Social unrest ‘has important economic consequences,’ IMF economist says

IMF Economist (Worldwide Youth Unemployment) Philip Barrett joins Yahoo Finance Live to discuss the correlation between youth unemployment and social unrest and how social factors can impact the global economy.

Video transcript

[AUDIO LOGO]

- And something that has gotten a lot of attention this week, Rochelle, and we're going to keep the conversation focused on youth unemployment worldwide. From Asia to Europe and the Middle East, those numbers have continued to tick higher with Arab states seeing the fastest rise of unemployment in the youngest workforce. The lack of jobs have fueled mass protests, just like we saw in China this week. But our next guest says a poor job outlook doesn't always equal unrest.

Joining us now to explain is Phillip Barrett. He is IMF Economist. Philip, good to talk to you today. Let's start by looking at these numbers.

It's certainly noticeable when you look at a place like China, more than 20% unemployment among the youngest. As we mentioned, Arab countries even higher. What's led to that?

PHILIP BARRETT: Hi, good morning. It's a pleasure to speak to you. One of the things that we've seen in recent years is, as you mentioned, a pickup in youth unemployment and part of that's been related to the pandemic and the scarring that we've seen from that. Obviously, the interruption of things like education and so forth during the pandemic have hit countries, particularly hard, where there is less infrastructure for delivering that sort of education in alternate forms.

- And we have seen that when it comes to economic slowdowns, it is younger people who tend to bear the brunt of it first and deepest as well. But I want to ask you, because you're saying that there's not a straightforward link between sort of economic and social conditions and the unrest.

PHILIP BARRETT: That's quite right. So this is a question we've been studying at the International Monetary Fund for some years. And a story you often hear for instance, around the Arab spring in 2011, is that there is a simple and direct link from outcomes, like say youth unemployment or corruption or provision of public services, through to social unrest. And one of the things we've been trying to do is to more systematically measure unrest and then try to explain it through different economic forces. And one of the somewhat surprising findings of that research is that those broad social and economic phenomena don't necessarily explain as much of the unrest as you would expect, if it were true, that those are underlying economic forces were translating straight through to things like mass demonstrations, protests, and the like.

- So what's actually fueling some of that unrest? If there is a consistent through-line of high unemployment, but not every country that has that number is seeing the kind of unrest we're seeing in China, what has fueled that?

PHILIP BARRETT: So I think it's important to have in mind, perhaps, a slightly deeper understanding of what drives unrest. And the way I've come to think about it through the research that we've done is to think about there has perhaps being broad sources of dissatisfaction or grievance in society, but that those don't necessarily always translate through to unrest. And those sources of unhappiness might persist for many years and may not translate to unrest. Or they might be quite short lived and they do translate to unrest. And so that then prompts the question, well, what causes that unrest and why is there this disconnect between these fundamental forces and the outcomes we see?

And I think part of the answer there is in the nature of how unrest operates. If you go and protest on your own, it's at best and ineffective protest, and in some countries, potentially somewhat dangerous. And so as a result, that means that incentives for unrest for any one individual are larger when you think other people are also going to be out on the streets at the same time. And so that means that unrest can have this important self-fulfilling or self-perpetuating component, that even if you're unhappy today about the basic economic circumstances of life, you might not go and protest unless you think everyone is going to go protest.

But as soon as you think everyone is going to go protest, you might go and do that. And that's an inherent and difficult unpredictability that we think explains some of this departure of outcomes away from those fundamental drivers. And that's not to say that those fundamental drivers are not important, but the translation of those things into unrest is inherently unpredictable.

- And Philip, I want to ask you about opportunities for young people. Because the ILO says that they see opportunities for young workers in green, digital, and the care economies. But what is actually going to get them there in terms of the skills gap?

PHILIP BARRETT: So I think what you're talking about there is a broad transition of economies towards those sectors that you're talking about there. And obviously, as you have more scope for opportunities in general, that's better for all workers entering the labor force, it's particularly important for young workers. But to return back to the question of unrest there, I think it's important to recognize that there's no magic bullet for either addressing the propagation of economic factors through to social unrest, be it youth unemployment or anything else. And I think we should also recognize that social unrest has important economic consequences that can happen.

- They certainly do all feed into each other. A big thank you for joining us this morning. Phillip Barrett there, IMF Economist. Thank you for joining us.