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Based on "The Economy Gave Up On Young People ... It's Starting To Show" from Economics Explained Watch the original video

The Generation Adrift: Why Young People Are Checking Out of the Economy

Episode summary

The global economy is failing young people, with 262 million (one in four worldwide) aged 15-24 classified as "NEETs" – Not in Employment, Education, or Training. This isn't laziness, but a structural issue: entry-level jobs are disappearing due to automation and AI, while the cost of higher education and housing has skyrocketed, making degrees less valuable and moving for work unaffordable. For instance, in the UK, the share of NEETs with a work-limiting health condition nearly doubled in a decade.

Addressing this requires treating vocational training as a primary path, not a fallback, as seen in the Netherlands where 90% of vocational graduates find employment. Additionally, making childcare affordable and implementing "flexicurity" (flexible hiring with strong safety nets and retraining) like Denmark's 6.2% NEET rate are crucial. Ignoring this problem leads to dire consequences, exemplified by Japan's 1.5 million "hikikomori" (social recluses), and the "80/50 problem" where elderly parents support their middle-aged, economically inactive children.

Somewhere in a prosperous nation, a young person wakes up today with no work, no school, and no immediate plan to pursue either. Tomorrow will be the same. And the day after. This isn't an isolated incident; it's a global phenomenon affecting 262 million young people—one in four worldwide. They have a name: NEETs, standing for Not in Employment, Education, or Training.

The immediate, often predictable, reaction to this statistic is a dismissive "lazy generation," "too soft," or "get off their phones and get a job." This sentiment, frequently voiced across family dinner tables by older generations, paints a picture of individual failing. However, a closer look at the data reveals a far more complex and troubling narrative. Youth unemployment rates have actually been declining in many wealthy nations, suggesting, by official measures, that young people are doing fine. But this is precisely where the official statistics fall short.

The traditional unemployment rate only counts those who are actively looking for jobs. For every young person counted in these official statistics, there are roughly three more who are entirely invisible to the economic system. These aren't just the "lazy ones" your uncle might describe; they are a generation struggling with deep-seated structural challenges that are pushing them to the margins, threatening the foundational promise that each generation will do a little better than the last.

This article will delve into what it means to be a NEET, why this crisis is unfolding now and everywhere, the true cost of this disengagement, and crucially, what solutions already exist to bring this generation back into the fold.

The Invisible Crisis: Beyond Unemployment Figures

To understand the NEET phenomenon, we must first recognize the limitations of the conventional unemployment rate. This metric, while useful for gauging the immediate availability of labor, counts only those without a job who are actively engaged in the job search—sending applications, attending interviews, registering with job centers. The moment someone stops these activities, for any reason, they cease to be "unemployed" and become "economically inactive." This is a clinical term for a grim reality: the system has stopped worrying about them.

Unemployment benefits are typically tied to active job searching, so stopping the search often means losing crucial financial support. This narrow definition of unemployment fails to capture the full scope of young people genuinely struggling to build productive lives. It misses those who, after months of rejection, have simply given up; those who cannot work due to undiagnosed health conditions; those caring for sick parents or young children without support; or those living in towns where available jobs pay less than the cost of commuting to them. None of these individuals are "unemployed" in the technical sense, but they are very much disconnected from the economy.

The NEET measure was specifically designed to find these invisible people. By capturing everyone between 15 and 24 who isn't working, studying, or in any formal training—regardless of their job-seeking status—we gain a far more complete picture. In 2023, while only 6% of young people globally were officially unemployed, a staggering 20.4% were NEET. This stark difference highlights the inadequacy of our current economic indicators to truly reflect the health of our youth labor markets.

Unpacking the NEETs: A Nuanced Picture

It's crucial to acknowledge that the 262 million NEETs worldwide are not a monolithic group. Their circumstances vary dramatically, particularly between developing and wealthy nations. In developing countries, entire regions may lack the infrastructure for formal employment, while conflict can make education and work impossible. Cultural expectations and early motherhood often keep young women out of the workforce. These are severe problems, but the focus here is on NEETs in affluent nations—countries with functioning economies, robust education systems, and social safety nets, where the problem paradoxically persists and grows.

