Global youth unemployment soars. China’s rate is at an all-time high. More problematic is the little-known Nietzsche rate, which measures the percentage of young people not in employment, education or training.
The rising nicht rate should sound alarm bells everywhere. It has crept up by more than 20 percent globally, a level not seen in nearly two decades. According to the International Labor Organization, even when jobs are offered, they are often of the wrong kind, low-paying and mostly informal.
Affordability comes to mind as I send my son to school in the middle of a construction boom in southern Athens. I wondered about my young neighbor, who had just earned his doctorate and had just accepted a part-time position as an entry-level restaurant manager. “It’s better than no job at all,” she said.
This downgrading of jobs is a form of economic trauma, and even when the economy recovers, the quality of employment declines. Scarring is common in low-income economies. Developed economies, including parts of the United States, have not been spared.
The risks are greatest for the poorest and most vulnerable economies, such as Niger, Yemen and Somalia, where soaring nits rates have led to catastrophic economic and social consequences. Now, excessive food and energy prices have exacerbated the situation.
In an era of multiple shocks, higher niti rates further embed severe vulnerabilities. This is true for monolithic, resource-dependent and gender-imbalanced economies. Globally, 32% of young women are Neet, compared to about 15% of young men. The Neet gap in South Asia is staggering, with 53 percent of young women compared to 6 percent of young men.
The economic consequences of this imbalance are clear. Rising Neet rates will trigger productivity shortfalls, leading to the so-called middle-income trap. When countries are not productive enough, the economy as a whole can never reach higher income levels. Compare the economic dynamism of Ireland and South Korea with the chronic turmoil of Mexico and Argentina.
Digitalization and the “platinum economy” jobs that come with it could reverse the trend of rising global nits. High-tech jobs are more than just a job. According to economist Enrico Moretti, for every new high-tech job added, cities generate five additional non-tech jobs.
However, digital access rates remain alarmingly low in several emerging economies, especially in rural areas, including large economies such as India. Digital innovation is also fickle for workers, as it can depress wages, rapidly shift work assignments or lay off workers altogether.
Policymakers are taking note. South Korea has proposed its New Deal for Humanity, which aims to address the impact of its energy transition and greater digitalization on the labor market. It aims to do so primarily by providing training and insurance for non-standard forms of employment.
Ultimately, success in reducing Neet rates will depend on the circumstances. For some economies, such as Mexico and India, improving the investment climate for foreign companies – and the knowledge spillover they bring – will be aligned with prioritizing education. While Greece could devote more effort to its think tank sector so that PhD graduates can innovate.
Improving education and labor market outcomes to spur innovation and productivity is critical. Without further understanding and addressing Neet rates, growth and well-being will stagnate.
Increased financial volatility, rising borrowing costs and geopolitical turmoil could mean a succession of multiple shocks ahead. In this context, the Neet rate is an important indicator of widespread vulnerability among young people and an important barometer of the well-being of the next generation.
