The Great Recession and Young Adults' Labor Market Outcomes around the World
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The Great Recession and Young
Adults’ Labor Market Outcomes
around the World
ARNALDO MONT’ALVAO and MONICA K. JOHNSON
Abstract
In this essay, we consider the impacts of the Great Recession on youth labor market
prospects around the world. Young adults were especially affected by the crisis, experiencing heightened levels of unemployment, underemployment, and idleness. We
highlight how variations in social context as well as youth status characteristics and
skill levels matter in how youth fare in the labor market. We also draw connections
to other important outcomes, such as college enrollments and migration. Our discussion points to important lines of inquiry needing development, especially regarding
the plight of youth in developing countries and much needed evaluation of institutional and policy changes that have been designed to promote successful transitions
to adulthood despite the economic challenges youth face.
INTRODUCTION
The Great Recession took place between late 2007 and 2009 in most countries
around the world, with economic difficulty extending well past the official
end date in most places. Its beginning was marked by economic stress in
the United States and other developed countries, with decreasing activity in
labor and stock markets. Its effects gradually exposed developing countries
through international trade, turning it into a major world economic crisis,
and creating economic insecurity for major groups of the population. Youth
were among those critically exposed to its effects, experiencing rising levels
of unemployment, underemployment, informality, precarious work, loss of
income, and discouragement (ILO, 2013, 2015).
Late adolescence and young adulthood are life stages of crucial importance
for life trajectories. It is during this time that young people make critical
decisions about education, training, employment, and family formation that
continue to constrain or enable future opportunities for years to come. As
Emerging Trends in the Social and Behavioral Sciences.
Robert Scott and Marlis Buchmann (General Editors) with Stephen Kosslyn (Consulting Editor).
© 2016 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
such, it is of great importance to consider how young people experienced
the severe, worldwide recession known as the Great Recession and what it
might mean for the lives they build. How widespread were unemployment
and other indicators of labor market difficulties among youth? What does it
mean for the long term to enter the labor market during such tough times?
And what kinds of education, migration, and other labor-market-relevant
decisions are affected? Such questions have practical value for young adults,
their families, and policy makers; they also raise intriguing issues for scholars
interested in how lives intersect with historical events to shape the pathways
of different cohorts.
In this essay, we examine how the Great Recession has impacted, and how
it likely will continue impacting, the lives of youth around the world. We
focus on labor market outcomes but also recognize that recessions can have
impacts across domains of the life course (Crosnoe, 2014). While economic
indicators are the most visible effects of the recession, other markers of the
transition to adulthood are also influenced: home-leaving, marriage timing,
and parenthood. Economic recessions tend to cause a delay in these markers,
leading to extended dependence on parents, and, depending on national context, on the welfare state. These markers will not be analyzed here, but a few
studies are already available—see, for example, Morgan, Cumberworth, and
Wimer (2012) for the US case and Newman (2012) for a comparative study
of six industrialized nations (Japan, the United States, Italy, Spain, Denmark,
and Sweden).
Although we do not focus on it here, we also recognize that the impact
of recessionary times on young lives operates not only via labor market
processes but also through families, which usually work as a safety net, as
well as through diminishing public services. For an applied example of how
family struggles in Ireland can affect youth, see the study by Watson, Whelan, Maitre, and Williams (2015), and, for a discussion of indirect effects of
recessions on youth via family support and public services, see Mont’Alvao,
Mortimer, and Johnson (forthcoming).
In the following section, we discuss the overall effects of the Great Recession on youth labor market outcomes. We begin by drawing a global picture
and then consider societal variations. Although youth from all continents
have been affected by the Great Recession, they do not experience them in
exactly the same way because of variations in the social context. The social
context is structured by institutional settings, especially the institutional links
between the educational system and the labor market, as well as by cultural
expectations. We follow this with consideration of the differential effects of
the recession on youth by status characteristics and skill levels. Finally, other
related outcomes (college enrollments and migration) are also analyzed. The
The Great Recession and Young Adults’ Labor Market Outcomes around the World
3
section titled “Variation among Nations” discusses limitations of the current literature on the subject, especially regarding youth plight in developing
countries, and suggests important questions for continuing research.
LABOR MARKET EFFECTS: GLOBAL PICTURE
The Great Recession, or Global Financial Crisis, hit young people
hard around the world, raising unemployment and forcing many into
poor-quality and temporary employment, no matter the country’s level of
industrialization or the region of the world. Although all groups of workers
suffered major occupational setbacks in the Great Recession, youth were
disproportionately affected (Bell & Blanchflower, 2011). The greater vulnerability of young workers stems from several factors. Importantly, young
people have had no time to build up wealth, which can serve as an important
cushion in tough times for older workers. Beyond that, youth are more often
employed in vulnerable industries such as construction, they more often
hold temporary jobs across industries, and are disproportionately hit by
“last hired, first fired” policies. They have fewer general work skills and less
firm-specific human capital. Structural changes in skill requirements have
also affected young workers, especially the unskilled ones. In shrinking
and unstable labor markets, unskilled youth tend to experience even more
precarious situations than their skilled counterparts, which can lead to
exacerbated inequalities among youth during economic downturns, an issue
we will consider further in the following paragraphs.
The International Labor Organization’s (ILO)’s 2015 report on employment
trends documents the persistent disproportional impact of the Great Recession on youth, even though two important structural changes have been acting to improve youth’s transitions around the world. First, the size of recent
cohorts entering the labor market has been smaller, especially in regions such
as Asia and Latin America. Second, the average educational attainment of
recent cohorts making the transition to the labor market has been rising.