Within wealthy nations, there are two distinct groups of NEETs:

The Voluntarily Disengaged

This group represents a minority—in Europe, about one in five NEETs. These are young people who have made a deliberate, though sometimes questionable, choice to step back from the conventional path, or who are simply in a transitional phase. Some might be holding out for the "right" opportunity rather than settling for the first job that comes along, while others are trying to build their own ventures. And, to be frank, some are "riding it out" at their parents' homes, waiting for circumstances to change. Particularly among young men, there's a noted tendency to hold out for a dream job title and perfect salary straight out of the gate, believing anything less isn't worth pursuing. While this group exists, they are smaller than popular headlines often suggest.

The Involuntarily Disconnected

The vast majority of NEETs in wealthy nations—four out of five in Europe—are disconnected from work or education less by choice and more by circumstance. Many are actively looking for work but, after countless rejections, have become discouraged and stopped trying altogether.

A rapidly growing segment of this population consists of young people dealing with illness or disability. In the UK, the share of NEETs reporting a work-limiting health condition nearly doubled in a decade, rising from 26% in 2015 to 44% in 2025.

Another significant group, heavily skewed female, comprises young people with caretaking responsibilities. One in five NEET women are looking after children, compared to just one in 30 young men. When childcare costs exceed potential earnings, or when no other support is available, the option to work simply evaporates.

The data consistently points to a profile for these vulnerable NEETs: they tend to come from lower-income families, are more likely to live in rural areas than cities, and have less education. In the US, a quarter of NEETs come from families earning less than $25,000 a year, and the rate among Black youth is more than 50% higher than among white youth. These patterns strongly suggest structural disadvantage rather than individual laziness. If this were merely a problem of motivation, nearly a million young people in the UK wouldn't be in this category—the highest number in over a decade, in a country that had previously made progress on this very issue.

The Economic Ladder is Broken

The core promise of modern economies—that each generation will enter the workforce, contribute, and ultimately achieve a better life than their parents—is failing for a significant share of young people. For the first time in a generation, many are struggling to become economically active at all, let alone surpass their parents' achievements.

The immediate question arises: if these young people have no paycheck or training wage, who is supporting them? The short answer is, predominantly, their parents. For the first time on record, over half of American parents with a child over 18 are providing financial support, averaging nearly $1,500 a month. The state provides some residual support, mainly through health-related benefits for those unable to work. But this merely masks the underlying structural issues that have dismantled traditional pathways to adulthood.

Disappearing Entry-Level Jobs

For most of the 20th century, the economy offered a reasonably reliable first rung on the career ladder. Jobs like factory work, administrative roles, data entry, retail management, and customer service required little experience, paid a living wage, and, crucially, taught essential work ethic and provided a work history. These roles were not glamorous, but for an 18-year-old without credentials or connections, they were the gateway to economic activity.

These vital entry points are now vanishing. Automation first targeted routine tasks like data entry and basic processing. Now, artificial intelligence is doing the same to entry-level white-collar work. Between late 2022 and mid-2025, employment for new workers in jobs most exposed to AI fell by 6%, even as older workers in the same fields saw employment grow. The gig economy has absorbed much of what remained, replacing stable entry-level employment with flexible work that, while sounding appealing, often offers no progression, no training, and no clear path upward.

The Costly, Diminishing Return of Education

The obvious response to this disappearing ladder is often: "Go to university, get a degree, that will open doors." And while it's true that a degree remains effectively required for most "good" jobs, despite public announcements from companies dropping degree requirements (fewer than one in 700 new hires actually benefited from such changes), the landscape has shifted dramatically.

The problem lies in the escalating cost of higher education and its diminishing returns. In the UK, tuition fees tripled in 2012. In the US, the average student borrower carries nearly $40,000 in federal debt alone. Young people took on this debt with the reasonable assumption that a degree would translate into a graduate-level job. However, the labor market has not kept pace. In 2024, over a million students graduated from UK universities, but the share landing in roles actually requiring a degree has fallen to its lowest level since 2014. And for the first time on record, the unemployment rate for recent US graduates has started to exceed the overall unemployment rate. The degree costs more than ever, delivers less than it promised, and the jobs that didn't require one have largely disappeared anyway.

