Thursday, July 26, 2007

Youth unemployment

I've written previously on how difficult it is to compare rates of joblessness between countries. One of the trickiest areas is the youth labour market. Suppose countries A and B each have 1 million 16-20 year olds. Out of this population, each country also has the same number - let's say 50,000 - of youths who are neither at work nor in education. Now, country A is less generous with funding for education, so 450,000 of the the 950,000 kids at school there work part-time. Country B offers more support for education, so only 50,000 of the kids at school there work. Now, the unemployment rate is, by definition

number unemployed / (number unemployed + number employed)

Thus, the formal youth unemployment rate in country A is just 10% but in country B a whopping 50%. Both countries have exactly the same number of kids who are not usefully occupied, but A's situation looks better simply because it has more of its students at work. (You could even argue that B's position is better, since the long-term pay-off of good education is high, and it may well be the case that it's preferable if students don't have to work.)

There's a good argument to be made that the US currently resembles country A, and France country B. As economists John Schmitt and David Howell report:

At 22 percent, the nominal youth unemployment rate in France is double the U.S. rate of 11 percent, and even further above the U.K. rate of 9.9 percent...


...for male youth the unemployment-to-population rate is 8.3 percent in the United States and 8.6 percent in France...

And there are of course differences in the rate at which young people work:

In the United States, 23.1 percent of 16- to 19-year-old students were also working, compared to only 1.8 percent of French teenagers. This disparity creates most of the higher statistical unemployment rate.

Be wary of unemployment rates: they really are the most heavily politicised of economic indicators...!


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