However, these two countervailing changes have not been able to overcome
to negative effects of the recession.
The Great Recession arrived just as global youth unemployment had actually started to improve, with the 2007 rate of 11.5% for 15 to 24-year-olds
the lowest in a decade (ILO, 2013). The global youth unemployment rate has
remained high, and the ILO estimates a youth unemployment rate of 13.1%
for 2015, which it anticipates will be stable through 2018 (ILO, 2015). These
statistics do not include the millions who are underemployed or have found
part-time or temporary positions. Unemployment rates also do not include
those who have given up seeking employment after years in a tough labor
market.
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
One group affected, but who are also not represented in official unemployment statistics, are teenagers still in secondary school who delay entry into
paid employment or work only sporadically when jobs are available. Many
of these youth may not be officially unemployed, but may wish to work if
they could. In the United States, where part-time employment during high
school has been very common and provides many youth the chance to build
human capital before full-time employment in adulthood, rates of participation in paid work have fallen dramatically. Such declines have occurred as a
part of a broader trend since the 1980s, but drops were especially precipitous
during the Great Recession (Staff, Johnson, Patrick, & Schulenberg, 2014).
In addition to the immediate effects of unemployment or underemployment, youth entering the labor market during hard times can pay a price
for years to come. Studies of “scarring,” conducted mostly in developed
economies, indicate that cohorts that enter the labor market during recessions suffer career disadvantages that last beyond the recessionary times.
Long spells of unemployment limit the development of their work skills,
reducing their ability of being hired and causing long-lasting damages to
their career. Studies in Canada, the United States, and Japan, for example,
show lower employment rates, lower earnings, and lower occupational
placement up to 10–12 years after leaving school during a recession than
leaving school in better economic times (Genda, Kondo, & Ohta, 2010;
Oreopoulos, von Wachter, & Heisz, 2012). It can also have long-term effects
on youth job satisfaction (Bell & Blanchflower, 2011) and beliefs regarding distributive justice and confidence in public institutions (Giuliano &
Spilimbergo, 2009). Only time will tell whether there will be persistent
negative effects of the Great Recession for ill-timed cohorts of labor market
entrants. However, patterns such as these from earlier recessions, along
with the severity of and slow recovery from the Great Recession, have led
to concerns about a “lost generation” (Scarpetta, Sonnet, & Manfredi, 2010)
or a “generation at risk” (ILO, 2013) as recent cohorts have failed to find a
foothold in the economy.
VARIATION AMONG NATIONS
Youth labor market conditions vary around the world and while the global
economic crisis was indeed global, the impact on youth varied across nations.
The International Labor Organization (2013) reports that youth unemployment in the United States nearly doubled between 2007 and 2010; in the
European Union, it rose considerably, but proportionately less than in the
United States. Unemployment peaks were especially high in countries such
as Greece, Ireland, Italy, and Spain, however. In the OECD area, Germany is
the exception to this trend because the youth unemployment rate during the
The Great Recession and Young Adults’ Labor Market Outcomes around the World
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crisis was actually lower than the rate at the onset of the period. Youth unemployment was also very high in the Middle East and North Africa during this
period, but much lower in East and South Asia.
Variation in youth unemployment reflects the overall health of economies,
but youth’s position relative to adults’ varies around the world as well. Globally, youth have almost three times the rate of unemployment compared to
adults (25 and over), but the ratio varies widely (ILO, 2015). Among the EU
nations, it is close to four in the United Kingdom and Italy, and even higher
in Romania, but in countries such as Germany, Austria, and the Netherlands,
where the bridges between the school system and the labor market are more
developed, youth have only twice the rate of unemployment.
Among the most affected countries were those where construction bubbles
or sovereign debt crises, as well as high levels of job protection for permanent
contracts, led to unprecedented youth unemployment rates, such as Spain,
Ireland, the Baltic States, and Greece (Bell & Blanchflower, 2011). In addition,
how youth in different nations have fared under the global financial crisis
(and the major economic changes tied to globalization more generally) has
much to do with the institutional structures supporting the school to work
transition (Mont’Alvao et al., forthcoming). Educational systems with strong
tracking and with stronger institutional bridges to the labor market better
protect youth during tough times.
Countries including Germany, Austria, the Netherlands, and Japan are
among those with the most highly structured school-to-work transitions,
keeping rates of youth unemployment low, and more broadly, having
lower rates of idleness NEET (not in education, employment, or training)
among young people than other countries, even during economic downturns (Christopoulou & Ryan, 2009; Quintini & Manfredi, 2009). Countries
with the strongest vocational education systems (in Germany, Austria,
Switzerland, the Netherlands, Australia, and Norway) were also able to
cushion the effect of the Great Recession, leading to lower youth unemployment rates, or smaller increases, than their counterparts in the OECD
area (Scarpetta et al., 2010). In contrast, youth in the United States, with
arguably the weakest institutional bridges from school to work, suffered
sharp increases in youth unemployment in the wake of the financial crisis,
as noted earlier.
Thus, societies differ in the level of collective responsibility taken for
young people’s transition from school to work, with some providing
stronger bridges between the educational system and employment. Societies
also differ in their welfare regimes. In “family-oriented” Italy and Spain,
for example, family members take care of one another when needed, with
a minimal public safety set and limited social supports. In “social democratic” Norway and Sweden, in contrast, a large public sector and active
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
employment policies are combined with a more generous public safety net.
