Alarming rise in unemployment rates in Asia and the Pacific

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Alarming rise in unemployment rates in Asia and the Pacific

Saturday, 30 September 2023 | Sunil Goel/ Dimple Khokhar

The rising unemployment across the world can have serious consequences on the world economy and security

As per the recent report of ILO Global Employment Trends for Youth 2022: Asia and the Pacific, the unemployment rate of young people aged between 15 and 24 years in Asia and the Pacific is estimated to have reached 14.9 per cent in 2022, which is the same as the global average. While that rate represents a decrease from the rate of the previous year (15.5 per cent), it remains higher than the pre-pandemic benchmark of 13.3 per cent in 2019.

Beyond the regional aggregate, there are important divergences between sub-regions and countries in the evolution of unemployment rates and other labour market indicators. In both Southern and Eastern Asia, youth unemployment rates in 2022 are projected to be higher than the pre-pandemic benchmark by less than 1 percentage point, whereas in Southeast Asia and the Pacific, the corresponding rate is projected to be higher by 2 percentage points. In Sri Lanka, which is currently experiencing balance of payments and sovereign debt crises, youth unemployment in the second quarter of 2021  was at 30.0 per cent, whereas in Vietnam, which is benefiting from diversification strategies of global value chains as COVID-19 lockdowns in China persist, the corresponding rate for the same quarter was 5.5. per cent.

Young men in the region face substantially higher unemployment rates (16.0 per cent) than young women (12.7 per cent). However, when examining a more comprehensive measure of labour underutilization, that is, the combined rate of youth unemployment and potential labour force (termed the LU3 rate), the gap between men and women diminishes, pointing to young women having higher potential labour force rates than young men.

The proportion of youth not in employment, education or training (NEET) also jumped in the region as a result of the pandemic, rising by 1.5 percentage points to reach 24.8 per cent in 2020 – higher than the global average of 23.3 per cent. Whereas NEET rates are almost 2.5 times higher for young women than for young men, the pandemic served to increase the NEET rate among men (by 2.1 percentage points) more than among young women (a rise of 0.7 percentage points), thereby decreasing the gender gap in the NEET rate. This development was driven by trends in South Asia, where the male NEET rate increased by 2.7 percentage points compared to 0.9 percentage points for young women.

Deteriorating economic conditions in the first half of 2022 are likely to further increase the NEET rate among young people in the region, with potential long-term scarring effects on employment trajectories and incomes of affected individuals. The gender gaps in NEET rates are closely related to those in the labour force participation rate (LFPR) and the employment-to-population ratio (EPR). Young women in Asia and the Pacific experience much lower LFPRs and EPRs: the LFPR for women in the region in 2022 is projected to be 26.3 per cent, compared to 46.6 per cent for young men, while 23.0 per cent of young women in the region are projected to be in employment compared to 39.1 per cent of young men. Southern Asia, at 29.9 percentage points, has the highest LFPR gender gap in the region.

In Global Employment Trends for Youth 2022, the ILO used a macro-econometric model to quantify the economic and employment impacts of a number of policy measures for promoting inclusive and sustainable green, digital and care transitions. The macro-econometric modelling simulating the employment impacts of a package of green policy measures aimed at improving energy efficiency in buildings and appliances, decarbonizing electrical power generation through a shift to renewable energy, and expanding electric vehicles usage and the associated infrastructure (termed the “green scenario”) could, by 2030, create an additional net 8.4 million jobs worldwide for young people aged 15–29 years relative to a “business-as-usual scenario”, with Asia and the Pacific accounting for 5.8 million (or 69.0 per cent) of those jobs. Policy measures aimed at providing universal (90 per cent) internet broadband coverage (termed the “digital scenario”) in the region are projected to lead to a net increase of 2.1 million jobs for young people by 2030 relative to the baseline, accounting for a third of the global total. This lower global share compared to the green scenario is a reflection of the relatively smaller internet coverage gap in the region. Policy measures directed at increasing investments in health and social care provision and in education coverage with a view to meeting the relevant targets of SDG 3 (on health) and SDG 4 (on education) are expected to create an additional net 8.5 million jobs for young people in the Asia and the Pacific region by 2030 compared to the business-as-usual scenario. This represents almost half of the global total, highlighting the increase in care services coverage needed in the region. 

(Goyal is a columnist and Professor of DoHE, GoMP and Khokhar is a research scholar at RIMT university; views are personal)

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