INDUSTRIAL COUNTRIES: THE YOUTH UNEMPLOYMENT PROBLEM

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• Collection: General CIA Records
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• Document Creation Date: December 19, 2016
• Document Release Date: February 14, 2007
• Sequence Number: 2
• Publication Date: July 1, 1982
• Content Type: REPORT

ppro_ved For Release 2007/02/16: CIA-RDP83B00851 R000100C ntial
rectorate o
Intelligence
Industrial Countries:
The You Unemployment
Problem
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GI 82-10134
July 1982
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Directorate of Confidential
Intelligence
Industrial Countries:
The Youth Unemployment
Problem
An Intelligence Assessment
Information available as of 15 June 1982
has been used in the preparation of this report.
The author of this assessment is
of the Office of Global Issues. Comments and queries
are welcome and may be directed to the Chief,
Economic Analysis Branch, OGI
Confidential
GI 82-10134
July 1982
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Confidential
Industrial Countries:
The Youth Unem to ment
Problem '
Key Judgments Rapidly expanding youth population and slow economic growth have
elevated youth unemployment to record levels in almost all foreign
industrial countries. The problem is particularly serious in Western
Europe, where unemployment among young people-those 15 to 24 years
old-accounts for about 40 percent of total joblessness. The high level of
overall unemployment is often cited by West European government
officials as a reason for the inability to support US policy initiatives,
particularly on East-West issues.
Although circumstances differ from country to country, a number of
general factors have led to the rise in West European youth unemployment.
Most important among these:
? The size of the West European youth population has increased sharply,
rising by some 2.5 million during 1976-80.
? The number of jobs available to this group, rather than increasing, has
declined by nearly 1.2 million positions since the mid-1970s, including
750,000 jobs lost last year.
Even if economic recovery gets under way soon, the impact on youth
joblessness will be delayed; this group tends to be the first fired and last
hired because of a lack of skills, experience, or seniority.
The youth unemployment problem in Western Europe should ease around
1985, when the youth population begins to decline in most countries. Given
demographic patterns now in train, the youth population by 1990 will be
3.7 million less than in 1985. Only in West Germany will this translate into
substantially less unemployment. At the other extreme, in Spain and
Portugal, where youth unemployment is already very high, the number of
young people will continue to rise throughout the 1980s.1
Japan faces a much different future on the youth employment front.
Specifically, the youth population will swell during the 1980s, sharply
reversing the decline that occurred in the 1970s. Tokyo should have little
trouble dealing with the reversal in youth demographic trends, however,
because the adult population will decline. The shift to a younger labor
force, according to Japanese trade officials, will help underpin the move to
high-technology industries. F7 I
' Data used as the basis for this analysis are taken from official statistical yearbooks and
from two publications of the Organization for Economic Cooperation and Development,
Labor Force Statistics (Paris, 1981) and Demographic Trends 1950-1990 (Paris, 1979).
Confidential
Gf 82-10134
July 1982
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Confidential
Industrial Countries:
The Youth m I ment
Problem
Youth Unemployment Trends
After remaining roughly constant at 3 million persons
during the 1960s, youth unemployment in the devel-
oped countries rose sharply in the early 1970s (see
figure 1 at end of text).' By the mid-1970s the number
had reached 6.4 million; almost all of this increase
occurred during the 1974-75 recession years. Despite
the economic expansions that characterized the devel-
oped countries through most of the 1976-80 period,
youth unemployment failed to subside. Youth unem-
ployment again surged during the current recession;
the number of unemployed in the 15- to 24-year age
bracket will probably surpass 9 million this year. This
age group now accounts for about 40 percent of total
industrial country unemployment.
The number of unemployed youth stands at record
levels in all of the major industrial countries (figure 2):
? The United Kingdom has the worst problem with
more than 1 million unemployed youth, 20 percent
of the youth labor pool.
? France and Italy each have over half a million
unemployed youth, about double the 1975 number.
