Youth Employment Programs - Independent Evaluation Group

ConsequencesEarly unemployment is stressful and can leave scars. Unemployed youth donot get a chance to build professional skills. As a result, they are more at riskfor higher adult unemployment, career downgrades and lower wages laterin life, and a loss in lifetime earnings (Kahn 2010). In the United Kingdom,Gregg and Tominey (2005) found a large and significant wage penalty of13 to 21 percent up to 26 years later as a result of early unemployment.Such long-term evidence for developing countries is scarce. However, otherevidence points to similar problems: Low-skilled youth who are not ineducation, employment, or training (NEET)—around 70 percent of youth inEgypt and Pakistan (World Bank 2012)—are more likely to remain in thissituation. Surveys from 60 developing countries show that young peopletake an average of 1.4 years to find stable employment after school (WorldBank 2007). Many youth are discouraged and some migrate to find work.Joblessness has negative externalities on social cohesion, which may affectconflicts and poverty.The agriculture sector remains a significant employer of young workers inAsia and Africa, yet many youth are migrating to find higher earnings.Young people are the key to the future of agriculture. However, given the lowearnings and growing disinterest of youth in agriculture, the lack of capacityof other rural sectors to absorb youth, particularly in Asia and Africa,contributes to migration, joblessness, disillusionment, and the associatedrisks of instability (Lochner and Moretti 2004).The youth dividend, that is the added productivity to economic growth whenyouth cohorts enter the workforce, cannot materialize without creatinghigher productivity jobs for youth. Increasing youth cohorts add to thechallenges for youth in search of decent livelihoods and employment, andfor governments in providing education and accelerating job growth toaccommodate these youth (appendix A, box A.3).Youth unemployment is costly. Related costs include direct costs to thegovernment, depending on the extent of support programs, such asunemployment insurance, public works programs, and costs related tothe economic loss of investment in education, forgone earnings, savings,and aggregated demand (ILO 2010). Instead of contributing to society,unemployed youth create a direct cost estimated at $40–50 billion annuallyfor the Middle East and North Africa (IFC 2011a), reflecting about 3 percent ofthe region’s gross domestic product (GDP) in 2010 (GDP in constant US$ for allMENA countries, World Development Indicators). Youth unemployment is nowan important component in the misery index (Dao and Loungani 2010), thesum of inflation and unemployment, as governments have tamed inflation(figure 1.1).6 Youth Employment Programs