Arnold Kling raises the issue that youth unemployment has risen disproportionately during the recession. He raises three stories and says only one makes sense – his third story:
- Sticky wages,
- Shift in demand/technology
- His PSST story – where it is taking time for entrepreneurs to utilise labour/match skills following a structural shock.
This is all well and good, but there is a massive story missing here. Young workers require training, and have no prior experience with which to base their quality on – they are a “risky investment”.
Firms pull back on investment during times of uncertainty and distress, as a result we would expect to see youth unemployment rise disproportionately around the globe.
That is why its always made sense to me to have skill training as part of any unemployment program, so that an unfortunate recession that leads to the exclusion of part of the labour market only has a limited long-term impact – without this type of intervention we run the risk that the young people suffering from misfortune today have permanently lower income as a result!