? West Germany and Japan each have some 300,000
unemployed youth; about 5 percent of the youth
labor force.
? In the United States and Canada, youth unemploy-
ment stands at nearly 15 percent.
In many respects the problem is more serious in the
smaller industrial countries, especially those in south-
ern Europe. Last year the number of unemployed
young people in Spain was more than 1 million-
nearly 35 percent of the youth labor force and over
one-half of total unemployment.
Underlying Factors
The youth unemployment problem has been driven by
several factors, including demographic trends and the
pace of job creation (tables 1 and 2). In the developed
' The countries included in this analysis are the United States,
Japan, Canada, Australia, West Germany, France, the United
Kingdom, Italy, Austria, Finland, the Netherlands Norway, Portu-
gal, Spain, Sweden, and Switzerland.
Figure 2
Youth Unemployment Rates, 1981'
Spain
Portugal
France
United Kingdom
Italyb
United States
Canada
Netherlands
Australia
Finland
West Germany
Norway
Sweden
Japan
Austria
Switzerland
aYouth aged 15 to 24, aged 15 to 30 in Austria and S
bAdjusted for comparability.
countries as a whole, the number of people in the 15-
to 24-year age bracket in 1981 was 113 million, up
from 108 million in 1975, according to the Organiza-
tion for Economic Cooperation and Development
(OECD). In the United States the number of jobs held
by people in this age bracket increased by 3.0 million
from 1975 to 1981. Outside the United States the
number of jobs held by this age group declined by 2.5
million. Youth participation rates-that proportion of
the youth population seeking employment-leveled in
Western Europe and dropped less sharply in Japan,
adding to the youth unemployment problem.
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Industrial Countries: Changes in
Youth Labor Force and Determinants
United States
Labor force 6,221.4
Population 10,367.0
Participation rate 0.4
(percent change) a
Japan
Labor force 464.9 -2,877.9 -1,163.8
Population 3,233.9 -2,703.8 -995.6
Participation rate -1.3 -3.1 -1.9
(percent change) a
Western Europe b
Labor force -904.3 -567.5 903.5
Population 5,643.4 1,652.7 2,455.7
Participation rate -1.6 -1.1 -0.3
(percent change) a
-409.7 708.4 1,063.2
-2.2 -0.8 -1.3
Western Europe. In several key countries in Western
Europe, the central factors in rising youth unemploy-
ment have been the accelerated growth of the youth
population and a shrinking job market. Western
Europe's youth population increased by 2.5 million
during the 1976-80 period, although French and
Italian youth populations declined slightly. The num-
ber of young people looking for work has also been
boosted by a leveling off in West European participa-
tion rates. Youth participation rates declined sharply
through the mid-1970s, partly as the result of an
increased proportion of young Europeans staying in
school (table 3); this trend apparently changed in the
late 1970s. Female participation rates are probably
also rising more rapidly. In the case of Italy, rising
participation rates meant that the youth labor force
increased during 1976-80, despite a decline in the size
of the youth population.
Labor force 655.0 -313.0 -269.6
Population 2,627.4 271.3 -53.7
Participation rate -2.1 -2.1 -1.3
(percent change) a
United Kingdom
Labor force 312.0 -277.0 727.0
Population 1,057.0 -91.0 840.0
Participation rate -0.6 -0.9 0.8
(percent change) a
Participation rate -3.:3 -2.7 1.7
(percent change) a
On the employment side, the number of jobs held by
young people in Western Europe declined by some
400,000 during 1976-80, even though real economic
growth averaged 3 percent annually. The steepest
decline-a loss of 500,000 youth jobs-occurred in
France, where government policy was designed to
reduce excess employment in government and indus-
tries. As a result, youth unemployment rose sharply
despite the small decline in youth population between
1976 and 1980. Spain experienced a similar job loss.
