The Jobless Generation

Alex Rodríguez Toscano thought he had prepared himself well to compete in the 21st century. For five years, the Spanish economics major studied hard at Madrid's University of Carlos III, taking the most complicated mathematics courses and polishing the three foreign languages he speaks. But after graduating in February 2011, Rodríguez discovered that even those desirable qualifications mean little in today's distressed global economy. For eager college grads in crisis-hit Spain, where more than half of all young people are out of work, finding a job is almost impossible. Rodríguez has tried his best, sending 88 résumés to organizations that might require some economics research, but he hasn't gotten a single offer. "There are so many applications from so many people with master's and doctorates, people who have been doing this much longer," he complains. "Why would they hire me?" To bring in a bit of cash, Rodríguez takes catering jobs and tutoring assignments, but his earnings are not enough for him to survive on his own. Forced to live with his parents, Rodríguez, 25, worries that his lot might never improve. Being young and unemployed "makes you desperate," he says. "Desperate."

Tens of millions of other young people around the world feel exactly the same way. Creating jobs for the up-and-coming generation has become one of the most urgent problems facing policymakers worldwide. From Milan to Manila, Seattle to Santiago, the global economy is failing to provide good job opportunities for college graduates and others entering the workforce for the first time. After getting slammed during the 2008 — 09 financial crisis — when the global youth unemployment rate posted its largest increase on record — young workers are discovering that their job prospects remain bleak three years later. Young people in the world's richest nations got hit the hardest. Persistent recession and budget cutting have brought the situation to crisis proportions in some developed countries — like debt-burdened Greece, where youth unemployment is over 51%. Over the past two years, the share of Americans ages 18 to 24 who are employed, at only 54%, is the lowest on record, according to a recent study by the Pew Research Center. In 2007, more than 62% were employed. The International Labor Organization (ILO) figures that 75 million people ages 15 to 24 are unemployed globally — or 2 out of every 5 jobless — and there is little hope of significant improvement. Without action, this army of young jobless could become "a lost generation," warns Gianni Rosas, the Geneva-based coordinator of the ILO's Youth Employment Programme. "We are in a situation where our kids are worse off than we were 20 years ago," he says. "We are going backward."

The longer the youth job crisis persists, the more severe the consequences will be for the global economy, in both developed and developing nations. Instead of nurturing the labor force of the future, the world is creating an underclass of millions of disaffected workers who lack the skills necessary to support growth for decades to come. For advanced economies, where high costs make the development of top-notch talent even more critical, the damage to competitiveness could hamper these countries' ability to contend with emerging rivals like China and India. In aging societies, especially in Europe and Japan, youth unemployment makes the burden of funding health care and pensions for retirees even heavier, since the number of taxpaying workers is curtailed and the cost of benefits that governments must provide increases. That puts more strain on governments already buried under debt. Youth unemployment's most potentially lethal consequence: unemployed youths are more likely to engage in terrorist activities and crime, studies have shown. "If you have a growing number of people left behind, there is a cost for society," says Anne Sonnet, senior economist at the Organisation for Economic Co-operation and Development, a Paris-based intergovernmental group. "You run the risk of a jobless generation disconnected from society."

The crisis now facing the world's young people has been brewing for some time. Although in many countries the jobless rate for youth has consistently been much higher than for the overall population, policymakers in both advanced and emerging economies have generally failed to address the problem. They are paying the price today. The Great Recession has elevated youth unemployment from an unfortunate social ill to a major threat to future economic and political stability in many parts of the world. Violent riots in London and other cities in the U.K. last year were, in part, the result of disenchantment among young men over miserable economic prospects. In the Middle East, where youth unemployment rates, often about 25%, are routinely among the highest in the world, persistent joblessness is a key source of the rage that sparked the Arab Spring. If the new leaders in the region can't create more jobs for young people, it could descend into a debilitating cycle of violence. "If you don't restore hope," says Ahmed Heikal, chairman of Cairo-based private-equity firm Citadel Capital, "we will be in a bigger problem. Another Tahrir Square."