Young people and the Great Recession

TLDR: In this paper, the effects of the Great Recession on youth labour markets are reviewed and the authors argue that young people aged 16-24 have suffered disproportionately during the recession and there is a strong case for policy intervention to address the difficulties that the young are having in accessing employment.

Abstract: This article reviews the effects of the Great Recession on youth labour markets. We argue that young people aged 16-24 have suffered disproportionately during the recession. Using the USA and UK as case studies, we analyse youth unemployment using micro-data. We find that there is convincing evidence that the effects of unemployment when young impose costs on individuals and society well into the future. Although the effects of current policies on youth unemployment are uncertain, there is still a strong case for policy intervention to address the difficulties that the young are having in accessing employment.

Figures

Figure 3: Ratio of Median Youth to Median Adult Wages UK and USA 1997-2010

Table 2: Ratio of Unemployment Rates of those Aged 16-24 to Unemployment Rates of those Aged 25-64: 1970-2009

Table 1: Youth Unemployment Rates 1970-2009 (Per Cent)

Table 6 – Percent Change in Employment by Age Group 2008Q1 to 2010Q3

Table 5. Youth Unemployment and Educational Attainment

Table 7. Well-being in 2008/2009 at age 50 Life satisfaction Health status Down & depressed Job satisfaction Male -.2940 (6.42) -.2264 (4.56) .0023 (0.22) -.2292 (4.86)

Full text

Bell, David N. F.; Blanchflower, David G.
Working Paper
Young people and the Great Recession
IZA Discussion Papers, No. 5674
Provided in Cooperation with:
IZA – Institute of Labor Economics
Suggested Citation: Bell, David N. F.; Blanchflower, David G. (2011) : Young people and the
Great Recession, IZA Discussion Papers, No. 5674, Institute for the Study of Labor (IZA), Bonn,
https://nbn-resolving.de/urn:nbn:de:101:1-201105173104
This Version is available at:
http://hdl.handle.net/10419/52080
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DISCUSSION PAPER SERIES
Forschungsinstitut
zur Zukunft der Arbeit
Institute for the Study
of Labor
Young People and the Great Recession
IZA DP No. 5674
April 2011
David N.F. Bell
David G. Blanchfl ower

Young People and the Great Recession
David N.F. Bell
University of Stirling
and IZA
David G. Blanchflower
Dartmouth College, University of Stirling,
CESifo, NBER and IZA
Discussion Paper No. 5674
April 2011
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IZA Discussion Paper No. 5674
April 2011
ABSTRACT
Young People and the Great Recession
This article reviews the effects of the Great Recession on youth labour markets. We argue
that young people aged 16-24 have suffered disproportionately during the recession. Using
the USA and UK as case studies, we analyse youth unemployment using microdata. We
argue that there is convincing evidence that the effects of unemployment when young impose
costs on individuals and society well into the future. Though the effects of current policies on
youth unemployment are uncertain, there is still a strong case for policy intervention to
address the difficulties that the young are having in accessing employment.
JEL Classification: J01, J11, J21, J23, J38, J64
Keywords: youth unemployment
Corresponding author:
David Bell
Division of Economics
University of Stirling
Stirling, Scotland
United Kingdom
E-mail: dnfb1@stir.ac.uk