The West European joblessness problem worsened
last year when real GNP fell and roughly 750,000
youth jobs were lost. Spain, the United Kin dom, and
West Germany were the biggest losers.
Japan. In contrast to the trend in Western Europe, the
size of Japan's youth population declined sharply
during 1976-80. By the end of the period, it was 3.7
million below the 1970 population. The drop com-
bined with a decline in youth participation rates to
push the youth labor force to 4 million persons below
r
25
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Table 1 (continued)
Industrial Countries: Changes in
Youth Labor Force and Determinants
Labor force
148.0
-36.0
-43.0
Population
192.2
-53.5
-55.7
Participation rate
(percent change) a
1.1
-0.3
-0.6
Netherlands
Labor force
211.0
-159.0
-67.0
Population
667.4
49.4
120.4
Participation rate
(percent change) a
-1.8
-2.9
-2.1
Norway
Labor force
18.0
4.0
11.0
Population
140.7
-3.6
0.8
Participation rate
(percent change) a
-2.2
0.4
0.7
Portugal
Labor force
17.4
255.6
99.0
Population
-93.5
242.1
93.0
Participation rate
(percent change) a
0.9
2.4
0.7
Labor force
390.0
138.1
12.0
Population
607.6
308.9
580.7
Participation rate
(percent change) a
0.2
-0.2
-1.9
a Average annual percent change.
b Western Europe including West Germany, France, the United
Kingdom, Italy, Austria, Finland, the Netherlands, Norway,
Portugal, Spain, Sweden, and Switzerland.
Confidential
Labor force
107.9
-19.0
15.0
Population
148.9
-114.5
40.3
Participation rate
(percent change) a
0.3
1.5
-0.3
Labor force
69.8
-106.8
-82.2
Population
129.7
-8.9
34.3
Participation rate
(percent change) a
-0.4
-3.2
-3.7
Participation rate
(percent change) a
0.0
1.9
1.8
Labor force
429.0
129.0
125.6
Population
739.0
208.0
131.0
Participation rate
(percent change) a
-0.7
-0.1
0.4
the 1970 level. These youth labor force trends made it
easier for Japanese industry to continue its lifetime
employment practice, despite slower economic growth
in recent years
Government Reactions
Nearly every developed country government has tak-
en steps to mitigate the impact of the rising youth
unemployment of the 1970s (table 4). The most
frequently encountered youth assistance programs are
designed to bolster employment either by direct job
creation in the public sector or through subsidies and
allowances to the private sector. Youth programs in
Western Europe generally utilize the private sector to
a much greater extent than do those in North
America:
? West German employers have been required to
increase the number of apprentice positions or face
an additional tax and a loss of authority over the
apprenticeship system.
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Industrial Countries: Changes
in Youth Employment a
United States 5,619.0
Japan 469.0
Western Europe NA
West Germany -1,407.2
France 635.2
United Kingdom 159.0
Italy -649.5
Austria NA
Finland NA
Netherlands NA
Norway
Portugal
Spain
Sweden 31.9
Switzerland 70.5
Canada 666.0
Australia 257.5
a Youth aged 15 to 24, aged 15 to 30
in Austria and Switzerland.
2,815.0 2,544.0
-2,918.9 -1,156.0
-1,643.1 -401.9
2.0 352.0
-600.9 -527.9
-443.0 350.6
-500.9 92.9
119.1 62.5
-40.0 -61.0
-160.6 -73.4
1.0 11.9
201.6 -40.0
-88.9 -488.7
-25.0 5.0
-107.5 -85.8
460.0 298.7
7.8 58.2
? Under the current French Employment Pact, em-
ployers can be exempted from social security taxes
for new hires under 26 years old.
? In the United Kingdom, small employers in "special
development areas" are given a 26-week subsidy for
newly created jobs.
? The governments of Finland and the Netherlands
will finance 12 months of private employment;
Canada, Australia, Norway, Spain, Sweden, and
Switzerland will pay full or partial tabs for work
lasting from two to six months.
