Thursday, May 9, 2013

Misinterpreting youth unemployment rates

Unemployment rates in the EU27 and EA17 have rightfully being front and centre.  They are unacceptably high.  One sub-category that gets considerable attention is the “Youth Unemployment Rate” for those aged 16 to 24 but it is also one that is subject to significant misinterpretation.  Here is President Higgins at a conference in Trinity College back in January as reported by The Irish Times:

“As President of a country that is a member of the European Union I am so conscious of the discourse that concentrates entirely on the security of the currency, but is happy to leave aside the question of an enormous wedge of the population that are unemployed – 55 per cent of people between 18 and 24 in some countries.”

Some youth unemployment rates are as high as 55% but that does not mean that 55% of people in this group are unemployed.  Unemployment rates are calculated as a percentage of the labour force; not the total population.

Here are the youth unemployment rates in the EU at the end of 2012.

Youth Unemployment Rate

At 27%, Ireland is among the worst performers and the over-50% rates of Spain and Greece are clearly evident.

There are 5.6 million people in the EU27 aged between 16 and 24 who are unemployed leading to the youth unemployment rate of 23%.  Per comments like those from President Higgins this would be interpreted as meaning that almost 1-in-4 people in this age group are unemployed.  Not so. There are 56.7 million people aged between 16 and 24 in the EU.

The youth unemployment rate as a percentage of the total number of people in the age group is 10%.  This is unacceptably high but a rate of 1-in-10 is significantly different to a rate of 1-in-4.  The reason for the difference, of course, is that a huge proportion of young people are not in the labour force – they are in education or training.  In Ireland the proportion of people aged between 16 and 24 who are unemployed is 11%, compared to the unemployment rate of 27%..

Here is a chart that gives the number of 16 to 24 years old who are unemployed as a percentage of the labour force and as a percentage of the population.

Youth Unemployment Rate

It is still an ugly picture with rates for the population measure ranging from 3.8% in Germany to 20.5% in Spain.

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