ILO Calls for Action against Youth Unemployment
and Other Forms of Social Exclusion

Friday 28 November 1997
(ILO/97/31)

International Labour Organization

KOBE (ILO News) ­ Warning that youth unemployment and other forms of social exclusion have reached "intolerably high" levels in several G-7 countries, the Director-General of the International Labour Office (ILO) has called for the urgent adoption of special policies targeting workers trapped in low-paid jobs or long-term unemployment.

In a speech delivered today at the G-7 Jobs Conference in Kobe, Japan, Mr. Michel Hansenne underlined "the capital importance of the objective of full employment" and of public policies therefore "that promote sustained economic growth and preserve clear incentives for enterprise growth and job-creation". But, he added, these must "be complemented by social and labour policies that actively support the reintegration of the unemployed and increases the employability of the low-skilled".

"If we fail to contain the social costs" of the economic transformations wrought by globalization and technological change, said Mr Hansenne, "we risk being swept into a perilous zone of social and political turmoil".

With the notable exception of Germany, unemployment rates for workers between the ages of 16 and 24 in the G-7 countries are typically the highest among all demographic groups and twice as high as the overall average, according to an ILO background document ^(Endnote1). The situation is particularly dramatic in Italy, where the youth unemployment rate has surpassed 30% since 1983 and in France, where it stood at 25% in 1995.

Dramatic as they are, these figures do not take into consideration persons engaged in part-time work for want of a better alternative or those who have become so discouraged that they have given up the search for a job. Such "hidden unemployment", suggests the ILO document, affects "a higher proportion of young people than prime-age workers in the United States, Japan, France and the United Kingdom".

"Despite the general rise in school attendance, the proportion of 22-year-olds who were neither in school nor working increased between 1984 and 1994 in most of the G-7 countries (...) Particularly sharp increases occurred in Italy and the United Kingdom, where 28.8 and 26.8 per cent, respectively, of 22-year-olds fell in this category in 1994".

"The true exception to the general picture of youth unemployment is Germany", thanks to an apprenticeship system which "moves young people into stable employment quickly and smoothly" notes the ILO document.

Youth unemployment represents an obvious waste of human capital with long-term negative consequences for the individuals concerned and for those around them. It is often associated with rising crime and the emergence of an underclass with its own subculture and rules. But, in spite of these widely shared concerns, "it is clear", states the document, "that in all countries, proportionally more young people are without a job today than two decades ago".

Older Workers

Similarly, at the other end of the spectrum, increasing numbers of older workers are being excluded from the labour market. In France and Germany, the employment rate for older workers declined as a result of enhanced incentives for early retirement introduced in the 1980s in an effort to reduce open unemployment rates.

But not all withdrawals from the labour market are voluntary. The wave of enterprise restructuring and downsizing which occurred in the late 1980s "is believed to have increased age-specific dismissals concentrated on older workers" whose wages are the highest wherever pay scales are based on seniority rather than productivity.

"Hidden unemployment" also affects a growing number of older workers, many of whom are simply dropping out of the labour market. Between 1970 and 1994, the non-employment rates of older workers in the G-7 countries showed the sharpest increase among all age groups. In Canada, France and Germany, the rates doubled over the period.

"The basic public policy dilemma", says the document, "is the conflict between the use of early retirement as an instrument for alleviating unemployment among younger workers and the longer term financial viability of pension systems in ageing societies".

Concerns about the future financing of pension and health-care systems are not the only reason why attempts are being made to reverse the trend towards early retirement. Rising life expectancy and better health have lengthened the potential productive life of workers and a growing proportion among them choose, where they can, to remain employed.

"Several policy responses need to be considered", says the ILO. "The first is the removal or reduction of the incentives for voluntary early retirement and age-specific dismissals of older workers. This requires the phasing out of special state-funded early retirement schemes, adjustments to pension and tax systems to remove biases towards early retirement, and the reform of seniority-based wage systems".

Social Exclusion

The increasingly precarious situation of many young and older workers has led to growing concern in industrialized countries over the rise of social exclusion. Certain categories, such as the long-term unemployed or unskilled and inexperienced youths now face difficulties in obtaining a job even in periods of economic recovery.

Analyses conducted by the ILO reveal marked differences, however, in the behaviour of labour markets in Europe and North America. While the link between growth and employment remains high for all G-7 countries, youth unemployment rates in the European countries in the group are the least likely to decline during economic upswings. This suggests that, in Europe, it is the young unemployed who face the highest risk of social exclusion.

In North America, by contrast, being young and unemployed does not appear to decrease the probability of finding a job once a recovery is confirmed. Those at highest risk of permanent social exclusion there are the long-term unemployed, independently of any other consideration.

It is important to note in this context that while the long-term unemployed represent less than 11% of North American unemployment, youth unemployment accounts for about 25% of total unemployment in the four European G-7 countries.

"Special policies towards youth and older workers are necessary to redress current imbalances, but we cannot overlook the dilemma that, without strong employment creation, they risk being zero-sum in nature", acknowledged Mr Hansenne. "In slack labour markets the disadvantages faced by youth and older workers in the competition for jobs are likely to persist even though they are mitigated by special policies. This is why", he concluded, "promoting strong overall employment growth must remain the overriding goal."

Endnote 1:
Youth, older workers and social exclusion: Some aspects of the problem in G-7 countries. G7/1997/1. International Labour Office, Geneva. October 1997.