By Lars Thunell and Charlotte Petri Gornitzka
Too many people today cannot find a decent job — the result of three years of global financial instability and anemic global growth. But for young people, unemployment is not only a cyclical problem. It is also a chronic condition that is robbing them of a secure future and depriving society of their contributions to a healthier and more productive economic future for everyone.
To continue to accept these high levels of youth unemployment is to accept enormous economic, social and political risks. This is why Sida, the Swedish International Development Cooperation Agency, and IFC worked together to launch a new way forward at the Annual Meeting of the World Economic Forum on Global Risks in Davos last week.
We plan to build a new alliance of governments, private companies, civil society and youth to help young people strengthen their skills and job readiness. It is equally important that we act to remove the obstacles to job creation, particularly for the small and mid-sized companies that provide the bulk of employment around the world. This would be an alliance for real action, leading to more jobs for young people.
The global unemployment rate for young people between 15 and 24 reached the highest level ever as a result of the last global recession. In 2011, over 75 million young people had no formal job, according to the International Labor Organization. Youth are three times more likely to be unemployed than adults. Many millions more are struggling in the informal economy, forced to work in unsafe conditions for low pay. Ignoring these young men and women is not only a tragedy for them — it also represents significant social and economic costs for communities. Moreover, this cycle of exclusion can feed social or political unrest.
This is not only a problem for developing countries. It is a global problem that affects countries at all levels of economic development. Youth unemployment in Sweden is 25 percent. In the Middle East and North Africa, youth unemployment rates are at about the same level. The figure for East Asia and Sub-Saharan Africa is just below 15 percent. However, this captures only those youngsters officially registered as unemployed. The number of unreported cases is high. Employment and income generated from a decent job is by far the most important link between economic growth, increased well-being, and poverty reduction. This is the case in rich and poor countries alike.
Many efforts have been made on a global level to implement various labor-market policies to integrate young people and create jobs for them. But research shows little effect from these mostly supply-side-driven efforts. Not enough attention has been paid to demand for labor. One of the weaknesses of this approach is the wide gap between what employers need and the knowledge and skills that young people possess.
A recent survey shows that over one-fifth of the companies operating in developing countries are experiencing a shortage of workers with the right skills. These companies identify this mismatch as an obstacle to their operations and future investments. These results underscore the need for educational institutions to improve the quality of education — specifically, to create a closer link between education and labor-market needs.
Lasting success depends on deeper involvement of private companies in the higher education system. Private companies have everything to gain by integrating more people into the work force. It expands the pool of available workers as well as the number of consumers with the income to buy the products produced by the private sector.
As chairman and vice chairman of the World Economic Forum’s Global Agenda Council on Youth Unemployment, we used the Davos meeting to actively bring together government officials with business leaders and youth organizations. But we want more than words, talk, and discussions.
IFC, a member of the World Bank Group, and Sida plan to put programs addressing unemployment at the top of our agendas for the coming years. We propose Tunisia and Cambodia as pilot countries for this comprehensive approach. Governments of these two countries have identified the importance and magnitude of the problem and have asked IFC and Sweden for support in bringing together actors who can drive real change in education and employment.
One year has passed since the Tunisian people ousted their former president. Yet unemployment remains extremely high and opportunities for young people remain scarce. As of today, a third of all young Tunisians are jobless. In Cambodia, over 30 percent of the population is below 15 years old, and each year between 300,000 and 400,000 young men and women are new entrants into a labor market that is incapable of absorbing them.
The world’s young people are a resource that we cannot afford to ignore. Young people are agents for change in society and they bring innovation to economic and political challenges. Aging societies in developed and developing world need productive young workers to support their economies. Including youth is a prerequisite for sustainable development, economic growth, and poverty reduction.
IFC and Sida are targeting the countries where we work — developing countries and emerging markets. However, we hope that our common experience in Tunisia and Cambodia will demonstrate solutions and inspire many more.
Lars Thunell is the Executive Vice President and CEO of IFC, the International Finance Corporation. Charlotte Petri Gornitzka is the Director General of Sida, the Swedish International Development Cooperation Agency.
