Employing and training youth could generate 1.2 trillion

26 October 2015 Consultancy.uk

Youth unemployment remains an issue across developed economies. In some, more than half of those aged 20-24 are not in employment, education or training (NEET). In a recent index from PwC, the firm looks at how youth employment engagement has changed since 2005, finding that the situation declined significantly in Spain and Italy. For the UK, reducing the NEET rate to that of the best-in-region has the potential to add £55 billion, while for the 34 countries together an additional $1.2 trillion would be generated.

Since the 2008 economic crisis, the youth in the world’s developed countries have faced an uphill battle securing a place for themselves within their respective economies. In many countries youth unemployment skyrocketed, leading pundits to talk about a ‘lost generation’. The consequences for those out of employment for a length of time come with negative effects on future employability, productivity and broader life chances – exuberating further conditions such as crime, drug abuse and critically questioning the system. 


Levels of unemployment vary considerably across various developed countries however. Germany’s youth (15-24) unemployment has fallen to below pre-crises levels to 8%, while in Spain and Greece levels have jumped to above 50% in recent years. Furthermore, the number of youth (20-24) not in employment, education and training (NEETs) stands at 10% in Germany, Switzerland and Austria, while being above 30% in Turkey, Italy, Greece and Spain.

In a study by PwC, titled ‘PwC Young Workers Index’, the professional services firm ranks 34 developed economies in terms of their levels of youth economic engagement. The index is developed from 8 variables, including NEETs (20%) and employment rate 15-24 (20%). The data is then used to explore in how far disengagement is costing the relevant economies relative to high performers like Germany in the long term.

Top and bottom index ranks

Top and bottom ranked
The top ranked country on the index is Switzerland. The country has been in the number one position since 2006, enjoying high levels of youth employment, low NEET rate and low school dropout rates. Germany comes in at number 2, up from number 8 in 2006. Austria also continues to score well, at the number 3 spot since 2011 and up one spot on its 2005 ranking. On the other end of the scale are Spain, Greece and Italy. These countries continue to present high levels of unemployment among youth, at 53% in Spain, 52% in Greece and 40% in Italy. Long term unemployment (15-24) is also a considerable issue in the bottom three, standing at 60% in Italy and 40% in Spain.

The UK comes in above the average across the 34 economies, at number 21. Youth unemployment stands at around 20%, with a similar NEET rate. The long-term unemployment rate stands at 30%, highlighting that many young people have become trapped.

Ranking movement

Some countries have been able to improve their lot considerably in recent years. For instance, Israel jumped from 32nd spot to 9th in the past decade, while Poland has moved up 8 spots. On the other side of the spectrum, Ireland dropped from 7th place to 29th place, while Spain is up from 19th to 33nd. The UK has remained relatively stable, moving down one spot from 20th to 21st.

Economic benefit
The analysis considers how changes to the NEET rate for 20-24 year olds might affect the long term individual earnings outcome, and therewith, overall economic activity. Based on an economic study by York University for the UK National Audit Office, the consultancy estimates that the present value of lifetime economic gains from a person being moved out of the NEET category might be around £140,000 at 2015 earnings levels. Dropping the NEET rate from the UK’s around 20% to Germany’s 10% would add an additional 3% to the UK’s GDP or £55 billion at 2015 GDP values. The value would be built across a long time period as youth are helped into work.

Economic benefit of moving out of NEET

For other countries, improvements to NEET scores could greatly improve respective economies. Italy could stand to gain an additional 8% of GDP, while Greece would be boosted by 7.8%. The US could see gains of 2.9% while already high performing economies, such as Norway and Sweden would see gains of 0.2% and 0.9% respectively. Across all of the 34 countries considered, a total economic boost of $1.2 trillion could be realised.


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