Youth Unemployment and the Arab Spring

Rortybomb:

Is it useful to think of the Occupy movement more as a “left” movement or a “youth” movement?  To answer that question, it’s worth looking into data on the young, particularly as it relates to unemployment.
To leave the United States for a minute, one way people are trying to understand the Arab Spring is through the lens of mass youth unemployment and inequality.  Given how high unemployment has been in these MENA – Middle-East and North African – countries, what else could we expect besides revolution?
For instance, in early February then IMF chief Dominique Strauss-Kahn told a conference that ”this summer I made a speech in Morocco about the question of youth employment including Egypt, Tunisia, saying it is a kind of time bomb” and ”such a high level of unemployment, especially youth unemployment, and such a high level of inequality in the country create a social situation that may end in unrest.”  Here is the “youth unemployment” blog tag at the IMF to give you a sense of what people there have been saying about it.  In particular, they point out that it should be a major concern for the MENA and African regions.
Interestingly enough, there’s good research showing concern even before mass protests broke out.  Regional IMF officials Ratna Sahay and Alan MacArthur gave a January 23rd presentation - Challenges for Egypt in the Post Crisis World -  at the Egyptian Center for Economic Studies in Cairo (h/t WSJ).  Protests would begin a few days later.  Here’s a key slide from that presentation:

Part of you may want to immediately start getting your first-world privilege on.  Maybe you are furious at terrible, unresponsive, corrupt governments ignoring the plights of their populations.  Maybe you think that if these countries only had neoliberal, “flexible” wage contracts and a leakier safety net like we have in the United States then unemployment would be much better.
You may then head over to our monthly unemployment numbers and note that American youth unemployment is in the same ballpark as these MENA countries.
Let’s get some data going.  I’ve taken numbers from the IMF presentation slide above, and compared them to United States youth unemployment averages from January 2010 to October 2011 from the BLS’ CPS data.

I can’t find what ages are used for youth for “youth unemployment” in the IMF’s definition, and I’m not even sure if it is consistent across the different countries they estimated.  As such, I’m including ages 16-19 and ages 16-24, though I believe they are more likely looking at 16-24.  For 16-19, we are at the same level of youth unemployment for Egypt and well above the region as a whole.  At the broader 16-24 range, we are above Syria and Morocco, which both saw large-scale movement in the Arab Spring.

One potential explanation for the high level of youth unemployment in MENA countries is that they have huge demographic issues to deal with – they have a massive wave of people under 35 years of age to assimilate into their economics.  What’s our excuse...

Remember the increase from the 1960s onward reflects women entering the labor force.  And notice how it doesn’t improve after the early 2000s recession.  Every age group has seen a substantial drop in the employment-population ratio during this Lesser Depression, but no other group I’ve seen comes close to this plummet.  For the first time in half a century, a majority of young people aren’t working.

Via Brad Delong:

Is Regulatory Uncertainty a Major Impediment to Job Growth?: If regulation was a significant drag on business today, we would expect to see profits constrained after recent regulatory reforms were passed into law.  However, corporate profits as a share of gross domestic income have about recovered their pre-recession peak, and earnings per share in industries most affected by recent regulatory changes, such as energy and health care, have among the highest earnings per share of those in the S&P 500.  This growth is inconsistent with a corporate sector held back by regulation…. If regulatory uncertainty was the primary problem facing businesses, firms would prefer to use their existing capacity and current workers as much as possible, while avoiding building additional capacity until they are more certain about the contours of future regulation…. [T]hey would increase the hours of the workers they already employ rather than hiring additional workers.  We have seen no evidence of this…. Low capacity utilization is inconsistent with concerns about future regulatory risk, but aligns with weak demand holding back current production….
Since the end of the first quarter of 2009, real investment in equipment and software has grown by 26 percent – about five times as fast as the economy as a whole….

If regulatory uncertainty were having a significant impact on business performance, we would expect this to be reflected in capital markets.  However, financial indicators do not provide any evidence in favor of this hypothesis…. [C]orporate bond yields are low across a range of industries, suggesting that firms in industries facing greater regulatory risk, such as insurance and energy, are not being priced out of the market….
One commonly cited measure of uncertainty is the Chicago Board Options Exchange Market Volatility Index (known as the VIX), which measures the implied volatility of S&P 500 index options.  For most of the past year or so, the VIX has stood only a bit higher than in the pre-crisis period…. [T]he sharp increase in the VIX in August and previous sharp increases in late 2008 correspond to virtually identical movements in the VDAX, a similar measure calculated for the German stock market.  The correlation between these two indicators suggests that uncertainty in both countries primarily reflects global financial and economic conditions, rather than conditions specific to the United States, such as regulatory changes….
In an August survey of economists by the National Association for Business Economics, 80 percent of respondents described the current regulatory environment as “good” for American businesses and the overall economy. As noted above, in a recent Wall Street Journal survey of economists, 65 percent of respondents concluded that a lack of demand, not government policy, was the main impediment to increased hiring…