Reducing Youth Unemployment and Experiences of NEET through Enhancing Opportunities for Youth Entrepreneurship and Innovation

By Krista Flick

Krista represented Central Queensland University at the 2015 Y20 Summit in Turkey.

Recommendations

  1. Youth unemployment should remain a priority of the G20 Leaders’ Summit in 2015, with a particular focus on the progress of each member’s Employment Plan.
  2. The G20 should recognise the significance of increasing rates of young people neither engaged in employment, nor in education or training (NEET), and take action to create sustainable employment opportunities for young people
  3. The Australian Government should investigate opportunities to encourage young people into entrepreneurship, including through the simplification of administrative and registration procedures associated with business start-ups, the inclusion of elements of entrepreneurship curriculum at all levels of education, facilitating collaborative partnerships between community organisations and private businesses, and reducing financial barriers that restrict young people from starting their own businesses.

Introduction

Young people play a crucial role in the growth and sustainability of the domestic and international economy, yet the rate of youth unemployment is rising steadily on a global scale.[1] Promoting and fostering opportunities for youth entrepreneurship should play a role in a broader and more comprehensive youth unemployment policy, in order to address unemployment, increase labour market participation, and facilitate the creation of quality jobs.

Research has indicated that youth unemployment has major negative impacts both on young people themselves, and on the broader economy.[2] Compared to their adult counterparts, young people continue to face a disadvantageous labour market.[3] Young people who initially experience unemployment upon entering the labour market are at an increased risk of remaining unemployed long term, which results in negative outcomes and impacts for the economic climate at a local, domestic, and global level.[4] Labour market prospects have increasingly worsened for young people in almost every region of the world since the beginning of the economic and financial crisis in 2008, and despite a gradual acceleration of economic growth in the medium-term, these prospects are not expected to improve.[5]

Youth unemployment across the globe has seen the financial crisis transform into a wide-reaching social issue too. It has been identified that the increasing rates of unemployment for young people, combined with longer periods of job search, have resulted in a significant increase in the number of young people who are not engaged in employment or in education since 2008.[6] This increased number of young people who are neither engaged in employment, nor in education or training (NEET) indicates that the current economy is failing to create sustainable employment opportunities for a significant proportion of young people.[7]

It has been demonstrated that there is a close correlation between the condition of the economy and the number of young people who are considered NEET, which indicates that economic structures and labour market prospects can have significant influences on the situations, decisions and attitudes of unemployed young people.[8] However, it should not be assumed that all young people who are NEET are vulnerable, marginalised, or passive contenders in the labour market.[9] Many young people who are NEET display a positive attitude to work and study, or have completed study and are actively seeking employment.[10] Research indicates that empowering young people to create jobs for themselves and other young people through entrepreneurship can promote economic dynamism, innovation, and resilience.[11] It is therefore crucial to consider policy reforms that focus on innovative ways to improve the skills and fulfil the potential of young people, while simultaneously creating better quality jobs to further enhance sustainable economic growth.[12]

The issue of youth unemployment is currently high on the global political agenda, which generates an opportunity to analyse strategies and policies that are being implemented to various degrees of success throughout the world, and to identify opportunities for these to be replicated or amended for similar domestic economies.[13] The G20 can play a crucial role in harnessing this window of opportunity through the three I’s identified by the 2015 Turkish Presidency: Inclusiveness, Implementation, and Investment for Growth, and ensuring that the key outcomes and recommendations from the Australian Presidency are actioned. The 2014 G20 Leaders’ Communiqué identified higher annual growth rates as a key priority for each member and observer country, and this was identified as essential in addressing the enduringly high unemployment rates.[14] The Key Outcomes identified as part of the G20 Brisbane Summit 2014 also highlighted the importance of entrepreneurship and innovation through Small and Medium Enterprises (SMEs) as creators of jobs and labour market participation.[15] This research aims to develop and maintain accountability between the G20 host countries to ensure tangible outcomes are delivered.

