By Prakarsh Jain

Discussion surrounding the subject of income inequality has covered many of the trend’s repercussions in recent times; including decreased cohesion, mounting slums, exploitation of labour, and enfeebled middle classes. Nonetheless, one effect has received little attention than others: youth unemployment.

Since the economic crisis hit the western world, unemployment has wheeled worldwide. In the developed countries, ~20% of people aged 16-25 are jobless. Although the rate in Germany remains relatively low at 9%, it stands at 16% in the US, 20% in the UK, and much above 50% in Spain. Middle East and North Africa also have high youth-unemployment rates, estimated at approximately 30% and 25%, respectively. By divergence, only 10% of young people in Eastern and Southern Asia are unemployed.

Policymakers have done very negligible to address the problem. Globe now risks creating what the International Labour Organization has called a “lost generation,” with global youth unemployment anticipated to reach 13% in the next couple of years.

For obvious understanding, there is no single factor driving this trend. For example, in China, youth unemployment is entrenched in the dominance of the manufacturing sector, which provides more opportunities for high-school graduates than university-educated.

Unemployment also stems from a market mismatch. For example, in nine of the European Union countries, ~75% of the educators who responded to a survey reported that fresh graduates are qualified to meet prospective employers’ needs, though ~45% of employers reported that candidates do not possess the required skills.

Whatsoever the factor underneath high unemployment, inequality unquestionably intensifies the problem. Many jobs, particularly the lucrative ones – are available almost exclusively to young people from wealthy backgrounds. For example, in the UK, only 10% of children attend private schools. However, roughly 50% of the chief executive officers, and ~70% of its doctors, have been privately educated. This fashion is expected to persist, with the next generation of doctors likely to be born into families that rank among the wealthiest 20%.

There are several imaginable reasons for this pattern. For beginners, high positions require the most prestigious educational background and that costs money. Moreover, internships, a prerequisite for the most attractive jobs are unpaid, making them unrealistic for graduates whose families cannot afford to support them.

Money is not the only requirement. In cases, desirable jobs and internships and even admission to top institutions are far more accessible to those who are within the employers’ personal or professional network. When the job market rewards, whom you know more than what you know, young people with well-connected parents have an obvious advantage.

Inherently biased recruitment aggravates this inequality further. While companies may, recognize the value of bringing together talent from a variety of experiences, they tend to employee candidates with familiar skills, and experiences. Even if someone with a different educational background or work experience manages to get face time with those responsible for hiring, they must overcome the perception that they are a riskier choice.

The fact that an academic result is the uppermost hiring criteria skews outcomes further. Individuals who had the privilege of receiving private education are likely to have attended more reputable universities than others. The small proportion of students from not as good as backgrounds who manage to gain admission and secure scholarships to top institutions often have lower rankings, particularly towards the beginning of their education, owing to their inferior preparation.

For a fact, financial limitations prevent many capable students from attending university at all, owing to their need to earn an income that only full-time employment can provide. As a result, their earning capacity is constrained, regardless of their talent or ethic.

In order to create an equal footing ground for everyone, employers should re-think their recruitment strategies and consider applicants based on a broader range of criteria. Businesses can only benefit from fresh perspectives that more diverse candidate pool would offer.

With financial status serving as the key determinant, young people from poorer backgrounds are becoming increasingly discouraged and this would be a situation that can lead to social unrest. Unless all young minds have genuine prospects of improving their social and economic status, the gap between poor and rich will continue to enlarge, creating a vicious cycle that will be increasingly difficult to escape.

The good news is that efforts to alleviate youth unemployment will reduce inequality. The society that emerges will be more stable, unified, and prosperous – an outcome in which everyone, rich or poor, has a stake.


Prakarsh Jain is a graduate in Commerce from Jai Hind College, post-graduate in Master of Global Business from S P Jain School of Global Management and a Chartered Accountant (CA). Currently, Mr. Jain is working with EduBridge Learning as Head of Finance. Previously, he was associated with Mizuho Securities, a wholly owned subsidiary of Japanese Investment Bank in Corporate Advisory team. In recent time, he has represented UAE at the KPMG International Case Competition (KICC 2013) held in Spain and acted as a delegate at the World Islamic Banking Conference: Asia Summit held in Singapore.

Posted by The Indian Economist | For the Curious Mind