The West European employment projects that have
proven most popular are subsidized jobs in small
service-sector firms.
Most countries have also devoted some effort to
easing the transition from school to work. Japanese
employers submit their hiring plans in advance to the
Public Employment Security Offices, and up to 90
percent of all students have prearranged jobs before
leaving school. France's "stages of enterprise" pro-
gram helps students acclimate themselves to a work
environment by providing on-the-job training before
graduation. Guidance facilities have been upgraded in
several countries, particularly the Scandinavian coun-
tries, Switzerland, the Netherlands, Spain, and Can-
ada. Moreover, unique "outreach" programs in the
United Kingdom and Sweden enable employment
department officials to meet with young people in
sports clubs, cafes, and other gathering places.
The Netherlands and the United Kingdom have pub-
licized commitments to provide every young person
with a job, a place in training, or higher education. In
the United Kingdom, for example, any summer or
Easter school-leaver who remains unemployed by the
following Easter is to be offered a place in the Youth
Opportunities Program. Finland, Norway, and Swe-
den have implemented similar experimental "youth
guarantee" programs. These programs are unlikely to
lower youth unemployment significantly, however,
because of their temporary nature and limited fund-
ing.
Youth Unemployment in the ]1980s: Western Europe 3
Western Europe will experience rising youth and total
unemployment during the next few years before shifts
in demographic trends get fully under way and begin
to alleviate. the situation in the second half of the
decade. Through about 1985, youth population will
continue to rise in nearly all 'West European coun-
tries, although at a slightly slower pace than in 1976-
80 (figure 3 and table 5). If late 1970s trends in youth
labor force participation and youth labor usage (the
ratio of youth employment to real GNP) continue,
' To assess potential youth unemployment in the 1980s, we have
used a scenario approach incorporating the relatively certain
demographic trends and alternative assumptions of GNP growth,
the pace of youth job creation, and youth participation rates. This
analysis is available on request.
25
25X1
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Rates of Enrollment in Full-Time Education
for Teenagers and Young Adults a
West Germany
34.7
47.5
48.1
6.9
10.2
12.4
France
32.5
45.2
53.2
7.3
9.6
11.7
United Kingdom
16.6
33.9
44.6
4.9
6.1
7.7
Italy
18.7
31.6
43.3
4.9
8.6
16.8
Canada
49.2
64.9
66.4
7.0
14.1
14.5
Australia
36.6
38.6
44.4
1.2
3.0
5.4
Austria
NA
21.1
24.9
NA
6.6
10.7
Sweden
36.9
56.0
57.1
15.5
16.1
14.4
Switzerland
33.1
67.9
68.2
4.0
10.9
13.9
a Sources: Educational Statistics in OECD Countries (Paris, 1981),
and Reubens, B. G. and others, The Youth Labor Force 1945-1995,
(Allanheld, Osman Publisher, New Jersey, 1981).
West European real GNP would have to increase by
more than 6 percent a year from 1982 through 1985
just to maintain the present 16-percent youth unem-
ployment rate. Since actual real growth during the
period is likely to be barely half that amount, youth
unemployment could well top 5 million persons, or
more than 20 percent of the labor force, by 1985.
Total unemployment could top 12 million persons
France, Portugal, and Spain will likely face the
highest levels of youth unemployment in the next few
years. France's youth unemployment will increase
despite a declining youth population, unless the rate of
total and youth job creation turns around sharply
from its pace of the past several years. By 1985, these
three countries would have to create an additional
550,000 jobs for young people to keep youth unem-
ployment at present levels; in 1976-80 employment of
youth fell by over 1 million in these countries, despite
a drop of only some 150,000 in youths looking for
work. The United Kingdom and Italy also face rough
sledding, given youth population patterns and the
difficulty both countries have creating jobs.