Youth joblessness has been a problem in many countries for several decades. It has
been the subject of a wide range of policy interventions. Yet the accumulated wealth
of policy experience failed to prevent a rapid rise in youth unemployment during the
so-called “Great Recession” which occurred in 2008-09. This raises serious questions
about the relevance of past policy lessons to the present predicament of the youth
labour market. Should we discount these past lessons, and what can we learn about
future policy from recent experience? These issues are the subject of this paper. We
also discuss the longer-term implications of youth unemployment and its effects on
the well-being of the young, arguing that our findings reinforce the need to explore
policy options that address youth unemployment.
We begin by setting the background context of longer-run trends in youth
unemployment. Using evidence across a range of developed countries, we then
describe the dynamics of youth unemployment during the Great Recession; next, we
look at some micro-econometric evidence on the effects of unemployment from the
UK and the USA; finally we take a controversial line on policy, arguing that the
conventional wisdom on youth employment policy has turned out to be largely
irrelevant during this recession. The solution to the youth unemployment problem is
simply put – more jobs for young people.
1. Policy Background
Those aged over the minimum school leaving age and less than 25 are generally
described as “youth”. In 1999, this classification was formalized by the International
Labour Office (ILO 2011) in its definitions of the “Key Indicators of the Labour
Market” (KILM). One of these, KILM 9, is described as “youth unemployment”. It
comprises the number of unemployed that are aged less than 25. The ILO treats those
aged 25 and over as “adults”, largely because, by that age, most have completed
education and have entered the labour force. The lower end of the range, the
minimum school-leaving age, varies by country (and by state in the USA). For most
OECD countries it lies between 16 and 18. The “youth” age range captures almost all
individuals’ initial, and potentially formative, experience of the labour market.
However, there are still significant contrasts within this age group. Individuals who
leave education at the minimum school leaving age are likely to have considerably
more work experience by the age of 25 relative to those who spend their late teens and
early twenties in full-time education.
Changes in educational participation influence the size of the youth labour market,
and therefore youth unemployment rates. Thus, voluntary or mandatory increases in
educational participation could potentially increase the youth unemployment rate
without any increase in the number of young people seeking work. On the other hand,
increased educational participation might have no effect on the youth unemployment
rate. This is because many students, particularly part-timers, actively participate in the
labour market. In addition, the youth unemployment rate does not include those young
people who neither participate in the labour market, nor in education. The so-called
NEETs (young people not in education, employment or training) are drawn from both
unemployed and inactive youth.
The worsening labour market performance of youth became apparent in the 1970s.
Freeman (1979), Welch (1979) and Berger (1984) argued that its genesis lay with the
substantial increase in supply associated with the entry of the baby boomers into the

Frequently asked questions

Q1. What have the authors contributed in "Young people and the great recession" ?

This article reviews the effects of the Great Recession on youth labour markets. 

Q2. What was the effect of higher unemployment on the youth labour market?

Higher unemployment was accompanied by an increase in the wage gap between adults and youths, particularly during the 1980s and early 1990s. 

Q3. How long did the UK government provide a job to those unemployed?

The UK government established a package for those unemployed for more than six months, which included a recruitment subsidy of £1,000 for employers who hire those in receipt of JSA for six months or more. 

Q4. What is the effect of union membership among the young?

although the UK, for example, has relatively high youth unemployment rates, it has especially low union membership rates among the young. 

Q5. How much union density did Blanchflower (2007) show?

Blanchflower (2007) shows, using data from the UK Labour Force Survey, that union density rates for 16-19 year olds in 2004 were 4.3%. 

Q6. What was the effect of the decline in the labour market performance of young people?

But instead of improving as cohort size declined, the relative labour market performance of young people worsened during the 1980s and 1990s. 

Q7. What was the argument that the provision of temporary jobs through the Young Person'' Guarantee was an?

The argument was that the provision of temporary jobs through the Young Person'’ Guarantee was an “ineffective” use of public funds (HM Treasury 2010). 

Q8. What countries have seen the youth unemployment rate decline over time?

Youth-adult ratios in some countries, such as Italy, Australia and France, have fallen over time, while in others, such as the UK and Sweden, the young have tended to comprise an increasing share of the unemployed. 

Q9. What is the main reason for the decline in employment among young workers?

On the demand side of the labour market, it appears that employment opportunities for young workers have been declining more rapidly than those for older employees. 

Q10. What is the reason why youth unemployment rates are higher than adults?

Whether the cause is on the demand or the supply side, the outcome is that youths experience considerably higher rates of unemployment than adults.