Background to Youth Unemployment Rates: Causation, Crisis, and Why the G20 Plays a Critical Role


Causation

Young people are often among the first casualties when it comes to economic crises, and this has been clearly demonstrated in the aftermath of the 2008-2009 Global Financial Crisis (GFC).[16] This period saw an unprecedented increase in the rates of youth unemployment on a global scale, and since then these rates have continued to increase steadily.[17] Although the repercussions of the GFC had wide-reaching impacts across the entire economy, young people continue to face significant economic, social, and health disadvantages.[18] Young people remain almost three times more likely than adults to be unemployed, and are increasingly employed in transient, non-standard jobs including temporary employment and casual positions.[19] During times of economic recession or crisis, young people tend to be disproportionately disadvantaged in the labour market, which can largely be attributed to a lack of skills and experience.[20] Research indicates that the age at which young people are transitioning into full time employment has continued to increase after the GFC, and the duration of unemployment has also risen to an average of six months or more for one-third of unemployed young people.[21]

Changes in the economy and the subsequent reorientation of production and services across the globe have resulted in the transformation or disappearance of many traditional employers and fields of employment.[22] During times of economic recession or crisis, young people tend to be disproportionately disadvantaged in the labour market, which can largely be attributed to a lack of skills and experience.[23] Research indicates even possessing tertiary education qualifications does not necessarily improve the employability of a young person, because they are not deemed to have sufficient practical skills or work experience which employers consider invaluable.[24]

Crisis

Youth unemployment is a significant issue on a global scale, with labour market prospects worsening in almost every region in the world.[25] Across the globe, approximately 74.5 million young people aged between 15-24 years were unemployed in 2013 – a figure that increased by over 700,000 compared to the previous year.[26] Further evidence indicates that over 620 million young people worldwide are considered NEET.[27] This has resulted in an endemic global youth unemployment issue, which now impacts some of the most highly developed economies as well developing countries.[28] Regions including the Middle East, Central and South-Eastern Europe, South-East Asia and the Pacific, and North Africa have all recorded substantial increases in their youth unemployment rates.[29] Further to unacceptably high youth unemployment rates, the proportion of young people who are NEET has also risen significantly in many countries since the beginning of the GFC in 2008.[30] The rising numbers of young people among those NEET are a cause of concern because it indicates that there are increasing rates of young people who are not improving their future employability through learning skills or gaining experience through employment.[31]

It appears that the youth unemployment crisis is being exacerbated by the mismatch between tertiary graduate degrees and labour market needs, which indicates a disparity between formal education processes and the needs of the contemporary economy.[32] This mismatch results in economies that are unable to utilise the full potential of young people who are attempting to enter the labour market, which constrains productivity and economic growth, and contributes to the rising numbers of young people who are NEET.[33]

Employers have also identified that young people who have graduated from formal education with tertiary qualifications tend to lack the experiential knowledge and training that is critical to developing ‘soft’ skills and attributes necessary in the labour market.[34] Completing secondary or even tertiary education does not guarantee that a young person will transition into the labour market, as many employers identify a poor match between the skills learned at school, and the skills necessary for entering the labour market.[35]

The Role of the G20

The G20 plays a critical role in addressing the global youth unemployment crisis, as it provides an opportunity for member countries to work together to develop an integrated, collective approach to overcoming barriers to youth employment. Youth unemployment is becoming an increasingly prominent issue for the global economy, which indicates that it is an important aspect for the G20 to consider in policy discussions.[36] The Turkish Presidency has identified youth unemployment as a priority area to be addressed, as part of a broader focus on increasing employment to strengthen the global recovery and lift the potential of the economy.[37] The G20 provides a forum for countries to collaborate and develop policies that will facilitate the robust and efficient growth of the global economy, thus creating an environment where higher numbers of jobs are available which will subsequently decrease youth unemployment rates as well as unemployment rates in general.[38]

