Labour Markets, Institutions and Inequality

Labour Markets, Institutions and Inequality

Building Just Societies in the 21st Century

Edited by Janine Berg

Labour market institutions, including collective bargaining, the regulation of employment contracts and social protection policies, are instrumental for improving the well-being of workers, their families and society. In many countries, these institutions have been eroded, whilst in other countries they do not exist at all.

Chapter 14: Labour market inequality between youth and adults: a special case?

Gerhard Reinecke and Damian Grimshaw

Subjects: development studies, development economics, economics and finance, development economics, labour economics, social policy and sociology, labour policy

Extract

Inequality between youth (defined here as persons aged 15 to 24 years old) and adults is a key characteristic of labour markets worldwide. In almost all countries, the youth unemployment rate is more than twice the adult rate, the risk of precarious conditions of employment tends to be higher and wages tend to be lower. Moreover, during economic crises, young workers are disproportionately affected because of their precarious labour market integration. In the absence of effective policy intervention and decent labour market opportunities, the difficulties faced by young people are likely to mushroom into wider problems for economy and society, with several countries during the current economic crisis warning of a lost generation, undermining countries’ growth potential and routes out of poverty (Scarpetta et al., 2010; ILO, 2013). Nevertheless, unlike other types of inequality analysed in this book, inequality between youth and adults is not necessarily undesirable per se: for example, higher unemployment rates might reflect an unavoidable process of ‘job shopping’ as part of the transition between the educational system and the labour market, at least in countries with a significant formal labour segment. Moreover, lower wages may be a seemingly fair reflection of young people’s relatively limited work experience and on-the-job training. At stake, therefore, is the question of what level and forms of labour market inequality ought to be tolerated and what types of institutional interventions are most appropriate in the particular country context.

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