The experience of youth transitioning to adulthood in these regimes differs
markedly. While education allowances and subsidized housing support
young people’s independence from families in countries such as Denmark
and Sweden, in Italy and Spain youth remain living in their parents’ homes
to much older ages (Newman, 2012). Indeed a study of poverty risk among
young people aged 25–29 during the Great Recession found lower poverty
rates in Southern European countries than the Social Democratic ones
with their more generous public supports because young people were
more able to live with their parents (Aassve, Cottini, & Vitali, 2013). Even
among cultures where such “accordion families” are normative and valued,
however, family resources become strained and many parents and youth
worry about how they will be able to support the next stages of their lives
(Newman, 2012).
DIFFERENTIAL IMPACTS ON YOUTH
Around the globe, youth with lower education levels, as well as those who
come from disadvantaged racial/ethnic or immigrant groups generally saw
the greatest impact of the Great Recession. Both before and during the Great
Recession, for example, youth with higher educational qualifications had
lower unemployment rates than those with lower educational qualifications.
However, those with the lowest qualifications experienced larger increases in
unemployment in most countries (ILO, 2013, 2015). Exceptions exist, including Greece, where those with tertiary qualifications saw the largest increase
in unemployment (Bell & Blanchflower, 2011).
In the European Union, unemployment rose over six percentage points for
youth with the lowest qualifications (those with lower secondary education,
primary education, or less) but only two percentage points for those with
tertiary educations (authors’ calculations, Eurostat). Bell and Blanchflower’s
(2011) analysis of EU nations found the more educated youth’s advantage in
avoiding unemployment strengthened between the beginning of 2008 and
the beginning of 2010.
In the United States, the unemployment rate for those 20 to 24-year-olds
increased more for those with a high school diploma or less than for those
with some college or a BA (NCES, 2015). The increase in poverty rates
was also more pronounced among unskilled young workers (Smeeding,
Thompson, Levanon, & Burak, 2012). Immigrant youth were also hard hit in
the Recession; in the majority of major receiving countries, unemployment
rose faster among immigrants than among the native-born population
(Papademetriou, Sumption, & Terrazas, 2011).
The Great Recession and Young Adults’ Labor Market Outcomes around the World
7
The Great Recession also had a differential impact by gender, with young
men more affected than young women. In the United States and the European Union, unemployment rates rose more for young men than for young
women, although, in countries such as Greece, Italy, and Belgium, young
women actually experienced a greater increase in their unemployment rates
than young men (Bell & Blanchflower, 2011; Verick, 2009). The main reason
young men’s employment was more affected is that the proportion of young
men employed by some of the most affected industries, such as construction
and manufacturing, is much higher than the proportion of young women.
OTHER LABOR MARKET-RELATED OUTCOMES
Employment outcomes must be understood in relation to other behavioral
dynamics, among them school-going and migration. On a potentially
positive note, the Great Recession spurred educational investments among
young people. Indeed unemployment rates may have been higher were it
not for those young people leaving (or delaying entry to) the labor market
to upgrades their skills and improve their chances of acquiring better
work positions. Studies in both the United States and the United Kingdom
indicate that enrollments in postsecondary education rose during the Great
Recession, as they generally do during times of higher unemployment
(Bell & Blanchflower, 2011). Investment in vocational education (VET, both
initial and continuing) was also promoted by several European educational
systems during the Great Recession. The proportion of students pursuing
a VET education was declining across the European Union even before
the crisis (especially in countries such as Germany, the United Kingdom,
and Denmark), and the recession did not reverse this trend (Heyes, 2014).
In order to promote VET enrollments, social security contributions were
reduced for employers interested in hiring apprentices, but the number of
companies providing training for young workers declined, diminishing its
effectiveness.
Immigration flows are also tied to labor market conditions, though it is not
yet clear what effect the Great Recession may have had on migration rates
of young people around the world. Immigration inflows (all ages) declined
between 2008 and 2009 in the United States and European Union after a
period of substantial growth (Papademetriou et al., 2011). As emigration is
selective by age, it is likely that rates declined for young adults substantially. There is variation across nations, and Ireland in particular saw net
emigration in 2009 for the first time since 1995, while young educated natives
in Greece, Spain, and Portugal also appear to be emigrating at higher rates
(Bell & Blanchflower, 2011; Papademetriou et al., 2011). Emigration became
increasingly more likely for both skilled and unskilled young Portuguese
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
workers facing a precarious labor market as well (Carmo, Cantante, & Alves,
2014). Emigration may have kept youth unemployment lower than it otherwise would have been.
PROMISING RESEARCH DIRECTIONS
What have governments done to assist young workers during the crisis and
how well have they worked? Many countries in the OECD area responded
to youth’s plight in the Great Recession by designing programs focused
on employment (Bell & Blanchflower, 2011). Countries such as Germany,
Spain, and Sweden reduced social contributions for employers and their
young employees, whereas the United States invested in the expansion of
tax credits for companies hiring youth and other disadvantaged groups
(unemployed veterans, for example), and also providing funds for training
in high-demand industry sectors. In the United Kingdom, however, funding
for a program to create temporary jobs for chronically unemployed youth
(Young Person’s Guarantee) was drastically reduced not long after its
creation, as part of an austerity program introduced by the Coalition Government’s conservative agenda. Reduction of the fiscal deficit was believed
to be more effective in reducing adverse labor market consequences for
youth than specific policies targeting their employment levels. Additional
research is needed to assess the effectiveness of the various policies and
programs implemented in the wake of the recession for improving the labor
market outcomes of youth. It is particularly important that we consider what
can be done to move discouraged workers into employment as a part of this
effort. More research is also needed to assess whether increased schooling
spurred by the poor economy will pay off as young people anticipated.