Even if economic recovery begins fairly soon, any
favorable impact on youth employment will be de-
layed. In addition to the generally lower skills and
experience of levels of youth, union agreements in
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Industrial Countries: Public Programs
To Alleviate Youth Unemployment a
Public Service
Employment (450,000
participants).
Youth Community
Conservation and
Improvement Corps
(34,000 participants).
Young Adult
Conservation Corps
(70,000 participants).
Youth Incentive
Entitlement Pilot
Projects (37,000
participants).
Summer Youth Program
(901,000 participants).
Ninety percent of
compulsory school
graduates acquire
further general or
vocational training.
Dual system involves
simultaneous on-the-job
and classroom training.
Special vocational
training is available for
those not accepted for
normal training and who
are unemployed (15,000
participants).
Combined welfare,
counseling, and leisure
facilities for young
people.
Public Employment
Security Offices make
over a million
placements annually.
Youth wage determined
by prefecture; usually a
small fraction of adult
wage.
First year apprentices
receive 20 percent of the
adult wage rising to 30
percent in their third
year.
Apprenticeship Service. Youth Incentive
Tax credit for Work Entitlement Pilot
Incentive Program Projects provide jobs, but
(WIN). participants must remain
in school. Job Corps
program. National
Preapprenticeship
training.
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Experimental
Community Projects
(one-year subsidy; 5,000
participants).
"Stages in enterprise"
(work experience; 70
percent subsidy and
social security
exemption; 120,000
participants).
Exemptions from social
security charges (new
hires under 26; 135,000
participants).
Employment and
training contracts
(subsidies for training
new employees; 12,000
participants).
Special Temporary
Employment Program
(13,000 participants).
Community Industry
(6,000 participants).
Youth Opportunities
Program. Community
Service and Project-
Based Work Experience.
Youth Opportunities
Program (training
courses followed by work
experience on employer's
premises for six months).
Countercyclical support
for training. Small Firms
Employment Subsidy
(26-week subsidy). Job
Introduction Scheme
(primarily for disabled;
2,000 participants).
Youth Opportunities
program. Unified
Vocational
Preparational courses.
Training for skills
program.
Federal Youth Job Corps
(13,000 participants).
Job Exploration by
Students (nine-week
partial subsidy; 5,000
participants).
Job Experience Training
(50-percent subsidy for
26 weeks; 41,000
participants).
Canada Manpower
Industrial Training
Program (74,000
participants).
Employment Tax Credit
Scheme.
Work experience
programs and vocational
training.
National Employment
Pact stresses jobs but
offers a variety of
subsidies, training
contracts, mobility
grants, and
apprenticeship; stresses
employment by artisans
and small-scale
industries. Youth
minimum wage, about
70 percent of adult
minimum, received at
age 18.
Youth typically start at
60 to 75 percent of adult
wage, determined by
collective bargaining.
Adult wage received at
21.
Employment Act of 1977
(youth provisions not
implemented).
Computerized vocational
guidance assistance at
Canada Employment
Centers. Minimum wage
determined by province;
differential varies from 5
to 13 percent; adult
minimum received at 18.
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Table 4 (continued)
Industrial Countries: Public Programs
To Alleviate Youth Unemployment a
Community youth
support and volunteer
youth program (48,000
participants).
Employment subsidies to
local authorities (42,000
participants).
Extra office jobs for
youth (1,000
participants).
Temporary jobs scheme
(100-percent subsidy for
six months).
Additional job creation
program (4,000
participants).
Special Youth
Employment Training
Program (45,000
participants). National
Employment and
Training for long-term
unemployed (900
participants).
Financial support for
additional
apprenticeships.
Experimental Work
Experience (5,000
participants).
Subsidies to the private
sector for 12 months of
employment for
apprentices (6,000
participants).
Temporary junior
workers wage subsidy
(one-year subsidy; 2,000
participants).
Subsidy for apprentices
(1,400 participants).
Thirty-percent wage
subsidy for long-term
unemployed (400
participants).
