The Real Problem With Europe's Youth Unemployment

It's been a record year in Europe, for all the wrong reasons.

Unemployment rates passed 25% in some countries,  and were not much better for many others. Among European youths, statistics went even higher for many nations, and yet youths went relatively overlooked by the media compared to the rest of the mess. These trends inflict damage on the demographic's skills, work experience, and psyche, and young people in the U.S. might not be far from a similar situation.

The numbers and the newcomer
The wave of youth unemployment comes as a result of the eurozone's second recession in three years, and the European labor force is expected to decline by 50 million people within the next 50 years.

According to a recent study from Eurostat, Greece, Spain, and Portugal have been hit hardest by the wave of youth unemployment, all facing 35% to 55% unemployment rates. While the rest of the Continent reported more optimistic figures, most countries listed rates exceeding 8%, which is still by no means ideal.

Portugal is a newcomer to these unfortunate superlatives, jumping from 31.4% in 2011 to 39.1% this October . The country's austerity has led approximately one-fifth of Portugal's graduates to leave the country in search of work elsewhere.

The remaining Portuguese youth population must face several harsh truths about their country: Only 28% of all working-age adults have finished high school, and the country is reportedly the least qualified in the entire international Organisation for Economic Cooperation and Development, or OECD. Losing its most qualified youths to countries such as Brazil -- where many Portuguese graduates are reportedly moving -- is the last thing Portugal needs if it hopes to recover.

The state of Spain
Fifty-three percent of Spanish youths are unemployed. Take a moment to digest this. Of the country's entire population aged 15-24, more than half of them don't have jobs. Since 2008, this figure has nearly tripled, and morale has become dangerously low.

Last year, the International Labor Organization warned against the potentially severe consequences that mass youth unemployment could entail, including an increase in crime rates, drug use, and mental health issues, like depression. Unfortunately, it appears that the rest of the country still has yet to find a solution, which means statistics could get worse before they get better.

Ode on a Grecian economy
Greece has borne the brunt of the European unemployment outbreak. The country most recently reported that 55% of its workers aged 15-24 were not employed. Look back only a few years, and the country starts to resemble one of its own tragic heroes -- it had been doing so well, until suddenly everything became so, so bad. Economic growth reached 5% in 2006, slowed to 3% in 2007, and then the bottom dropped out.

Now, with companies like German pharmaceutical distributor Merck KGa pulling their deliveries of cancer drugs to Greece , and the country's strongest companies like Coca Cola Hellenic (NYSE: CCH  )  fleeing to find safety abroad, the national stage is starting to look like the final act in a Sophocles play. To try to avoid this, the Greek government is contemplating drastic austerity measures and loan repayments that critics argue are at best dubious and, at worst, unconstitutional. The country has a long way to go before it can get out of the woods.

Response from the EU
The European Union unveiled a plan to rectify youth unemployment at the beginning of December . Based on models from Finland and Austria, the "youth opportunity initiative" is designed to guarantee jobs for young people up to age 25 who have graduated from formal education within the past four months. The EU has reserved 4 million euros for the project, and officials hope the program will be able to have as many as 2 million young people working by 2014.

Are we next?
It doesn't take a degree in economics to know that unemployment hurts an economy. Would-be workers spend less because they earn less (or nothing), and a country's financial workings and GDP suffer as a result. That much is easy to see, but many of unemployment's effects can't be predicted by textbooks, like the full extent of a country's unrest, or its capacity for protest and violence. As fellow Fool contributor Dan Carroll noted in a recent article, civilian disorder in Europe has recently become catastrophic.

Is the United States that far off from this same level of turmoil? Comparatively, the U.S. youth unemployment rate is a relief, at 17.1%, compared to Greece's 55% and Spain's 53%. However, the proportion of Spain's youth to its population size is much smaller than that of the U.S. Spain may have 53% unemployment, but only 30% of its youth population is looking for work, compared to 55% of U.S. youth . The numbers might be smaller, but we actually have more youths in need of work than Spain does.

The proposed changes for Europe could be beneficial for the U.S. unemployment situation. Some experts also believe that employing fresh-out-of-school students in jobs requiring 80% of a normal work schedule could build experience for young workers, while also saving money for struggling companies.

One strength our country also has going for it is its manufacturing reputation. The jobs in this sector can be a tremendous boon for U.S. youth, as well as the country's overall economy, and companies like Vishay Precision Group (NYSE: VPG  ) have steadily beaten the S&P 500 this year, as has solid dividend stock Hillenbrand (NYSE: HI  ) . 

In the free report, "The Future Is Made in America," our Foolish experts take an in-depth look at how the U.S. manufacturing industry could become one of the world's greatest investment opportunities before long, as well as three companies that could benefit the most from it.


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