The recently announced referendum and subsequent fears around the Greek exit from the Eurozone threaten to distract attention from the biggest issue facing the country: unemployment.
The recently announced referendum and subsequent fears around the Greek exit from the Eurozone threaten to distract attention from the biggest issue facing the country. Unemployment – specifically youth unemployment – rather than financial contagion, continues to be the biggest threat to the short- and long-run health of the Greek economy.
Today, youth unemployment in Greece stands at 55.3 percent. Regardless of how the Greek people vote in the referendum, and whether Greece stays in the Eurozone, the country will witness the adverse effects of today’s high youth unemployment for decades to come.
Research has shown that being unemployed at a young age has long-term effects on employment and income. For example, a study of the United States economy by Thomas Mroz and Timothy Savage shows that six months of continuous unemployment at the age of 22 results in an 8 percent decrease in wages for the next year on average. They also find that wages are 5 percent lower four years after the age of unemployment and 2 to 3 percent lower 10 years after unemployment when compared to those workers who remained employed.
These are the effects of six months out of work. Many young people in Greece have been jobless for years. The longer high youth nemployment persists, the more severe the long-term consequences for Greece’s economy and society.
Whatever course of action the Greek people choose, their leaders must forge employment-based growth models. If prude fiscal policy returns the Greek economy to positive growth but fails to create employment en masse for the country’s out-of-work youth, it will have solved only one symptom of a much larger and more destructive syndrome.