"Individual work places"
program (2,000
participants).
"Individual work places"
program (lump sum
subsidy for 13 weeks of
employment).
Revised support for
apprenticeship.
Youth employment
promotion program and
training assistance (75-
percent social security
remission; 101,000
participants).
Commonwealth Rebate
for Apprenticeship Full-
Time Training (tax
exempt rebate to allow
employees to train full-
time during working
hours; 85,000
participants).
Basic literacy training
(6,200 participants).
Additional 10th year of
school for those not
admitted to vocational or
secondary schools and
who would otherwise be
unemployed.
Increased vocational
school capacity. _
Training subsidies for
unemployed apprentices.
Subsidy for training
jobseekers.
Grants for special course
for unemployed (1,000
participants).
Expanding vocational
training programs.
Vocational guidance
system for young
persons.
Special unemployment
benefits for persons
under 16; full benefits
over 16 with no time
limit.
Two-year experimental
program to guarantee
work, school, or training
to all youths.
Fifteen-year-olds receive
40 percent of adult age;
proportion increases by
age until 23.
"Youth Guarantee"
program to ensure those
under 20 of an
opportunity of further
education or
employment; emphasis
on vocational training.
1975 law guarantees
youth 50 percent of the
adult minimum wage.
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ton idential
Table 4 (continued)
Relief work (41,000 Relief work (75-percent
participants, including reimbursement for six
private sector). months).
Labor Market Training
(temporary jobs).
Fifty-percent subsidies
for temporary work on
environmental projects.
a Source: OCED; numbers of participants, where available, are the
most recent annual numbers; participants in these programs are
Toyed in labor statistics.
most major European industries require that former
employees be rehired first. In the Big Four West
European countries, youth employment during the
early stages of the 1976-80 economic expansion trend-
ed much less favorably than total employment. Youth
employment declined by 200,000 in 1976-77, for
example, while employment of older workers rose by
100,000 jobs
Demographic factors should provide relief for West
European youth and total unemployment situations
beginning around 1985. By that time the youth
population will be declining in most West European
countries. In West Germany the decline will begin in
1984 and will be substantial; in the second half of the
1980s, West Germany's youth population will decline
by 2 million to a level 20 percent below the 1985
population. In Italy, the United Kingdom, and to a
lesser extent, France, declining youth populations
should also ease youth unemployment pressures. In
Spain and Portugal, however, the youth population
will continue to grow; this population pressure com-
bined with slow job creation could result in the kind of
substantial labor migration to northern Europe that
Courses on working life
and education.
Study grants for
unemployed.
Labor market
information and
vocational guidance.
Lengthening of
compulsory education to
10 years in some canons.
Vocational guidance
system.
Unemployment benefits
for school-leavers out of
work for three months.
"Youth Guarantee"
program subsidy for
employers to train
school-leavers.
Apprentices receive less
than 20 percent of the
adult wage.
occurred in the 1960s. By 1990 the total youth
population of Western Europe will be 3.7 million
below the 1985 mark and 2 million below the 1980
level.
These trends will influence overall unemployment in
West European countries:
? West German total unemployment should peak in
the next year or two and then decline sharply
through 1990 as the declines in youth population
override accelerated growth in adult population.
? If the British and Italian economies recover from
their present recession to achieve growth rates of
about 2 percent and 4 percent, respectively, in-
creases in overall unemployment levels should end in
those countries around mid-decade.
? Of the Big Four West European economies, France
faces the bleakest post-1985 outlook for total as well
as youth unemployment. French population in-
creases in the 25- to 54-year age bracket will
accelerate after 1985.
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Figure 3
Changes in Youth Population
Million Persons
?
76-80
81-85
2
2
2
85-90
0
0
0
-2
-2
-2
-4
-4
? Examination of overall population trends for Portu-
gal and Spain show little relief elsewhere in the age
structure to offset the expected continuation of their
already severe youth unemployment situations. In
fact, the adult population in both countries will
grow more rapidly after 1985 than before.