During the Australian Presidency in 2014, each member country unveiled their respective Employment Plans – almost all of which identified youth unemployment, or young people considered NEET, as key challenges to be addressed. These Employment Plans also identified a number of policy proposals to be implemented, and the 2015 G20 Turkey plays a critical role in providing informal accountability between countries. It also provides an opportunity to analyse and evaluate which countries are seeing decreased youth unemployment rates, and identify how policies and strategies may be tailored to other countries.[39]

Impacts of Youth Unemployment: Economic, Psychosocial, and Hindrance of Living Standards

High rates of youth unemployment can have serious negative long-term effects on young people, and are likely to become more serious the longer the unemployment crisis continues.[40] Extensive research indicates that young people who experience unemployment and difficulty entering the labour market in their early 20s could continue to experience the negative impacts on their employment and earnings prospects up to two decades later.[41] Early experiences of unemployment can also lead to the risk of future long-term unemployment or unstable employment, resulting in ongoing issues for young people into adulthood.[42]

Sustained, meaningful employment is an important aspect of maintaining mental health and increasing life satisfaction.[43] Young people who are unemployed are at a greater risk of experiencing negative, long lasting impacts on their lives.[44] Unemployment can have negative impacts on the physical and mental health and general wellbeing of young people, as a result of economic deprivation and stress related to uncertainty or instability of employment.[45] Social isolation, social exclusion, and marginalisation are also increased risks for young people who are unemployed.[46] Significant correlations have been established between unemployment and a number of psychosocial wellbeing indicators, which demonstrates that people who are unemployed experience decreased life satisfaction compared to people who have stable full time employment.[47]

Unemployment and the subsequent economic hardship for unemployed individuals can also have far-reaching impacts on social cohesion within broader society.[48] In the current economic climate, unemployment is having a disproportionate impact on young people and generating higher risks of marginalisation and social exclusion.[49] Productive, sustainable employment is important for the social and economic development of young people, and negative experiences upon trying to enter the labour market can have adverse, long-lasting impacts on the individual and the economy.[50]

Due to the increasingly high unemployment rates leading to longer periods of job searching, many young people become frustrated and discouraged with their lack of employment prospects, therefore becoming caught in a cycle of unemployment and labour market exclusion.[51] This cycle is further perpetuated when young people find themselves among the NEET group, where they are neither able to improve their employability prospects through developing skills and gaining experience, nor are they engaged in education.[52]

Enabling Entrepreneurship: How Entrepreneurship Can Contribute to Combatting Youth Unemployment 

Many young people who are unemployed possess the knowledge, skills, and capabilities to participate and succeed in the labour market, but are met with barriers due to their age and lack of experience.[53] One potential way to increase youth participation in the labour market and decrease numbers of young people who are considered NEET, is through facilitating opportunities for youth entrepreneurship.[54] Although it is unlikely to completely overcome barriers to youth employment single-handedly and cannot act as a ‘quick-fix’, entrepreneurship is considered a key element of economic growth and job creation, and should form part of broader and more comprehensive youth unemployment policies in order to address unemployment and increase labour market participation.[55]

Increasingly high rates of youth unemployment indicate that a policy overhaul is required, in order to create an economic environment conducive to building the capacity of young people to move into entrepreneurship.[56] Policies focused on encouraging entrepreneurship lead to job creation, increased innovation, and help the labour market to remain responsive to changing economic landscapes.[57] Encouraging young people into entrepreneurship, through starting their own small businesses or being involved in start-ups, provides a number of opportunities to the not only to the young person themselves, but also to the broader economy.[58]

The current economy is failing to provide adequate employment opportunities and stability for many young people, which has seen a significant increase in the number of young people who are currently considered NEET, despite the fact that they have completed tertiary education or are actively seeking employment.[59] Increasingly high rates of youth unemployment indicate that a policy overhaul is required, in order to create an economic environment conducive to building the capacity of young people to move into entrepreneurship.[60] This would be particularly beneficial for young people who are NEET, but possess a positive attitude towards work, and have completed their secondary or tertiary education and are actively seeking entry into the labour market.[61]

