BY DEBOLEENA RAKSHIT
Deboleena Rakshit is an IDEV student concentrating in Development Economics at SAIS and a Senior Editor at Perspectives. She is passionate about creating meaningful economic opportunities for young people and women in low-resource contexts.
Why should we care about youth unemployment?
Young people face unique barriers to employment that exclude, delay or confound their access to decent work opportunities. Globally, someone between the ages of 15 and 24 is three times as likely to be unemployed as an older member of the workforce. Entry-level jobs in manufacturing are often filled by younger workers and are usually the first to be replaced by robots. Young people also face protracted school-to-work transitions that delay their entry into the workforce – their lack of experience makes them less able to identify desirable career paths while simultaneously rendering them less employable. Young people are deemed a high-risk category by lending institutions and find it more difficult to get loans, despite evidence demonstrating the power of entrepreneurship as an effective pathway out of poverty.
The challenge of youth unemployment varies greatly by socio-economic and geographic contexts. Youth from better off households might continue to wait for the right jobs while surviving on family support. Yet such delayed entries into the workforce can nonetheless significantly reduce lifetime earnings and career development prospects. Alternatively, for young people from lower-income households, waiting for the ideal job is not an option. Many thus end up in the informal sector with poor work conditions and little to no social protection. In Africa, a “youth bulge,” or a fast-growing youth population, combined with an existing refugee crisis has resulted in a failure to address the obstacles to youth employment, which in turn exacerbates risky migration, political violence, and often tragic losses to life.
What role do the IFIs play in addressing youth unemployment?
The global scale of this challenge requires coordinated international response. The risks posed by youth unemployment are international in nature; risky and forced economic migration and rising political disaffection can have ripple effects across borders. Before asking what the international financial institutions (IFIs) should be doing about unemployed youth, it’s worth answering if they should be playing any role at all. The short answer is: absolutely. The challenge of creating decent work for youth is multi-faceted and requires coordination on a global scale between governments, aid agencies, educational systems, and the private sector. Policy responses that build pathways to meaningful economic opportunities for youth are wide-ranging. They can include entrepreneurship promotion through support for small-and-medium enterprises (SMEs), revamping education systems to be more market-demand-driven and implementing active labor market policies (ALMPs) that incentivize employers to hire more young people.
The IFIs are uniquely positioned to embrace the youth employment agenda. The IFIs’ access to resources, evidence-building capacities and ability to coordinate policy make them the right players to address the challenge of youth unemployment. Further, the recent push from donors to invest in projects with greater social impact and in lower-income countries, presents an opportune moment to pivot toward more youth-centered development projects in fragile contexts where youth unemployment rates remain high.
What have the IFIs done for youth employment so far?
Different strategic approaches include mainstreaming job creation, reforming education systems and building markets. The African Development Bank (AfDB) recently released its 2016-2025 Jobs for Youth in Africa (JfYA) strategy which focuses on mainstreaming job creation for young people in its various economic sectors. The Asian Development Bank (AsDB) instead approaches youth employment from an education systems reform perspective. For example, its Education by 2020 plan emphasizes the need for reform in the Technical and Vocational Education and Training (TVET) sector in the Asia Pacific region, recommending internship and training programs that are more closely linked with wider economic and labor policies and market demand. Further still, the International Financial Corporation (IFC) has a more comprehensive approach to job creation. It focuses on both training youth for work and on creating the investment climate required to promote more hiring of youth in low-resource contexts.
The extent to which the IFIs’ current portfolios are dedicated to youth employment outcomes is difficult to gauge. None of the three reviewed IFIs classify their portfolios in terms of projects with a youth employment focus. Comparisons are thus difficult to make and involve some imagination. For instance, AfDB projects that include goals related to “youth and skill development” in their names account for 13% of the total funds committed through project approvals in 2017. AsDB is the only IFI among the three to share outputs and outcomes for youth employment specifically. However, in laying out its portfolio, it groups all such projects under the broad heading of “education,” which represents about 4% of its total operations as of 2017. It is difficult to calculate the IFC’s current investments in youth employment since it does not disaggregate project data by age and does not have an explicit youth focus in its employment programs (except in the Middle East). However, over the past decade, the IFC has provided advisory services for over 10 projects related to youth, amounting to 6 million USD or 0.5% of its portfolio. In sum, it is difficult to make credible comparisons on actual funds committed to youth employment by the IFIs.