Unaffordable Cities and Delayed Adulthood

Adding to these pressures, the post-pandemic hiring boom has cooled, hitting young workers first. In the UK, youth employment in 2025 still hadn't recovered to 2019 levels, even as adult employment grew steadily. Moreover, the jobs that do exist tend to cluster in specific, expensive cities—finance in London and New York, tech in San Francisco. For previous generations, moving for opportunity meant stretching a modest income across a reasonable rent. In 1960, the typical renter spent less than a fifth of their income on housing; today, it's closer to a third on average, and significantly worse in job-rich cities.

Consider Sydney, Australia: the income needed to rent a typical apartment without financial stress jumped from $88,000 Australian in 2019 to $130,000 in 2025. The average young worker in New South Wales earns around $54,000. In the US, three in five Gen Z renters are now "rent-burdened," spending over 30% of their income on housing before any other expenses—a figure closer to three in four in cities like Los Angeles and San Diego.

The logical conclusion for many young people is that the move simply isn't worth it. They stay in their hometowns, where opportunities are scarcer and the NEET risk is higher, or they move back in with their parents. This is now the living situation for roughly one in four young adults in the US, up from one in nine just 50 years ago. While financially pragmatic, this arrangement often comes with a growing feeling that adulthood has been indefinitely delayed.

The Mental Health Toll and Vicious Cycles

The cumulative effect of an unstable job market, crushing debt, and unaffordable housing is a generation under chronic stress. Unsurprisingly, "none of this," as the video aptly puts it, "is particularly good for your mental health." The share of young people in the UK reporting common mental health conditions has risen from 19% in 2014 to nearly 26% today. In Australia, the prevalence of depression among young adults more than doubled between 2007 and 2021. And in the US, for the first time on record, young people aged 18 to 24 are now more likely to report poor mental health than people twice their age.

The question of whether structural pressures cause mental health crises or vice-versa is a complex "chicken and egg" scenario; it's genuinely a bit of both. Chronic stress from economic precarity undoubtedly harms mental health. Yet, the numbers began moving in the wrong direction as far back as 2011, years before the post-pandemic job crunch and cost-of-living crisis. In the UK, depression among young people aged 15 to 24 nearly doubled between 2003 and 2019. Struggling with mental health at 15 makes school harder, leading to worse qualifications, fewer labor market options, and ultimately, a worsening of mental health—a vicious cycle that becomes increasingly difficult to break.

Even for those who successfully navigate these challenges and land a job, the conditions are hardly a relief. One job, it turns out, is increasingly not enough. A record 1.35 million adults in the UK now work at least two jobs, with Gen Z driving most of that growth. Yet, over two-thirds of them still rely on parents or family for essentials like rent, groceries, or bills. For those working a single job, the hours often extend beyond what was agreed; over a third of workers report employer expectations to work beyond contracted hours, and nearly a quarter of Gen Z answer work emails outside normal hours at least five days a week. The gig economy promised flexibility but largely shifted risk to the worker. Half of Gen Z workers report feeling burned out.

Compounding this, the social support networks—friendships, local communities, places to switch off—that previous generations relied upon have thinned out. When young people eventually decide the grind isn't worth it and step back, there are fewer forces pulling them back in. Moving back home used to carry a tacit social pressure to "get on with it"; that pressure has largely dissipated, removing one of the informal mechanisms that kept people in the labor market, even when conditions were tough.

The Cost of Inaction: Japan's Warning

All of this comes with a hefty price tag. Eurofound estimates the cost of NEETs to European economies at €142 billion annually, distributed across foregone taxes, lost productivity, and benefits paid out. But the true, long-term cost is far greater and more insidious.

To see what happens when a country ignores these issues for too long, one need only look at Japan. Following the burst of its asset price bubble in the early 1990s, stable jobs dried up almost overnight. Japanese employers, accustomed to hiring fresh graduates in annual cohorts for lifetime employment, suddenly left new graduates cycling through low-paying part-time work. The economy narrowed, entry points closed, and they never truly reopened.

