Unemployment is a major crisis facing many nations and more so thirdworld and developing countries. This, however does not mean thatindustrialized countries do not face the same problem. During timesof financial crisis such as the financial recession that began in2008, the problem of unemployment becomes exasperated because of areduction in employment opportunities and closure or down scaling ofcompanies which means loss of jobs. During the great recession of the21st century over 9 million jobs were lost in the United States ofAmerica alone. The country also experienced a significant decline inGDP the USA GDP fell by 5% at the peak of the recession. The massiveeffects of the 2008 recession were so server that the recession iscommonly referred to as the great recession. Most economists hold theopinion that the collapse of the US stock market was a symptom of thedepression but not the cause of it. The decline in the price of crudeoil is designated as one of the major factors that lead to thefinancial recession of 2008. The great recession just like thefinancial crisis of 1982 were observed in the USA stock prices and ithad an effect on the global economy.
The youthful generation is the most affected by any financial crisisas they occupy the junior positions in most companies and thesepositions are the first to be eliminated in attempts to savefinancial resources in a crisis. The youth are also graduatingannually from colleges and universities ready to enter the workenvironment. In a financial crisis many companies opt not to take onany new employees leaving the youth in a difficult situation. Theyouth need protection from the problem of unemployment because theyare the future leaders, and also a great resource for any country,since they are innovative, and have a globalized view of life. Somegovernments have implemented unemployment policies to help solve theproblem. This paper will look into the policies and other possiblesolutions. The paper shall consider the youth globally but with aspecial interest in the United States of America. The USA isparticularly intriguing as the country has a large percent of youthcompared to other countries such as Italy and Japan.
This study paper is aimed at analyzing the effects of the 2008 greatrecession on the youth and unemployment in the youth compared totheir older companions. The paper is vital as it provides the readerwith a deep understanding of the effects of a financial crisis onunemployment and possible solutions.
According to the United States of America constitution a youth is anyindividual who is aged between 15 and 24 years of age. With apopulation of over 300 million citizens, 20% of all American citizensfall under the category of youth according to the US Census Bureau.In any country where 20% of the entire population and an even higherpercent of working aged citizens is disadvantaged the country is notlikely to grow economically. As a result the USA and any othercountry that intends to develop require analyzing the youth trendsand coming up with policies to boost their growth and intake into thework environment. Unemployment is defined as being capable andwilling to work but without receiving any employment opportunity.Employment on the other hand is an individual working for an hour ormore within a week with the aim of receiving payment or gaining aprofit. The recession mostly affected the financial industry which isa large contributor to the USA economy. The industry contributed anaverage of 1.2 trillion US dollars in the year 2015 and is predictedto have risen in the 2016 financial year. The industry contributesover 7% of the country`s GDP and revenue
The 2008 recession had extremely diverse effects on the youths. Mostof the youths were rendered jobless as a result of the recession.This was a problem that was experienced the world over. It was causedby the lack of or minimal skills among the youths compared to theadults. The crisis was even worse after the recession. The problemcan be averted in future by setting aside a certain percentage ofjobs in the market for the youths. The youths can also be cushionedfrom the effects of unemployment by providing them with funds toensure they are able to be self-employed (Pissarides, 2013).
As a result of the 2008 recession, unemployment among the youth roseand has continued to rise. Almost all the countries the world overhave been affected by this recession. Men have been affected by thisrecession more than women. A sharp increase in unemployment has beenexperienced in the European Union and many other states of the worldover. The labor market contracts significantly when an economicrecession occurs. However, for the youths, the effects are even moredevastating. This is mainly due to the fact that the youths have hada time transforming from the school to the working environment. Theyare also more affected by the job cuts that take place during andafter the recession. According to the UN world youth report (2012),the youths are more affected by a recession than the olderpopulation. They are usually the last in and first out in the jobmarket. The unemployment rate for youths was at 12.6% compared to the adults or older people which was at 4.8% according to theInternational Labor Organization and United Nations, Department ofEconomic and Social Affairs, Population Division), (2011). The samereport concludes that the labor market for young people iscontinuously decreasingly.
The purpose of this study is to prove that despite the fact that theyouths are the future, they are neglected in the labor market. Thestudy should provide explanation and evidence that the youth arealienated in the job market.