Young people can play a significant role in developing a resilient economy, if they are supported in their innovation and enterprise endeavours.[62] Investing in young people to develop innovative and enterprising solutions to youth unemployment and broader economic and social issues will provide opportunities to create a flexible, responsive economy and labour market.[63]

Australian Context

Economic research indicates that the most effective productivity growth is largely driven by innovation, and by creating an economic environment conducive to market experimentation. This includes accepting the risk of failure, and recognising that even failure will potentially result in invaluable learning and skill development.[64] In terms of economic competitiveness, Australia fares quite well in terms of global rankings.[65] However, Australia needs to continue developing a resilient economy that can withstand global shocks, and this is achievable through continuing to encourage and facilitate innovation and market diversity.[66]

Australian statistics indicate that as well as increasingly high rates of youth unemployment, young people are experiencing higher rates of underemployment and precarious casual employment.[67] This contributes to the difficulties that young people experience when attempting to enter the labour market on a full-time basis, as they do not have the opportunity to develop and acquire the skills and experience that increase their future employability.[68] Young people are therefore at an increased risk of social exclusion and marginalisation, which can have long-term impacts on their physical and mental wellbeing.[69]

Domestic governments can develop and implement a number of policies and strategies in order to encourage young people into entrepreneurship. Simplifying administrative procedures and regulations associated with business start-up and registration is a positive step towards reducing the barriers to young people starting their own businesses, and should be included in any policies surrounding entrepreneurship in general.[70] It is also crucial to recognise the relevance of including adequate entrepreneurship curriculum at all levels of education, in order to ensure young people are developing the necessary skills and knowledge to participate and engage in the labour market as entrepreneurs.[71] However, entrepreneurship skills can also be developed outside of the classroom and the formal education system, through collaborative approaches involving community organisations and established businesses to provide mentoring and support networks for young entrepreneurs.[72]

Difficulty providing initial capital and obtaining adequate finance is also a significant barrier to young people.[73] Governments can develop and implement policies to overcome these financial barriers through traditional approaches such as grant schemes or micro-loans, or through more contemporary means such as crowd-funding campaigns which would expand the range of financial options available while tapping into more private sources of funding.[74]

The Australian government must develop and implement policies that emphasise social investment, equality, labour market integration and empowerment in order to address the issue of youth unemployment.[75] It is also of critical importance to recognise the changing landscape and structure of Australian industries, and ensure that young people are being adequately prepared for the economy of the future.[76]

Conclusion 

Youth unemployment rates are increasingly high across the global economy, indicating that this is a significant issue that is challenging governments worldwide. The G20 therefore plays a critical role in addressing youth unemployment, through developing and implementing innovative solutions at both a domestic level for individual countries, and at an international level. The G20 provides an opportunity to ensure that real action is implemented to start addressing youth unemployment on a global scale. Countries that form the G20 have a unique opportunity to work together and learn from each other, by identifying successful approaches to addressing youth unemployment and adapting these policies at a domestic level.

A wealth of research suggests that early experiences of unemployment, NEET or difficulty entering the labour market can have long lasting adverse effects on young people and on the broader community. It is therefore essential for governments to ensure policies are developed and implemented to support young people into the labour market, where they can gain the experience and training necessary to increase their future employability.

Promoting and fostering opportunities for youth entrepreneurship has been identified as a vehicle for addressing youth unemployment, and should therefore form part of a broader youth unemployment policy to facilitate job creation and labour market participation for young people. Youth unemployment policy should be founded in empowering young people to create jobs for themselves and their peers, using entrepreneurship as tool for economic innovation and resilience.

Full Footnotes and Bibliography can be found here or by copying the following URL into your browser: http://bit.ly/Krista-Flick-2015