Today, one in four Japanese people in their 20s will be NEET at least once over any four-year period, with more than half experiencing it multiple times. In a society with immense stigma around falling behind, some young people not only gave up on work but also on going outside. This gave rise to the term "hikikomori," referring to individuals, mostly young men, who withdraw from work or school and barely leave their rooms, sometimes for years. This is the reality for 1.5 million people in Japan right now—2% of everyone aged 15 to 39—with an average duration of withdrawal around 10 years. This isn't a "rough patch"; it's a decade largely spent in isolation.

Japan didn't deliberately create a society where millions disappeared into their bedrooms. It simply fostered an intensely competitive education system, an economy with narrowing entry points, and a welfare system that heavily relied on families to absorb the strain. Once families reached their limit, there was little left to catch those falling out of society. While "hikikomori" is a Japanese word, similar patterns have been documented across South Korea, the US, Singapore, and much of the developed world.

The long-term consequence of this unaddressed problem is known as the "80/50 problem": parents in their 80s still financially supporting children in their 50s who never re-entered society. This effectively removes two people from the economy—one through spending, one through working. When these elderly parents eventually die, many of their children are left with no income, no work history, and nowhere to go. This grim scenario illustrates the devastating human and economic cost of allowing the NEET problem to fester for an entire generation.

Pathways to Re-Engagement: Lessons from Europe

While the picture painted thus far is bleak, it's not without hope. Some countries have found parts of the solution. Across Europe, NEET rates vary enormously, from above 22% in Italy and 19% in Greece to remarkably low figures like 5% in the Netherlands, 6.2% in Denmark, and 6.7% in Sweden. This isn't a matter of culture or attitude; it's a matter of policy.

The "low countries" and Nordic nations offer clear examples of effective strategies:

Valuing Vocational Training

These countries treat non-university routes as a genuine first choice, not a fallback. They run "dual education systems" where vocational students split their time between classrooms and real workplaces. Graduates emerge with work experience, employer relationships, and a foot already in the door. In the Netherlands, 90% of recent vocational graduates were employed in 2024, well above the EU average. This creates clear pathways for more young people, reducing NEET rates and significantly lessening the drain on public finances.

Early Intervention & Affordability

Catching young people before they fully disengage is critical, as pulling someone back after years out is dramatically harder and more expensive. These countries prioritize policies that make work economically viable and life manageable for young adults. Sweden, for instance, makes childcare affordable, resulting in nearly 80% of women being in the workforce and a low NEET rate. Sweden also implements housing policies that enable young people to actually live near where the jobs are, addressing a major barrier to opportunity.

Flexicurity (Denmark)

Denmark's approach, known as "flexicurity," combines flexible hiring practices for employers with strong safety nets and active retraining programs for workers. This means that losing a job doesn't become a life sentence; the system actively helps individuals transition into their next role rather than simply paying them to stay home. Denmark's NEET rate of 6.2% is well below the EU's strategic target to keep the rate at 9% or below by 2030, a testament to the effectiveness of this integrated approach.

Building the Political Will

None of these solutions are theoretically complicated, and the economic case for implementing them is compelling. In the UK alone, reducing every region's NEET rate to match the best-performing one would add £26 billion to the economy every year. This figure doesn't even include the savings from reduced welfare payments, health costs, and decades of foregone tax revenue from people who remained disengaged. That total bill is considerably larger and harder to calculate.

So, why hasn't this problem been fixed more broadly? Partly because the "lazy generation" story is far easier to tell and significantly more politically convenient than the structural one. If one accepts the "lazy" framing, the policy response is simple: motivational lectures, benefit sanctions, and exhortations to "lower expectations." But if one accepts what the data truly shows—that these are structural problems—the required response looks entirely different.

Structural problems, unlike perceived generational laziness, can actually be fixed. The evidence is there, and the successful examples are there. The hard part, as with most things, is building the political will to do it.

Fixing this problem matters far beyond the young people directly caught up in it. None of us can look forward to a stable future when millions of young people globally lack decent work, cannot build a life, and are checking out of the economy entirely. These are the individuals who are supposed to be driving future growth, paying taxes, and supporting the rest of us as we age. For the first time since the Industrial Revolution, younger generations in wealthy countries are struggling to exceed their parents' wealth despite overall economic growth. This is fundamentally reshaping our economies and societies. The time to act is now.