The research was conducted on a variety of young people. Thisincluded the former students who had left school and the youngsterswho had graduated immediately. Other young students who had also beeninvolved in vocational training and those that were involved inapprenticeship for different careers were also involved in the study.The studies used were carried out by different organizationsincluding the United Nations. Different case studies were used in thestudy and statistical percentages were analyzed. Both qualitative andquantitave techniques were used. Data from the United Nationsregional information centre for Western Europe was used and othercredible other sources. The reason for this was due to the fact thatthese organizations are legitimate and widely used worldwide. The keyquestions asked were whether the youth unemployment was better orworse during the recovery of the recession. The other factors thataffected the unemployment of the youth were also considered. Theresults in the analysis showed that the youth unemployment was worseoff than that of the adults. The US Labor Market was the main sourceof data used for the unemployment statistics.
All members of the groups of people that were included in the studywere selected from the general public. This included the elderlyindividuals, the completely jobless individuals and the people whohave not been employed for a long time. The Latest month is used asthe normal reference in cases where the rate has remained the sameover a month’s time. The month with the lowest rate is to bedefined as the significant or the turning point. Data from differentresources was used in order to reduce the probability of biasinformation making it into the analysis. All this data was used toanalyze the effects of the last recession on the unemployment ofyouths compared to the adult. The difference between how the youthsand overall adults were affected in terms of unemployment by therecession was analyzed by the data. The data also was used todetermine whether the youths were better off in this recession or theprevious one.
According to the United States of Labor statistics, (2016) Anindividual only classifies as unemployed if they qualify and areready to perform at a job have been searching for an opportunity inthe prior 4 weeks. The rate of unemployment is measured as apercentage of the people with no jobs to the labor force. From thedata that was available, it was clear that the youths were moreaffected by the recession in terms of unemployment compared to theadults. There was an increase in the number of employed youths from1.9 million to 20.5 million. This was according to the data availablefrom April to July of 2016. Youths amounting to around 3.4 millionaged 18 to 24 years were unemployed in July 2008 according to theUnited States Labor statistics, (2016). This was the highest rate ofyouth unemployment since the July of 1992. It was at 14.0%. Thisreflected a weaker job market.
The unemployment rate was at 15% for young men and 12.8% for youngwomen. The same rate for unemployed whites was 12.3% and similarlyfor the blacks it was 24.8%. All this was the increase from theprevious year. The unemployment rate for the Asians was approximatelyunchanged from the July of 2007. This data showed that the unemployedrate was high when it came to the youths compared to the adults. Forthis study, the youths were considered to be those individuals agedbetween 18 and 24 years of age. Those aged above 24 were consideredto be adults. From the data, it was pretty obvious that theunemployment among the youths was high during the recession periodwhich was around 2008 compared to the years after. It was still highfor the youths compared to the adults. The unemployment rate amongthe youth is shown in the graph below.
Source:Clark and Summers, 2012): the figuredemonstrates youth unemployment between 2005 and 2009
Thepolicy makers mostly try to increase the minimum wage of individualsin the economy. This however has implications on the employment ofpeople moistly the youths. It raises the rates of unemployment amongsome youths while increasing the income of others. According toKalenkoski (2016), the young workers miss out on the opportunity of alow paying job that includes training and which in future turns to ahigh wage job. Those youngsters who are unable to find jobs end uprelying on their families for financial support slowing theproductivity of the country as whole. However, the same minimum wagerules may end up increasing the income of the youths due to the factthat those youths that already have jobs get more money forthemselves.
Thestudy therefore showed that the youth had a harder time finding jobsduring the recession than the adults. They were also worse off duringthe recovery of the recession than even during the recession. Toavoid this in future, the respective governments should put upmeasures that ensure the youths get a quota of the jobs in theeconomy. This can include even giving them a part of the governmenttenders and providing them the capital to start businesses to advancethemselves. This would definitely cushion them from the effects ofunemployment. These are some of the measures that would promote theyouths and ensure that they do not suffer from the effects ofrecessions which seem to affect them more. They can also be cushionedfrom these effects by setting aside a certain percentage of jobs inthe economy to them.