Educational institutions may have to some extent successfully warehoused
an excess supply of labor, but it remains to be seen whether benefits to that
schooling accrue to the individual and the economy more generally.
Key questions also arise about the labor market experiences and future
prospects of youth under dramatically different contexts. In particular,
our knowledge of how young people in developing countries have been
affected by the Great Recession is very limited. According to the United
Nations Population Fund (UNFPA, 2014), there are 1.8 billion young people
(10–24 years old) in the world, and approximately 90% of them live in
developing countries. Clearly this means that we know very little about
the way the vast majority of the youth population is affected by economic
downturns. Besides the unemployment rate trends compiled by the ILO,
scarce empirical evidence on the effects of the Great Recession show that
young workers in developing countries were affected as much as their
counterparts in developed nations, presenting not only increasingly higher
The Great Recession and Young Adults’ Labor Market Outcomes around the World
9
levels of unemployment but also underemployment and inactivity (Cho
& Newhouse, 2012). In addition to a better accounting of trends worldwide, we need to augment recent scholarship attending to comparisons
of school-to-work structures and social welfare policies among advanced
industrial economies with research that attends to a wider range of institutional contexts and youth populations with widely varying levels of
inequality. What kinds of employment policies, school-to-work structural
adaptations, and social investments better met the needs of youth? We also
need to examine processes of potential “scarring” and other labor market
dynamics in less developed nations that research in more developed nations
suggests impose long-term penalties on youth transitioning to adulthood in
tough economic times. Do young people in less developed economies suffer
the same scarring effects? Are the mechanisms involved similar?
Pulling together these two themes (lack of policy evaluation and lack of
attention to less developed economies), it is especially striking how little is
known about how governments in developing economies have helped youth
to fight the deterioration of their labor market position, which policies have
been effective, and what the consequences have been for other social welfare programs. To the extent that one spell of unemployment increases the
chances of further spells, an increasing proportion of youth experiencing
long or repeated unemployment spells may increase dependence on government support. Panel studies, which have been used to investigate scarring
and other processes in more developed countries, are much less available in
developing countries, making it more difficult to address such questions. For
similar reasons, we also know less about young people’s experiences during
the recession in less developed economies from a dynamic or life course perspective; population rates (e.g., unemployment) can mask great variation in
the experience of repeat episodes, duration of episodes, and job trajectories
that may be critical to evaluating institutional structures and public policy.
It is strongly anticipated that youth unemployment rates will continue
at current levels for years to come. The ILO projects stable rates through
the end of this decade (ILO, 2015), and, in a few countries, new cycles of
economic recession are promoting rising unemployment for young people.
In Brazil, for example, a recent recessionary period following the end of the
Great Recession, caused mainly by fiscal problems and political uncertainty,
has led to higher levels of unemployment and idleness. In South Africa,
youth unemployment is still on the rise, reaching almost two-thirds of the
youth population. Other developing economies, however, have shown signs
of stability (such as Mexico and Ukraine) or recovery (such as Colombia and
Chile). Research is needed to understand how institutional differences, as
well as family arrangements, in these countries interact with the way youth
and their families respond to the economic challenges from the recession.
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
What enables young people to fully take part in recovery in less developed
economies, and what puts them at higher risk?
Around the world research is also needed on how the Great Recession
shaped the aspirations, achievement orientations, strategies, and life outlooks of adolescents and young adults that find their way into employment
outcomes, as well as family behavior and political action. Economic downturns may have the ability to undermine youth’s confidence and outlooks
to the future, which could, in turn, affect their educational and occupational
prospects in the long run.
Finally, we need to know much more about migration flows among young
adults and their effects on unemployment rates and wages in both sending
and receiving nations as well as the impacts on the labor market outcomes
of immigrant youth. The greater movement of people around the world is a
key characteristic of globalization and we do not yet have a good picture of
what changed with migration flows, even temporarily, with the worldwide
recession. What happened to young people in particular is important, given
their greater mobility and the crucial stage at which they are with respect to
their life trajectories.
Over the next few years, more research will be able to document the full
extent of the Great Recession’s impact on youth’s labor market experiences,
as well as its effects on other markers of the transition to adulthood. In doing
so, special attention is needed to include the experiences of youth in understudied parts of the world. Variations in institutional context and culture
should be at the forefront of our research agenda, along with evaluations
of how effective programming and policy efforts are helping youth navigate
such difficult economic times.
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ARNALDO MONT’ALVAO SHORT BIOGRAPHY
Arnaldo Mont’Alvao is an assistant professor of sociology at the Institute for
Social and Political Studies (IESP), Rio de Janeiro State University (UERJ), in
Brazil. His research focuses on educational stratification, transition to adulthood, and life course.
MONICA K. JOHNSON SHORT BIOGRAPHY
Monica K. Johnson is Honors College distinguished professor and professor
of sociology at Washington State University. Her recent research examines
families’ and young people’s adaptations to the changing nature of the transition to adulthood.