Youth Unemployment in the 1980s: Japan
The outlook for unemployment in Japan is in many
ways the opposite of that in Western Europe. Rather
than declining, Japan's youth population will increase
sharply. Between 1980 and 1985, the number of
Japanese young people will rise by 800,000; bf tween
1985 and 1990 an additionai increase of 1.9 million
will occur. Thus, to keep youth unemployment con-
stant at the present low level (5 percent of the youth
labor force), some 1.5 million job openings will have to
be created for Japanese young people over the course
of this decade.
A roughly commensurate decline in the adult popula-
tion will alleviate Tokyo's problem of dealings with the.
reversal in youth demographic trends. Specifically,
the 25- to 54-year-old adult population will actually
decline by 3 million persons in the 1980s, after having
risen by 6 million in the 1970s. Consequently, Tokyo
could keep its unemployment problem under control
during the 1980s by creating: jobs at a pace similar to
that of the second half of the 1970s. The age structure
of Japanese employment will, have to be shifted,
however, away from the 25- to 54-year-old workers
toward younger and older workers
Policy Implications
Rising youth unemployment through the mid-1980s
will continue to put pressure on almost all foreign
industrial countries, particularly in Western Europe.
Specifically, aggressive expansionary policies to alle-
viate the effects of rising joblessness would run the
risk of generating new inflation and would require
additional outlays from already strained budgets. As
it is, total government spending in Western Europe is
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Industrial Countries: Changes in
Youth Population a
United States
1,590.0
-1,588.8
-3,526.7
Japan
-995.6
756.1
1,898.5
Western Europe
2,455.7
1,596.5
-3,661.5
West Germany
1,063.2
215.0
-1,981.7
France
-53.7
-17.2
-194.4
United Kingdom
840.0
519.5
-761.4
Italy
-312.1
414.8
-247.1
Austria
104.5
45.3
-177.2
Finland
-55.7
-51.4
-84.2
Netherlands
120.4
61.9
-215.4
Norway
0.8
23.0
1.8
Portugal
93.0
111.9
58.9
Spain
580.7
211.2
38.4
Sweden
40.3
46.0
-3.1
Switzerland
34.3
16.5
-96.1
Canada
192.0
-235.5
-455.1
Australia
131.0
139.3
-6.3
a Demographic Trends 1950-1990, OECD, Paris, 1979. Youth aged
15 to 24 years.
the equivalent of 45 percent of GNP; the lion's share
of these outlays are for social programs. The large
deficits facing most countries mean that increased
spending to fight youth joblessness will have to be
offset by cuts in other areas. At a minimum, pressures
to increase spending for social programs are apt to
strengthen the position of those who argue for smaller
defense outlays.
We are uncertain about how and to what extent rising
youth unemployment in the near term will affect the
political process in Western Europe. We believe that
social strains, attributable at least in part to youth
unemployment, played a role in Mitterrand's victory
over Giscard and are factors in the increasing polar-
ization in the West German political arena. The
resiliency of Spain's weak democratic government
may also be tested by the continuing high levels of
youth unemployment. Fears of major social disruption
stemming from high youth joblessness, however, ap-
pear to have been largely overplayed, at least in the
past.
For the next few years, West European governments
will continue to use their unemployment problems in
general, and youth problems in particular, as a reason
for not supporting US policy initiatives, particularly
on East-West issues. West German and French oppo-
sition to more restrictive credit policies already draws
heavily on the argument that neither country can
afford to lose jobs associated with goods exported to
the Soviet Union. The employment problem also
provides much of the impetus for protectionist pres-
sures. Unless the next economic upturn generates
substantially more employment opportunities than the
previous one did, these pressures are apt to intensify.
High-employment industries-steel, automobiles, and
textiles, for example-will be the chief focus of
protectionist sentiment.
