The IMF’s lack of vision on youth unemployment

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The International Monetary Fund (IMF) recently published a Staff Discussion Note on youth unemployment in Europe, which remains one of the most pressing problems in the region.

 
 

According to the IMF, youth unemployment stood at an average 23 per cent in the Euro Area in mid-2014, after increasing continuously since the onset of the crisis.

It is also the region in which the IMF has been most active in recent years as one of the Troika partners (the others being the European Central Bank and the European Commission).

In its discussion note, the IMF acknowledges that the critical cause of the surge of youth unemployment was the dramatic collapse of output, explaining up to 70 % of the job destruction for young workers in vulnerable crisis countries.

Furthermore, the analysis points out that jobs for young worker are concentrated in sectors which are highly dependent on consumption and more sensitive to the business cycle. Those industries include the retail and wholesale sector, restaurants and hotels as well as manufacturing.

According to the IMF, youth unemployment rates are “on average almost three times as sensitive to output growth as adult unemployment rates”.

Given this, one would expect a strong case for a reversal of the IMF and Troika policies that have been applied over the last five years, including the lowering of worker’s protection and cuts in social spending.

The IMF’s harsh reforms have failed to alleviate the social catastrophe of high overall unemployment. Even more alarming, the IMF obviously lacks any new vision of how to deal with youth unemployment and suggests rather “more of the same”.

The IMF fails once again to follow a logical and coherent approach.

The paper is not much more than a reinforcement of outdated stylised facts, with little corroboration from serious research. It does not even differentiate, in most cases, between the effects that certain labour market institutions are supposed to have on overall versus youth unemployment.

Regarding collective bargaining, for example, the authors argue that the effect on overall unemployment is “mixed or inconclusive”. At the same time, they praise the positive effects of the German dual vocational training system arguing that “The government and business community share costs and work together to constantly improve the system.”

This completely ignores the role and impact of trade unions and collective bargaining in developing quality apprenticeships.

In this discussion note, the IMF has proven once again its inability to base its policies on serious, evidence-based analysis and to change direction from the neo-liberal agenda that has caused so much pain for numerous young people in Europe who have lost their jobs.