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The Great Recession and Young Adults’ Labor Market Outcomes around the World
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-
The Great Recession and Young
Adults’ Labor Market Outcomes
around the World
ARNALDO MONT’ALVAO and MONICA K. JOHNSON
Abstract
In this essay, we consider the impacts of the Great Recession on youth labor market
prospects around the world. Young adults were especially affected by the crisis, experiencing heightened levels of unemployment, underemployment, and idleness. We
highlight how variations in social context as well as youth status characteristics and
skill levels matter in how youth fare in the labor market. We also draw connections
to other important outcomes, such as college enrollments and migration. Our discussion points to important lines of inquiry needing development, especially regarding
the plight of youth in developing countries and much needed evaluation of institutional and policy changes that have been designed to promote successful transitions
to adulthood despite the economic challenges youth face.
INTRODUCTION
The Great Recession took place between late 2007 and 2009 in most countries
around the world, with economic difficulty extending well past the official
end date in most places. Its beginning was marked by economic stress in
the United States and other developed countries, with decreasing activity in
labor and stock markets. Its effects gradually exposed developing countries
through international trade, turning it into a major world economic crisis,
and creating economic insecurity for major groups of the population. Youth
were among those critically exposed to its effects, experiencing rising levels
of unemployment, underemployment, informality, precarious work, loss of
income, and discouragement (ILO, 2013, 2015).
Late adolescence and young adulthood are life stages of crucial importance
for life trajectories. It is during this time that young people make critical
decisions about education, training, employment, and family formation that
continue to constrain or enable future opportunities for years to come. As
Emerging Trends in the Social and Behavioral Sciences.
Robert Scott and Marlis Buchmann (General Editors) with Stephen Kosslyn (Consulting Editor).
© 2016 John Wiley & Sons, Inc. ISBN 978-1-118-90077-2.
1
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EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
such, it is of great importance to consider how young people experienced
the severe, worldwide recession known as the Great Recession and what it
might mean for the lives they build. How widespread were unemployment
and other indicators of labor market difficulties among youth? What does it
mean for the long term to enter the labor market during such tough times?
And what kinds of education, migration, and other labor-market-relevant
decisions are affected? Such questions have practical value for young adults,
their families, and policy makers; they also raise intriguing issues for scholars
interested in how lives intersect with historical events to shape the pathways
of different cohorts.
In this essay, we examine how the Great Recession has impacted, and how
it likely will continue impacting, the lives of youth around the world. We
focus on labor market outcomes but also recognize that recessions can have
impacts across domains of the life course (Crosnoe, 2014). While economic
indicators are the most visible effects of the recession, other markers of the
transition to adulthood are also influenced: home-leaving, marriage timing,
and parenthood. Economic recessions tend to cause a delay in these markers,
leading to extended dependence on parents, and, depending on national context, on the welfare state. These markers will not be analyzed here, but a few
studies are already available—see, for example, Morgan, Cumberworth, and
Wimer (2012) for the US case and Newman (2012) for a comparative study
of six industrialized nations (Japan, the United States, Italy, Spain, Denmark,
and Sweden).
Although we do not focus on it here, we also recognize that the impact
of recessionary times on young lives operates not only via labor market
processes but also through families, which usually work as a safety net, as
well as through diminishing public services. For an applied example of how
family struggles in Ireland can affect youth, see the study by Watson, Whelan, Maitre, and Williams (2015), and, for a discussion of indirect effects of
recessions on youth via family support and public services, see Mont’Alvao,
Mortimer, and Johnson (forthcoming).
In the following section, we discuss the overall effects of the Great Recession on youth labor market outcomes. We begin by drawing a global picture
and then consider societal variations. Although youth from all continents
have been affected by the Great Recession, they do not experience them in
exactly the same way because of variations in the social context. The social
context is structured by institutional settings, especially the institutional links
between the educational system and the labor market, as well as by cultural
expectations. We follow this with consideration of the differential effects of
the recession on youth by status characteristics and skill levels. Finally, other
related outcomes (college enrollments and migration) are also analyzed. The
The Great Recession and Young Adults’ Labor Market Outcomes around the World
3
section titled “Variation among Nations” discusses limitations of the current literature on the subject, especially regarding youth plight in developing
countries, and suggests important questions for continuing research.
LABOR MARKET EFFECTS: GLOBAL PICTURE
The Great Recession, or Global Financial Crisis, hit young people
hard around the world, raising unemployment and forcing many into
poor-quality and temporary employment, no matter the country’s level of
industrialization or the region of the world. Although all groups of workers
suffered major occupational setbacks in the Great Recession, youth were
disproportionately affected (Bell & Blanchflower, 2011). The greater vulnerability of young workers stems from several factors. Importantly, young
people have had no time to build up wealth, which can serve as an important
cushion in tough times for older workers. Beyond that, youth are more often
employed in vulnerable industries such as construction, they more often
hold temporary jobs across industries, and are disproportionately hit by
“last hired, first fired” policies. They have fewer general work skills and less
firm-specific human capital. Structural changes in skill requirements have
also affected young workers, especially the unskilled ones. In shrinking
and unstable labor markets, unskilled youth tend to experience even more
precarious situations than their skilled counterparts, which can lead to
exacerbated inequalities among youth during economic downturns, an issue
we will consider further in the following paragraphs.
The International Labor Organization’s (ILO)’s 2015 report on employment
trends documents the persistent disproportional impact of the Great Recession on youth, even though two important structural changes have been acting to improve youth’s transitions around the world. First, the size of recent
cohorts entering the labor market has been smaller, especially in regions such
as Asia and Latin America. Second, the average educational attainment of
recent cohorts making the transition to the labor market has been rising.