So, how can the IFIs better address the issue of youth unemployment?
Youth-centered interventions, more transparent data sharing, peer learning and thoughtful impact measurement present a promising course of action. Without an explicit focus on youth outcomes, projects tend to be misclassified, making comparative analyses over time and across regions or institutions impossible. Further, disaggregating project data by age and gender will enable more nuanced analyses of impact and strengthen comparisons across time and region. Each IFI has followed a different approach to addressing youth unemployment; among these approaches, “supply-side” mechanisms, like skills training, and “demand-side” mechanisms, like incentivizing employers, have both seen success. Promoting institutional dialogue between these peer organizations could potentially yield efficiency gains by helping institutions learn the benefits and drawbacks of specific approaches in different regions without having to pilot each individually. Finally, measuring job creation impact can be complex in development projects. Thoughtful impact assessments thus should aim to capture long-term outcomes, such as improvements in quality of work and youth employment levels over time. These are crucial to developing better informed policies in the future and tackling the burgeoning issue of youth unemployment.
 ILO 2017, 1.
 WB 2019, 20.
 IEG 2013, 2.
 IEG 2013, 5.
 IEG 2013, 4.
 AfDB 2016, 12.
 Horton et al. 2018.
 OECD 2019.
 “AIMM: Will IFC Hit?”
 ILO 2017, 18.
 AfDB 2016, 13.
 AsDB 2010, 4.
 IEG 2013, 123.
 Calculation author’s own using keywords in English and French on youth issues, tertiary education, skill development, and job creation. Data from AfDB 2018.
 AsDB 2017.
 IEG 2013, 19.
 Some ideas have been developed by the Solutions for Youth Employment (S4YE) coalition. Romero 2017.
African Development Bank (AfDB). 2016. Jobs for Youth in Africa: Strategy for Creating 25 Million Jobs and Equipping 50 Million Youth 2016-2025. Accessed online April 15, 2019. https://www.afdb.org/fileadmin/uploads/afdb/Documents/Boards-Documents/Bank_Group_Strategy_for_Jobs_for_Youth_in_Africa_2016-2025_Rev_2.pdf.
African Development Bank (AfDB). 2018. “Data Portal.” African Development Bank Group. Accessed online April 10, 2019. http://projectsportal.afdb.org/dataportal/VSectorProject/list.
“AIMM: Will IFC Hit Rights-Based Development Target?” Bretton Woods Project. March 27, 2018. Accessed online April 15, 2019. https://www.brettonwoodsproject.org/2018/03/aimm-will-ifc-hit-rights-based-development-target/.
Asian Development Bank (AsDB). 2010. Education by 2020: A Sector Operations Plan. Mandaluyong City, Philippines: Asian Development Bank. Accessed online April 15, 2019. http://dx.doi.org/10.22617/FLS189307.
Asian Development Bank (AsDB). 2017. “Total ADB Operations by Sector.” Accessed online April 15, 2019. https://data.adb.org/sites/default/files/ar2017-total-adb-operations-sector-region-2017.pdf.
Horton, S., Helena Molina, Ammar Khalid, and Mae Patteera Chaladmanakul. 2018. Unlocking Finance for Young Entrepreneurs: Evidence from a Global Stocktaking. SME Finance Forum. [Draft Version]
Independent Evaluation Group (IEG). 2013. Youth Employment Programs: An Evaluation of World Bank and International Financial Corporation Support. Washington, DC: World Bank. Accessed online April 15, 2019. doi: 10.1596/978-0-8213-9794-7.
International Labour Office (ILO). 2017. Global Employment Trends for Youth 2017: Paths to a Better Working Future. Geneva: ILO. Accessed online April 15, 2019. https://www.ilo.org/global/publications/books/global-employment-trends/WCMS_598669/lang--en/index.htm.
Organisation for Economic Co-operation and Development (OECD). 2019. “Active Labour Market Policies.” OECD. Accessed online April 15, 2019. http://www.oecd.org/employment/activation.htm.
Romero, Jose Manuel. “Measuring youth employment projects: What can we learn from each other?” Jobs and Development. November 21, 2017. Accessed online April 20, 2019. http://blogs.worldbank.org/jobs/measuring-youth-employment-projects-what-can-we-learn-each-other.
World Bank (WB). 2019. World Development Report 2019: The Changing Nature of Work. Washington, DC: World Bank. Accessed online April 15, 2019. doi:10.1596/978-1-4648-1328-3.