Data Analysis and Discussion
From the above literature review and primary research the study paperhas observed that the youth suffer the most from an economic orfinancial crisis. The current unemployment rate for the youth in USAis at 16.2% which is the highest percentage of unemployment for anyparticular age group. The youth unemployment rate is more than doublethe national unemployment rate. During the great recession theunemployment percent among the youth sky rocketed and hit the highestrates in the past decade. According to a survey conducted by theCenter for American Progress even after the youth populationeventually get a job they would have already lost over 20 billiondollars in job finances.
It has also been noted that the youth are more prone to moving fromone employer to another. This has a great impact on the decisionsmade by managers while letting go of workers. Managers are morelikely to lay off youthful employees compared to their oldercounterparts as the youths are prone to moving on to anotheremployer. The youth because of their age and having less workexperienced compared to older generations of workers start off atjunior positions. During a recession such as the great recession of2008 workers are laid off and most companies start by firing thejunior staff before any other positions. This puts the youth in adisadvantaged position compared to other workers as they are likelyto lose their jobs before other workers (Gardner, 1994).
After the Second World War the number of youth in employment wasrelatively high and they contributed a large percentage of thecountry`s gross domestic product. The trend has however seen areduction over the ages. One of the factors that have led to thisdecline is the drastic decline in number of employed teenagers whichcan be attributed to an increase in the number of citizens who seekhigher education before employment. This is not to dismiss highereducation as a university education leads to exposure to differenttheories and possible ways of solving a problem one might face whileat work. The contemporary world is moving towards globalization andan employee requires knowing how to interact with people fromdifferent backgrounds and cultures. While at university a studentcomes into contact with diverse cultures and learns early in life howto interact with others in a non-offensive manner. The reductionhowever has had a negative impact on youth unemployment as oldergenerations take up the preferred jobs leaving the youths with alimited amount of jobs and most of the available jobs are in juniorand intern positions. An uneducated youth is even more disadvantagedas most of the contemporary managers require education certificatesduring interviews and while hiring new employees leaving only manualjobs which do not require special or technical skills.
The youth are faced with another problem, which is of an increasingwage gap between the youth and older workers. CEOs and otheradministrative positions are mostly occupied by non-youth workersapart from the technology industry which has a substantial number ofyouth in administrative positions. Administration positions pay asignificantly larger amount compared to lower levels of employmentand junior staff that mostly consist of the youth. With a lowerincome compared to their counterparts the youth are at a disadvantagewhen it comes to the ability to advance their lives and improve theirliving conditions.
From a regression analysis conducted on the United States of Americaon the topic of youth unemployment a positive correlation betweenfinancial crises, minimum wage and youth unemployment. The regressiontook the shape of general regression implementing the below formulae.
In this case the independent variable , X is financial crisis whileY, the dependant value is the youth unemployment rate. Below is afigure that represents the summary of this regression.
Source:(US Labor Market Data, 2016)
For the younger population aged between 15 to 19 years an 30%correlation was discovered between unemployment in the group andminimum wage. The minimum wage also plays a significant part inshaping youth unemployment. A one percent increase in the minimumwage leads to a 1.05 percent increase in youth unemployment. Thefigure below elaborates further the relationship between theunemployment rate in the younger generation between 15 and 19 yearsof age and the minimum wage (Tiraboschi, 2014).
An increase in the tendency of large multinational corporations toexport jobs to other regions of the globe outside of the USA has alsoincreased the number of unemployed youth. Countries such as China andIndia have a large population which is considered by many companiesas a large working force have absorbed a significant number of jobsthat were previously given to American citizens. These countriesbeing developing countries have lower minimum wage compared toindustrialized economies such as the USA. Global companies considerthese factors and as a result open manufacturing plants in thosecountries. These labor intensive jobs previous provided the youth andother US citizens with employment opportunities and the export ofsuch jobs has contributed to an increase in the unemployment levelsamong the youth in the US and other industrialized countries. Thejobs that have been moved to other countries with a cheaper laborforce are mostly manual jobs and junior positions in a firm thesejobs are ones that most youth begin with hence having a greatereffect on the youth population compared to their older counterparts(Long, 2016).