However, these two countervailing changes have not been able to overcome
to negative effects of the recession.
The Great Recession arrived just as global youth unemployment had actually started to improve, with the 2007 rate of 11.5% for 15 to 24-year-olds
the lowest in a decade (ILO, 2013). The global youth unemployment rate has
remained high, and the ILO estimates a youth unemployment rate of 13.1%
for 2015, which it anticipates will be stable through 2018 (ILO, 2015). These
statistics do not include the millions who are underemployed or have found
part-time or temporary positions. Unemployment rates also do not include
those who have given up seeking employment after years in a tough labor
market.
4
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
One group affected, but who are also not represented in official unemployment statistics, are teenagers still in secondary school who delay entry into
paid employment or work only sporadically when jobs are available. Many
of these youth may not be officially unemployed, but may wish to work if
they could. In the United States, where part-time employment during high
school has been very common and provides many youth the chance to build
human capital before full-time employment in adulthood, rates of participation in paid work have fallen dramatically. Such declines have occurred as a
part of a broader trend since the 1980s, but drops were especially precipitous
during the Great Recession (Staff, Johnson, Patrick, & Schulenberg, 2014).
In addition to the immediate effects of unemployment or underemployment, youth entering the labor market during hard times can pay a price
for years to come. Studies of “scarring,” conducted mostly in developed
economies, indicate that cohorts that enter the labor market during recessions suffer career disadvantages that last beyond the recessionary times.
Long spells of unemployment limit the development of their work skills,
reducing their ability of being hired and causing long-lasting damages to
their career. Studies in Canada, the United States, and Japan, for example,
show lower employment rates, lower earnings, and lower occupational
placement up to 10–12 years after leaving school during a recession than
leaving school in better economic times (Genda, Kondo, & Ohta, 2010;
Oreopoulos, von Wachter, & Heisz, 2012). It can also have long-term effects
on youth job satisfaction (Bell & Blanchflower, 2011) and beliefs regarding distributive justice and confidence in public institutions (Giuliano &
Spilimbergo, 2009). Only time will tell whether there will be persistent
negative effects of the Great Recession for ill-timed cohorts of labor market
entrants. However, patterns such as these from earlier recessions, along
with the severity of and slow recovery from the Great Recession, have led
to concerns about a “lost generation” (Scarpetta, Sonnet, & Manfredi, 2010)
or a “generation at risk” (ILO, 2013) as recent cohorts have failed to find a
foothold in the economy.
VARIATION AMONG NATIONS
Youth labor market conditions vary around the world and while the global
economic crisis was indeed global, the impact on youth varied across nations.
The International Labor Organization (2013) reports that youth unemployment in the United States nearly doubled between 2007 and 2010; in the
European Union, it rose considerably, but proportionately less than in the
United States. Unemployment peaks were especially high in countries such
as Greece, Ireland, Italy, and Spain, however. In the OECD area, Germany is
the exception to this trend because the youth unemployment rate during the
The Great Recession and Young Adults’ Labor Market Outcomes around the World
5
crisis was actually lower than the rate at the onset of the period. Youth unemployment was also very high in the Middle East and North Africa during this
period, but much lower in East and South Asia.
Variation in youth unemployment reflects the overall health of economies,
but youth’s position relative to adults’ varies around the world as well. Globally, youth have almost three times the rate of unemployment compared to
adults (25 and over), but the ratio varies widely (ILO, 2015). Among the EU
nations, it is close to four in the United Kingdom and Italy, and even higher
in Romania, but in countries such as Germany, Austria, and the Netherlands,
where the bridges between the school system and the labor market are more
developed, youth have only twice the rate of unemployment.
Among the most affected countries were those where construction bubbles
or sovereign debt crises, as well as high levels of job protection for permanent
contracts, led to unprecedented youth unemployment rates, such as Spain,
Ireland, the Baltic States, and Greece (Bell & Blanchflower, 2011). In addition,
how youth in different nations have fared under the global financial crisis
(and the major economic changes tied to globalization more generally) has
much to do with the institutional structures supporting the school to work
transition (Mont’Alvao et al., forthcoming). Educational systems with strong
tracking and with stronger institutional bridges to the labor market better
protect youth during tough times.
Countries including Germany, Austria, the Netherlands, and Japan are
among those with the most highly structured school-to-work transitions,
keeping rates of youth unemployment low, and more broadly, having
lower rates of idleness NEET (not in education, employment, or training)
among young people than other countries, even during economic downturns (Christopoulou & Ryan, 2009; Quintini & Manfredi, 2009). Countries
with the strongest vocational education systems (in Germany, Austria,
Switzerland, the Netherlands, Australia, and Norway) were also able to
cushion the effect of the Great Recession, leading to lower youth unemployment rates, or smaller increases, than their counterparts in the OECD
area (Scarpetta et al., 2010). In contrast, youth in the United States, with
arguably the weakest institutional bridges from school to work, suffered
sharp increases in youth unemployment in the wake of the financial crisis,
as noted earlier.
Thus, societies differ in the level of collective responsibility taken for
young people’s transition from school to work, with some providing
stronger bridges between the educational system and employment. Societies
also differ in their welfare regimes. In “family-oriented” Italy and Spain,
for example, family members take care of one another when needed, with
a minimal public safety set and limited social supports. In “social democratic” Norway and Sweden, in contrast, a large public sector and active
6
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
employment policies are combined with a more generous public safety net.
