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IMF Survey : Youth-friendly Labor Markets Can Help Cut Youth Unemployment

October 17, 2013

  • Five years into global crisis, youth unemployment a key concern
  • Countries urged to address skills mismatch, education gaps
  • Youth-friendly labor markets, world-class business climate also help

Recovery of economic growth is the most important factor for creating jobs in any country, but it is not the whole story, a seminar heard during the 2013 IMF-World Bank Annual Meetings in Washington, D.C.

Youth Dialogue panelists (from l) Shafik, Duffy, Klinge, DeMaio, Dominguez, Al-Akhali: ‘Youth can also act to take charge of their futures’ (IMF photo)

Youth Dialogue panelists (from l) Shafik, Duffy, Klinge, DeMaio, Dominguez, Al-Akhali: ‘Youth can also act to take charge of their futures’ (IMF photo)


IMF Deputy Managing Director Nemat Shafik told the IMF Youth Dialogue seminar that many countries have failed to make their labor markets youth friendly, which has aggravated unemployment.

“Growth will get us two-thirds of the way in the creation of jobs. But there are also structural issues that relate to the kinds of policies that determine how the labor market and the educational system work and prepare workers for the labor force,” Shafik said.

Unemployed generation

Five years since the onset of the crisis, there are currently about 200 million people unemployed; 75 million of those are young people. According to the International Labor Organization, youth unemployment rates in 2012 were highest in the Middle East and North Africa, at 28.3 percent and 23.7 percent, respectively. Between 2008 and 2012, youth unemployment also increased by as much as 24.9 percent in the developed economies and the European Union.

“In the Irish context, our youth unemployment rate is 28.6 percent,” said Mark Duffy, a student from the George Washington University in the United States. who migrated from Ireland. “We need to create new jobs and remove some of the boundaries for the youth to get jobs,” he said.

Workforce barriers

Shafik noted that uncertainty, lack of adaptability in labor markets, and skills mismatch may explain why unemployment remains high.

“The recovery of the world economy is still very tentative. Many investors are just too uncertain and are holding back investment and not creating jobs for anyone, but particularly for young people,” she said.

Shafik also noted that many countries have failed to make their labor markets youth friendly, which has exacerbated unemployment. “In parts of Europe and the Middle East, there is what we call ‘dualism’ in the labor market where, if you are in the formal labor market and have a job, you’re protected and can’t be fired,” she said. “But if you’re a new entrant, it’s very hard to break in, and you’re stuck in either informality or temporary contracts without benefits and very little labor security.”

Also, sectors that used to employ a great number of people, such as manufacturing, are no longer growing, Shafik explained. “Many young people are coming into labor markets in which the things they’ve been trained to do are not actually what the current labor market is demanding,” she said.

‘All hands on deck’

A number of initiatives in Yemen focus on building entrepreneurship skills, said Rafat Al-Akhali, chairman of Resonate! Yemen, a youth-run foundation. “But youth unemployment needs a coordinated approach,” he said. “It’s not enough for one sector or one entity to work on it. We need all hands on deck.”

“Private sector as employers is one piece of the puzzle,” said Al-Akhali. “But also as investors in education and training institutes, creating an ‘education for employment’ sort of sector.”

Other key players identified by panelists included the government, the education system, and civil society organizations.

“The government needs to encourage policies for educational institutions to design programs and courses that actually meet the country’s needs,” said Duffy.

“Education in Chile is not doing its work,” noted Damián Vergara, a graduate student at the Universidad de Chile. Chilean education has been highly privatized, while the quality of the public education has deteriorated. This, he explained, has led to an increase in inequality, among other things. “We can’t ask youth for all the solutions; most of the solutions have to come from higher levels.”

World-class systems

The best way for countries to keep up with evolving trends and deal with uncertainty is to foment the right environment for job creation, noted Shafik.

“Put in place winning systems of a world-class business environment that lets firms grow, fail, and evolve. Have a financial system where collateral is easy to recognize, where credit bureaus work, where smaller firms have opportunities to grow,” she said.

Linking these world-class systems to training institutions and universities —all working in youth-friendly labor markets—will ensure that the skills young people learn are relevant to the market place.

“The future of job creation is in creating these kinds of world-class systems,” said Shafik.

Homework for youth

Panelists agreed that there are things youth can do to take charge of their futures. College students in the United States, for example, can get more involved in their communities to gain real-life skills, noted Allison De Maio, a George Washington University student. “It is on the youth themselves to reach out for these opportunities, especially through volunteerism or internships.”

“Youth have to do a lot of work for themselves, preparing for the job market, finding what is out there and how they could be better suited for these jobs. And helping other youth with mentoring, as well,” said Al-Akhali. “It’s much easier for youth to be mentors for other youth than doing it across generations.”