In the latter 1980s the shift in West European
demographic trends will be felt most strongly in West
Germany, where the possibility of labor shortages
cannot be ruled out. In this environment Bonn will
have substantially more flexibility in formulating
domestic and foreign economic policy than the gov-
ernment now appears to have. On the domestic front, 2
Bonn will be well positioned to adopt expansionary
economic policies, but only if the country is willing to
accept relatively large numbers of guest workers, as it
did during the 1960s. We are not confident that
reduced unemployment will translate into greater
West German support for US policy initiatives on
East-West issues. The arguments used by Bonn,
however, will have to change. In most other West
European countries, particularly France, Spain, and
Portugal, unemployment problems will merely be
alleviated, at best.
The Japanese, for their part, expect that economic
growth will be sufficient to provide employment op-
portunities for the expanding youth labor force. Given
the drop in their 25- to 54-year-old labor force, they
may well be correct. The Ministry of Trade and
Industry maintains that the growing youth population
will provide a large pool of workers available at low
wages for Japan's expanding high-technology indus-
tries.
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A key factor pushing youth unemployment in West-
ern Europe has been the extremely slow pace of job
creation. Besides slower economic growth, the rigid
structure of labor costs contributed to this problem.
Employers are saddled with fringe benefit expenses-
including levies for social security, sickness, and
unemployment pay-that are generally higher in
Western Europe than in Japan or the United States.
In a large West German company such as Krupp, for
example, these indirect wage costs exceed the cash
paid to each worker. Because of problems like these,
the gain in total West European employment between
1975 and 1980 was only 500,000 positions in contrast
to a Japanese increase of over 3 million and a US
increase of over 12 million.
For a variety of reasons, the youth population has
suffered most from the poor West European job
market. A primary factor has been the particularly
weak performance of traditional manufacturing,
which employs large numbers of semiskilled youth.
Beyond this, legislated or collectively bargained
worker protection rules-such as in Italy and Swe-
den-have discouraged employers from hiring new
entrants because discharging them is difficult. Rela-
tively low youth wages are preventing even larger
declines in youth employment. West German and
Swiss apprentices, for example, receive about 20
percent of the adult minimum wage their first year
and about 30 percent by their third year. Otljer West
European countries usually pay workers under 21
between 50 and 75 percent of the adult minimum
wage.
European governments, following the Japanese lead,
are increasingly pinning their hopes for future jobs on
the development of high-technology industries. With
this in mind, governments have begun to pump more
money into research and development despite
strapped budgets. The Mitterrand government, for
example, has ordered a substantial increase in spend-
ing on research and development as a means of
fostering growth of the country's high-technology
industries. Government officials believe that the ex-
pansion of these research-intensive sectors will stimu-
late growth in other industries, enhance French com-
petitiveness, and boost employment.
30,758.0 28,820.2
579.1 461.6
1,932.4 1,945.9
4,060.0 3,357.6
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 Figure 1
Industrial Countries: Unemployment Rate Trends'
Percent of Labor Force
Legend -
Unemployment 40
Rate:
(Age 15 to 19)
Young Adult
(Age 20 to 24)
Total
(Age 15 to 64)
~ I ~ I I I~ I III Ii~I~ II
10 10 to la
111 11 111111111111111 II 1111111
0 1960 65 70 75 80 0 1960 65 70 75 80
Bill 11 I I I I Ii'I liii I
0 1960 65 70 75 80
United Kingdom Italy
Netherlands
I I I I I I I I I I I I I I I I I I I II
0 1960 65 70 75 80
0 1960 65 70 75 80 0 1960 65 70 75 80 1960 65 70 75 80 0 1960 65 70 75 80
10
I I, ,IIcy
0 1960 65 70 75 80
aComplete data for the 1960s were unavailable in Japan, Italy, the United
Kingdom, Finland, Portugal, and Switzerland; missing data points
were interpolated.
bData include all unemployed persons under age 30.
586913 7-82
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