The experience of youth transitioning to adulthood in these regimes differs
markedly. While education allowances and subsidized housing support
young people’s independence from families in countries such as Denmark
and Sweden, in Italy and Spain youth remain living in their parents’ homes
to much older ages (Newman, 2012). Indeed a study of poverty risk among
young people aged 25–29 during the Great Recession found lower poverty
rates in Southern European countries than the Social Democratic ones
with their more generous public supports because young people were
more able to live with their parents (Aassve, Cottini, & Vitali, 2013). Even
among cultures where such “accordion families” are normative and valued,
however, family resources become strained and many parents and youth
worry about how they will be able to support the next stages of their lives
(Newman, 2012).
DIFFERENTIAL IMPACTS ON YOUTH
Around the globe, youth with lower education levels, as well as those who
come from disadvantaged racial/ethnic or immigrant groups generally saw
the greatest impact of the Great Recession. Both before and during the Great
Recession, for example, youth with higher educational qualifications had
lower unemployment rates than those with lower educational qualifications.
However, those with the lowest qualifications experienced larger increases in
unemployment in most countries (ILO, 2013, 2015). Exceptions exist, including Greece, where those with tertiary qualifications saw the largest increase
in unemployment (Bell & Blanchflower, 2011).
In the European Union, unemployment rose over six percentage points for
youth with the lowest qualifications (those with lower secondary education,
primary education, or less) but only two percentage points for those with
tertiary educations (authors’ calculations, Eurostat). Bell and Blanchflower’s
(2011) analysis of EU nations found the more educated youth’s advantage in
avoiding unemployment strengthened between the beginning of 2008 and
the beginning of 2010.
In the United States, the unemployment rate for those 20 to 24-year-olds
increased more for those with a high school diploma or less than for those
with some college or a BA (NCES, 2015). The increase in poverty rates
was also more pronounced among unskilled young workers (Smeeding,
Thompson, Levanon, & Burak, 2012). Immigrant youth were also hard hit in
the Recession; in the majority of major receiving countries, unemployment
rose faster among immigrants than among the native-born population
(Papademetriou, Sumption, & Terrazas, 2011).
The Great Recession and Young Adults’ Labor Market Outcomes around the World
7
The Great Recession also had a differential impact by gender, with young
men more affected than young women. In the United States and the European Union, unemployment rates rose more for young men than for young
women, although, in countries such as Greece, Italy, and Belgium, young
women actually experienced a greater increase in their unemployment rates
than young men (Bell & Blanchflower, 2011; Verick, 2009). The main reason
young men’s employment was more affected is that the proportion of young
men employed by some of the most affected industries, such as construction
and manufacturing, is much higher than the proportion of young women.
OTHER LABOR MARKET-RELATED OUTCOMES
Employment outcomes must be understood in relation to other behavioral
dynamics, among them school-going and migration. On a potentially
positive note, the Great Recession spurred educational investments among
young people. Indeed unemployment rates may have been higher were it
not for those young people leaving (or delaying entry to) the labor market
to upgrades their skills and improve their chances of acquiring better
work positions. Studies in both the United States and the United Kingdom
indicate that enrollments in postsecondary education rose during the Great
Recession, as they generally do during times of higher unemployment
(Bell & Blanchflower, 2011). Investment in vocational education (VET, both
initial and continuing) was also promoted by several European educational
systems during the Great Recession. The proportion of students pursuing
a VET education was declining across the European Union even before
the crisis (especially in countries such as Germany, the United Kingdom,
and Denmark), and the recession did not reverse this trend (Heyes, 2014).
In order to promote VET enrollments, social security contributions were
reduced for employers interested in hiring apprentices, but the number of
companies providing training for young workers declined, diminishing its
effectiveness.
Immigration flows are also tied to labor market conditions, though it is not
yet clear what effect the Great Recession may have had on migration rates
of young people around the world. Immigration inflows (all ages) declined
between 2008 and 2009 in the United States and European Union after a
period of substantial growth (Papademetriou et al., 2011). As emigration is
selective by age, it is likely that rates declined for young adults substantially. There is variation across nations, and Ireland in particular saw net
emigration in 2009 for the first time since 1995, while young educated natives
in Greece, Spain, and Portugal also appear to be emigrating at higher rates
(Bell & Blanchflower, 2011; Papademetriou et al., 2011). Emigration became
increasingly more likely for both skilled and unskilled young Portuguese
8
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
workers facing a precarious labor market as well (Carmo, Cantante, & Alves,
2014). Emigration may have kept youth unemployment lower than it otherwise would have been.
PROMISING RESEARCH DIRECTIONS
What have governments done to assist young workers during the crisis and
how well have they worked? Many countries in the OECD area responded
to youth’s plight in the Great Recession by designing programs focused
on employment (Bell & Blanchflower, 2011). Countries such as Germany,
Spain, and Sweden reduced social contributions for employers and their
young employees, whereas the United States invested in the expansion of
tax credits for companies hiring youth and other disadvantaged groups
(unemployed veterans, for example), and also providing funds for training
in high-demand industry sectors. In the United Kingdom, however, funding
for a program to create temporary jobs for chronically unemployed youth
(Young Person’s Guarantee) was drastically reduced not long after its
creation, as part of an austerity program introduced by the Coalition Government’s conservative agenda. Reduction of the fiscal deficit was believed
to be more effective in reducing adverse labor market consequences for
youth than specific policies targeting their employment levels. Additional
research is needed to assess the effectiveness of the various policies and
programs implemented in the wake of the recession for improving the labor
market outcomes of youth. It is particularly important that we consider what
can be done to move discouraged workers into employment as a part of this
effort. More research is also needed to assess whether increased schooling
spurred by the poor economy will pay off as young people anticipated.