The unemployment rate both in the youth and nationally fell to recordfigures the highest in the past decade during the great recession of2008. The recession was a major blow to the United States of Americaespecially the financial industry. The financial crisis is onlyeclipsed by the great depression that occurred slightly after the endof the Second World War. National unemployment rates after therecession have reduced as a result of the economy bouncing back andeven growing. The great depression which is considered the worstfinancial crisis in the history of the USA recorded a lower increasein youth unemployment than the recession that started in 2008. Thelabor force, however grew by a lower figure during the greatdepression than the recession. The labor force increased by 1.9percent during the great recession while during the recession it onlygrew by 0.7 percent. The new jobs, however have not been taken ormade available to the youth. This argument can be made from theobservation that the youth unemployment rates have not fallen as muchas the national unemployment rates. The recession that lastedeighteen months saw a rise in youth unemployment to over 16%.
Youth unemployment Time Period
The figure was obtained from(OECD, 2017 BLS, 2016)
The chart portrays the trend in youth unemployment alongsidenational rates from 1992 – 2009
The paper concludes that in both the contemporary times and pasttimes the youth have received the burden of unemployment. Over thepast decades the rate of unemployment among the youth has been higherthan the national unemployment rate. This statistic clearly showsthat the youth have been disadvantaged for an extended period of timewhen it comes to availability and gaining of jobs. Tough economictimes make it harder for an unemployed youth to find a job since jobsare harder to come by. Statistics also indicate that during economiccrises such as the recession getting a promotion and moving up thechain of management. This means that the few youths who do get luckyand join the labor force stagnate at one position for an extendedtime frame during and shortly after the recession. A large percentageof the employed youth are in junior posts and wish to get promoted tobetter jobs. The great recession made it harder for youths in theactive labor force to move up in their careers. A significant percentof the employed youth are demoted or receive lower wages. It is uponthe government which is the largest shareholder in the economy toregulate the unemployment rates in the country. The government couldcome up with youth friendly policy aimed at reducing youthunemployment. The policy could compel all companies and organizationin the country to have a chosen percent of youth employees in theirhuman resource. Since the implementation of such a policy couldaffect companies significantly the policy could be implemented inphases. The US government has made efforts towards this end such asthe legislation of the American Recovery and Reinvestment Act. Theact was created to fund youth projects and empower the youth to gaindecent employment and stand a chance in advancing his or her career.The government is also one of the largest employer of its citizens inmost countries. Having this in mind the government could make asignificant difference in the youth unemployment levels by making anactive effort to employ as many youth as possible. The governmentcould ensure a particular percent of their employees are youths. Insome countries the government has designated a percent of all theirprocurement to the youth. In Kenya for instance the government hasdesignated 30% of all government procurement to the youth anddisadvantages groups. The move by the government has seen an increasein youth employment and the registration of new companies directed bythe youth. A modified policy such as the one mentioned previouslycould be implemented in the United States of America in an effort totackle youth unemployment.
The United States of America has a significant percent of youthscompared to other countries such as Japan and Italy. In the countrythe number of students who graduate from colleges, universities andother learning institutions after a year is greater than the numberof job opportunities that are created annually. The large numbers ofgraduates per year creates an employment gap. This also means thatthe youth unemployment rate is likely to grow slightly.
Training of the youth on matters that deal with employment would go along way in reducing youth unemployment. Youth training venturescould empower the youth with information on how to apply for jobs andalso where to find jobs designated specifically meant for the youth.Companies could be allowed to participate in the training exercisesso as to instill in the trainees skills that are required in the workforce. Self-employment is a viable option in tackling youthunemployment in the country. Small enterprises and other forms ofself-employment could ensure the creation of new job opportunitieswhile simultaneously growing the GDP. Self-employment and smallmarket enterprises have proven to work effectively in other countriessuch as Kenya. The East African country has seen a decline in youthunemployment resulting from job creation attributed to the formationof new ventures.
Suggestions for Further Research
Although this study paper has made a detailed analysis of the effectsof the financial recession on the youth unemployment figures there isstill room for further research. There is little research that hasbeen performed on the dynamics of youth unemployment during hardeconomic times. Further research could be done into the financial andeconomic problems that are specifically faced by the youthpopulation. A question to consider while performing more research onthe topic is do employers prefer older employees to youngeremployees and if so what are the reasons? Another important questionwould be are there countries that have very low youth unemploymentrates or lower youth unemployment compared to older generations andif there are how did these countries achieve this state?
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