The writer is director of research and advisory at Asia House think-tank
Global youth unemployment is soaring. China’s rate is at a record high. Even more problematic is the lesser-known Neet rate, measuring the share of youngsters not in employment, education or training.
A rising Neet rate should be ringing alarm bells everywhere. It has quietly risen above 20 per cent globally, a level not seen in almost two decades. And even when employment is offered, it is often the wrong kind, poorly paid, and mostly informal, according to the International Labour Organization.
As I walk my son to school through the construction boom of southern Athens, I think about affordability. I wonder about my young neighbour, who, with a newly minted PhD, has just accepted a part-time position as a junior restaurant manager. “It’s better than no job,” she says.
This job downgrading is a form of economic scarring in which the quality of employment deteriorates even as economies recover. Scarring is pervasive in lower income economies. Advanced economies, including parts of the US, have not been immune either.
The stakes are highest for the poorest, most fragile economies, such as Niger, Yemen and Somalia, where soaring Neet rates lead to catastrophic economic and social outcomes. This is now exacerbated by exorbitant food and energy prices.
In an era of multiple shocks, higher Neet rates further embed acute vulnerability. This is true for undiversified, resource-dependent and gender-imbalanced economies. Globally 32 per cent of young women are Neets compared with roughly 15 per cent of young men. Southern Asia’s Neet gap is an eye-watering 53 per cent of young women to 6 per cent of young men.
The economic consequence of this imbalance is stark. Rising Neet rates will trigger the productivity shortfalls that bring the so-called middle-income trap. When countries’ productivity falls short, the whole economy never reaches higher income status. Compare Ireland and South Korea’s economic dynamism with Mexico and Argentina’s chronic turmoil.
Digitalisation, and the “platinum economy” jobs that come with it, could reverse rising Neet rates globally. A high-tech job is more than a job. For every new high-tech job, five additional non-high tech jobs are generated in a city, according to the economist Enrico Moretti.
Yet, in multiple emerging economies, digital access remains staggeringly low, especially in rural areas, including in economic giants such as India. Digital innovation is also fickle for workers in that it can depress wages, rapidly shift work tasks or eliminate jobs altogether.
Policymakers are taking some notice. South Korea has put forward its Human New Deal that seeks to address the labour market impacts from its energy transition and greater digitalisation. It aims to do this largely through training and insurance for non-standard forms of employment.
Ultimately, success in lowering the Neet rate will be context-specific. For some economies, such as Mexico’s and India’s, an improved investment climate for foreign firms — and the knowledge spillover they bring — would align with prioritising education. While Greece could be devoting much more to its think-tank sector, so that PhD graduates can innovate.
Better education and labour market outcomes to spur innovation and productivity matter. Without further understanding and tackling the Neet rate, growth and wellbeing will stagnate.
Elevated financial volatility, rising borrowing costs and geopolitical turmoil could mean successive and multiple shocks ahead. In this context, the Neet rate is an essential bellwether for a broad array of vulnerabilities for the young — and an essential barometer of wellbeing for the next generation.
Source: Economy - ft.com