Educational institutions may have to some extent successfully warehoused
an excess supply of labor, but it remains to be seen whether benefits to that
schooling accrue to the individual and the economy more generally.
Key questions also arise about the labor market experiences and future
prospects of youth under dramatically different contexts. In particular,
our knowledge of how young people in developing countries have been
affected by the Great Recession is very limited. According to the United
Nations Population Fund (UNFPA, 2014), there are 1.8 billion young people
(10–24 years old) in the world, and approximately 90% of them live in
developing countries. Clearly this means that we know very little about
the way the vast majority of the youth population is affected by economic
downturns. Besides the unemployment rate trends compiled by the ILO,
scarce empirical evidence on the effects of the Great Recession show that
young workers in developing countries were affected as much as their
counterparts in developed nations, presenting not only increasingly higher
The Great Recession and Young Adults’ Labor Market Outcomes around the World
9
levels of unemployment but also underemployment and inactivity (Cho
& Newhouse, 2012). In addition to a better accounting of trends worldwide, we need to augment recent scholarship attending to comparisons
of school-to-work structures and social welfare policies among advanced
industrial economies with research that attends to a wider range of institutional contexts and youth populations with widely varying levels of
inequality. What kinds of employment policies, school-to-work structural
adaptations, and social investments better met the needs of youth? We also
need to examine processes of potential “scarring” and other labor market
dynamics in less developed nations that research in more developed nations
suggests impose long-term penalties on youth transitioning to adulthood in
tough economic times. Do young people in less developed economies suffer
the same scarring effects? Are the mechanisms involved similar?
Pulling together these two themes (lack of policy evaluation and lack of
attention to less developed economies), it is especially striking how little is
known about how governments in developing economies have helped youth
to fight the deterioration of their labor market position, which policies have
been effective, and what the consequences have been for other social welfare programs. To the extent that one spell of unemployment increases the
chances of further spells, an increasing proportion of youth experiencing
long or repeated unemployment spells may increase dependence on government support. Panel studies, which have been used to investigate scarring
and other processes in more developed countries, are much less available in
developing countries, making it more difficult to address such questions. For
similar reasons, we also know less about young people’s experiences during
the recession in less developed economies from a dynamic or life course perspective; population rates (e.g., unemployment) can mask great variation in
the experience of repeat episodes, duration of episodes, and job trajectories
that may be critical to evaluating institutional structures and public policy.
It is strongly anticipated that youth unemployment rates will continue
at current levels for years to come. The ILO projects stable rates through
the end of this decade (ILO, 2015), and, in a few countries, new cycles of
economic recession are promoting rising unemployment for young people.
In Brazil, for example, a recent recessionary period following the end of the
Great Recession, caused mainly by fiscal problems and political uncertainty,
has led to higher levels of unemployment and idleness. In South Africa,
youth unemployment is still on the rise, reaching almost two-thirds of the
youth population. Other developing economies, however, have shown signs
of stability (such as Mexico and Ukraine) or recovery (such as Colombia and
Chile). Research is needed to understand how institutional differences, as
well as family arrangements, in these countries interact with the way youth
and their families respond to the economic challenges from the recession.
10
EMERGING TRENDS IN THE SOCIAL AND BEHAVIORAL SCIENCES
What enables young people to fully take part in recovery in less developed
economies, and what puts them at higher risk?
Around the world research is also needed on how the Great Recession
shaped the aspirations, achievement orientations, strategies, and life outlooks of adolescents and young adults that find their way into employment
outcomes, as well as family behavior and political action. Economic downturns may have the ability to undermine youth’s confidence and outlooks
to the future, which could, in turn, affect their educational and occupational
prospects in the long run.
Finally, we need to know much more about migration flows among young
adults and their effects on unemployment rates and wages in both sending
and receiving nations as well as the impacts on the labor market outcomes
of immigrant youth. The greater movement of people around the world is a
key characteristic of globalization and we do not yet have a good picture of
what changed with migration flows, even temporarily, with the worldwide
recession. What happened to young people in particular is important, given
their greater mobility and the crucial stage at which they are with respect to
their life trajectories.
Over the next few years, more research will be able to document the full
extent of the Great Recession’s impact on youth’s labor market experiences,
as well as its effects on other markers of the transition to adulthood. In doing
so, special attention is needed to include the experiences of youth in understudied parts of the world. Variations in institutional context and culture
should be at the forefront of our research agenda, along with evaluations
of how effective programming and policy efforts are helping youth navigate
such difficult economic times.
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ARNALDO MONT’ALVAO SHORT BIOGRAPHY
Arnaldo Mont’Alvao is an assistant professor of sociology at the Institute for
Social and Political Studies (IESP), Rio de Janeiro State University (UERJ), in
Brazil. His research focuses on educational stratification, transition to adulthood, and life course.
MONICA K. JOHNSON SHORT BIOGRAPHY
Monica K. Johnson is Honors College distinguished professor and professor
of sociology at Washington State University. Her recent research examines
families’ and young people’s adaptations to the changing nature of the transition to adulthood.
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