Income Inequality and Youth Unemployment

CAMBRIDGE – With Thomas Piketty’s controversial book Capital in the Twenty-First Century topping several bestseller lists, income inequality – which has been on the rise since the 1970s – is once again capturing global attention. Debate surrounding the subject has covered many of the trend’s repercussions, including decreased social cohesion, growing slums, exploitation of labor, and weakened middle classes. But one effect has received relatively little attention: youth unemployment and underemployment.

Since the global economic crisis, youth unemployment has soared worldwide. In the developed world, 18% of people aged 16-24 are jobless. While the youth unemployment rate in Germany remains a relatively low 9%, it stands at 16% in the United States, 20% in the United Kingdom, and above 50% in Spain and Greece. The Middle East and North Africa also have very high youth-unemployment rates, estimated at 28% and 24%, respectively. By contrast, only 10% of young people in East Asia, and 9% in South Asia, are unemployed.

But policymakers have done relatively little to address the problem. The world now risks creating what the International Labor Organization has called a “lost generation,” with global youth unemployment expected to reach 13% by 2018.

There is no single factor driving this trend. In China, for example, youth unemployment is rooted in the dominance of the manufacturing sector, which provides far more job opportunities for high-school graduates than university-educated workers.