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Tackling the youth employment crisis: A macroeconomic perspective

— theme: Youth Employment, Youth Employment Policies and Programmes
— country: Global, Pacific, Asia
— type: Working Papers

ILO Employment Sector Employment Working Paper No. 124, 2012 - This paper is a revised and substantially expanded version of a background note that was prepared for the report on the Youth Employment Crisis: Time for Action that will be presented and deliberated at the 101st session of the International Labour Conference (1 - 14 June 2012). The authors highlight salient empirical regularities. First, the youth unemployment rate is typically twice the adult unemployment across low, middle and high-income countries. Second, youth employment is much more sensitive to business cycles and policy-induced economic downturns than adult employment. Third, short-run demand shocks mutate into long-run ‘scarring’ effects manifested in reduced employment and earnings opportunities that can last decades. Young people with limited skills and from disadvantaged backgrounds are particularly vulnerable to ‘scarring’ effects. There are also well-known negative externalities associated with high and persistent youth unemployment: higher incidence of unhappiness, higher crime rates, higher inequality, higher fiscal costs in terms of foregone output and lower tax revenues, and higher political and social tensions.

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