Youth gaps

Details

Economic inclusion

The assessment of youth inclusion gaps used indicators of labour market flexibility (since labour market rigidity particularly harms new entrants),¹ youth unemployment and idleness rates, as well as measures of education and financial inclusion.

The quality and length of education are considered separate dimensions: while quality is essential, there is also evidence that extending the length of secondary education affects careers and lifetime earnings.² Financial inclusion focuses on the use of bank accounts and debit cards (rather than access to credit), reflecting research that suggests that the early use of financial products and the early establishment of savings habits increase the quality of financial decision-making in later life.³ Table 5.3 lists the indicators and data sources used.

As in the case of the gender gaps, some of the underlying data consist of indices compiled by other institutions (such as the World Economic Forum’s indicators of labour market flexibility and the quality of education as perceived by employers), as well as comparative information on the reference group, which in this case consists of adults aged 25 and over. The latter is used to rate financial inclusion, as well as youth unemployment. Unlike gender gaps, however, youth and adult rates are compared in terms of absolute differences (expressed in percentage points), rather than as ratios or percentage differences.⁴Furthermore, the benchmark for calibrating a “negligible” gap is not zero (that is to say, parity between youth and adults), but a positive difference that is sufficiently low to be viewed as “normal” even in a very inclusive economic structure. For youth unemployment this is set at 6 percentage points, based on the low end of globally observed differences between youth and adult unemployment rates between 1991 and 2012, while a difference of 10 percentage points or less is still considered a “small” gap.⁵

In several cases – including the percentage of youths who are not in education, employment or training (NEET) and all data series related to the quality and quantity of education – gaps were assessed without a direct comparison with the adult reference group. There are no series that would correspond to the NEET category among adults, and the quality and quantity of education are no longer relevant for most adult workers.⁶ Hence, gaps for these data series are calibrated on the basis of international best practices (see Annex 5.2).

Table 5.4 shows interesting variation, both across dimensions (columns) and countries (rows). The quantity of education in most countries in the transition region compares well with international standards (11 years of schooling being the OECD average). SEMED countries, particularly Morocco, are an exception.

However, opportunities for young people – reflecting youth unemployment relative to adult unemployment, as well as the NEET category – are unsatisfactory in most countries, including most Western comparators. There are exceptions, though: the Baltic states, Germany, Slovenia and, thanks to a surprisingly low NEET rating, Ukraine. With the exception of Hungary and Slovenia, available data also suggest that quality gaps in education remain “medium” or “large” in the transition region and in SEMED countries.

The chart also shows that there is a degree of correlation between the level of rigidity in labour market structures, the quality of education and the availability of opportunities for young people. Most countries that experience “medium” or “large” gaps in the first two categories also have at least a “medium” gap in the third.

The best-performing country in the transition region appears to be Slovenia, with mainly “small” or “negligible” gaps. However, eight countries – Albania, Azerbaijan, Montenegro, Serbia and the four SEMED countries – have “large” gaps in opportunities for young people and one or both educational dimensions.

Between these extremes, common patterns across countries can be observed within the CEB and, to a lesser extent, EEC regions. In the latter region the typical pattern involves “medium” gaps for labour market structure, “medium” or “large” gaps for opportunities for young people and the quality of education, and “small” or “negligible” gaps for the quantity of education. CEB countries do better on quality of education and opportunities for the young.

1. See Lindbeck and Snower (1989) and, for SEMED countries, World Bank (2013). [back]
2. See Meghir and Palme (2005). [back]
3. See Reinsch (2012). [back]
4. This reflects the judgement that, at low rates of overall unemployment, a given ratio between youth and adult unemployment indicates a smaller inclusion problem than when overall unemployment is high. For example, a 10 per cent youth unemployment rate might be acceptable if adult unemployment is just 5 per cent, but a 30 per cent youth unemployment rate with adult unemployment at 15 per cent is far less acceptable. [back]
5. Youth unemployment rates are almost always higher than unemployment rates for older cohorts (see International Labour Organization, 2012), partly for undesirable reasons such as insufficient numbers of entry-level jobs and labour market rigidities, but also for efficient reasons such as job-switching among the young. Young people are also more likely to be idle (see O'Higgins, 2003 and World Bank, 2012b). [back]
6. While current education indicators could be compared with past indicators that would have been relevant for the current adult population, this would amount to comparing opportunities afforded to the young at two points in time, rather than comparing the opportunities of those who are currently young with those who are currently adults. [back]

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