Youth Unemployment and the 'Invisible Hand' - A Case for a Social Measure of Unemployment

Abstract

This paper considers the relationship between youth unemployment, the 'invisible hand', and increasing youth dependency. Empirically, it shows that conventional measures of unemployment often conceal more than they reveal. This is because they are based on labour force participation rates which differ both between different age, sex, and ethnic groups, and across time; and because the analyses are usually cross-sectional. The paper argues that such measures contribute to (i) superficial interpretations of the causes of youth unemployment (and unemployment in general); (ii) misleading impressions of the degree to which each group is exposed to (that is, 'carrying' the consequences of) unemployment; and therefore can lead to (iii) inappropriate policy responses. An alternative population-based index is proposed, and a more illustrative cohort perspective of unemployment is given. In combination with a brief review of associated demographic factors, the results place in doubt the current wisdom of permitting the 'invisible hand' to manage contemporary unemployment.