attention seems to have been paid to the issue of youth unemployment in this recession.  No effort has been made to make higher education more accessible and less costly.  Virtually nothing has been done to target youth in employment programs.  The ILO report suggests we may see consequences for this inaction.

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