Youth unemployment has taken center stage in global economic policy – and with good reason. The International Labour Organization (ILO) has put jobless youth at a minimum of 75 million worldwide, with young people unemployed at twice or even thrice the global adult unemployment rate. Yet, while job creation is indeed critical, generating widespread economic participation among the world’s youth requires an integrated approach with policies, programs, partnerships and systems that enable young people not only to earn a (livable) wage, but also empowers them to be savers, consumers, employers and CEOs. We also need to realize that generating economic participation among young people is an issue of both supply and demand, and that business is a critical – and often most innovative – player.
“Failing to act on the youth jobs crisis would sow the seeds of social unrest and destroy hopes for sustainable growth. That is a cost the world cannot afford,” said ILO Director-General Guy Ryder. Calls to action to create jobs are echoing down the halls from ministers’ offices to donors’ desks to corporate boardrooms and beyond. And these calls should be heeded. The International Finance Corporation (IFC) recently reported that the world needs 600 million new jobs by 2020 to absorb new entrants into the labor force.
However, fulfilling the promise of youth contribution to global prosperity – and mitigating the social and security challenges of an unprecedented youth ‘bulge’ – is about more than employment alone. The bigger picture of youth economic participation and economic growth must be framed within the dynamics of youth underemployment, financial inclusion (or exclusion as it currently stands) and entrepreneurship. We need to better recognize the connected challenges and opportunities of youth earning, saving, spending and investing.
Underemployment: For many young people, having a job does not necessarily translate into the ability to support themselves or their families. Nor do many jobs provide a foundation for savings, advancement and better quality of life. While hard to universally define or quantify, underemployment is often associated with the informal sector, part-time or seasonal work, and freelancing or family/self-employment. Low wages, short hours, lack of benefits, and job insecurity limit youth potential, stunt aggregate productivity, hinder consumption, and undermine economic growth. In 2012, to help address informality and the severe employment constraints among youth in Latin America, the Multilateral Investment Fund (MIF) of the Inter-American Development Bank and the International Youth Foundation together launched the New Economic Opportunity alliance with founding corporate partners Walmart, Caterpillar, Microsoft, CEMEX, and Arcos Dorados to create employment training, internship and entry-level job opportunities for poor and low-income youth.
Financial Inclusion: Many of us can remember the excitement of getting our first official bank account, writing our first check or the pride in making our first big purchase with money from our savings account. And many of us would not have been able to pursue our academic and professional dreams without a student loan. Yet, only 37% of young people aged 15-24 worldwide have a bank account, and youth are 40 percent less likely to have saved formally compared to those ages 25 and older, according to the World Bank’s Global Financial Index. Millions of youth do not even have the financial literacy or numeracy skills to value savings or to manage and protect their financial assets. Evidence also shows that youth are especially excluded from credit and insurance markets and are far less likely to get a loan from formal channels – which puts continuing their education, and starting or building their enterprise, at an unreachable distance. In Africa, Equity bank has been a pioneer in youth inclusive financial services. In 2007, they began youth banking through the Vijana Biashara Loan. In addition to youth loan products, Equity Bank provides youth savings, financial education, and entrepreneurship training.
Entrepreneurship: In the absence of decent jobs, many young people are going out on their own. Indeed, 25-34 year olds display the most entrepreneurial activity worldwide, and in some countries roughly half of new business efforts are attributable to those aged 18-34 according to the Global Entrepreneurship Monitor. Youth are increasingly behind new start-ups: companies, social ventures, and civil society organizations alike. And while the virtues of young leadership and innovation in business and society are rightly extolled, the ability of many or most would-be entrepreneurs to create a sustainable income from their own enterprise, and ultimately turn into employers themselves, is limited. Youth face aggravated constraints in obtaining start-up or operational capital; and managerial knowledge, networks, markets access and ability to pierce bureaucratic red tape are particularly challenging. In India, Young Entrepreneurs, a partnership between International Youth Foundation (IYF), Mastercard Worldwide, and the Community Collective Society for Integrated Development (CCFID) is offering business and life skills training, access to financial capital through a revolving loan fund, ongoing technical assistance and links to mentors in the business community.
Realizing demographic dividends demands that youth are active in the marketplace not just as employees, but also as citizens who are fully engaged economically and financially. Our collective prosperity depends on it.
Dr Nicole Goldin is Director of the Youth, Prosperity and Security Initiative at the Center for Strategic and International Studies (CSIS) – in partnership with the International Youth Foundation (IYF). Follow her on Twitter @nicolegoldin.