The COVID-19 pandemic is hitting almost everyone in one way or another. However, according to a report from The Brookings Institution, the economic costs, social crises, and long-term effects of COVID-19 will fall disproportionately on young adults.
Consider labor markets. The pandemic has impacted job prospects for the world’s 1.2 billion people aged 15-24. Employment levels among this group have taken a major hit, with the statistics being 8.7% employment loss for youth versus 3.7% for adults. With this impact to the job market, there is possible loss of potential lifetime earnings for youth.
According to a study by the Urban Institute, because they will have less time to amass savings, youth are put at risk because their “lower level of savings” could be diminished during a crisis, which may affect future financial security. In May 2020, the Organisation for Economic Co-operation and Development (OECD) conducted a webinar, “Supporting Young Entrepreneurs Through the COVID-19 Crisis: What’s Next?” and provided a summary of the presentation. According to data the OECD collected from international surveys, 90% of youth entrepreneurs reported a negative impact on their business due to the pandemic. This includes disruptions in distribution and supply chains and reduced customer demand, with one-quarter of the surveyed youth entrepreneurs having to shut down their businesses completely.
Such economic stagnation has contributed to significant increases in unemployment. David Halabiskyis a Policy Analyst at the OECD’s Centre for Entrepreneurship, SMEs, Regions and Cities (CFE). He says youth-led enterprises were already vulnerable prior to the pandemic for various reasons, including a lower level of labor market experience and entrepreneurial skills. He mentioned that youth-led businesses tend to have shorter survival rates due to operating in sectors with “low barriers to entry and high levels of price competition.”
Many youth entrepreneurs have yet to amass a significant level of human capital, and having fewer connections or limited technical knowledge can affect their likelihood of success. Limited finances including a lack of collateral and credit histories can make it harder for youth entrepreneurs to secure legitimate loans and other forms of financial support, creating greater challenges in times of economic shocks. From a survey where Youth Co:Lab interviewed 410 youth entrepreneurs across 18 countries in the Asia-Pacific, some of the actions entrepreneurs have taken in response to the negative effects of COVID-19 include laying off staff or reducing hours, cancelling orders from suppliers, and reducing wages. As a result of these actions, some businesses had to completely stop production and shut down. In Bangladesh, an agritech start-up’s research and development process faltered due to lab facilities being shut down. In Indonesia, a business had to borrow three months operating expenditures to stay afloat as it was unable to acquire inputs or distribute products due to a decrease in finances.
On a more positive note, throughout this challenging time, youth entrepreneurs around the world are finding innovative ways to navigate the impact of COVID-19, adapt, and support their communities by developing new products and services. For example, AccessiWheels in the Philippines has linked drivers with members of the community to get to hospitals while public transport is suspended. In Palestine, the unemployment rate is nearly 50% among university graduates. Palestinian youth are overcoming this challenge by creating their own jobs through technology entrepreneurship, remote work, and the app economy. The youth-led digital platform, SEPAK, sells Cambodian-produced products for an affordable price. Amid the COVID-19 pandemic, SEPAK has turned to creating and selling handmade masks. An ethical skincare company, Suri, based in West Sumatra, Indonesia was able to reach even more customers by developing its use of digital marketing and e-commerce.
Organizations are coming up with recommendations and resources to support youth entrepreneurs during the pandemic recovery. Youth Business International, a global network of organizations that supports entrepreneurs, launched a Rapid Response and Recovery Programme with Google that supports some 200,000 business in 32 countries that are struggling during the pandemic. The program provides training and mentoring opportunities, as well as financial support. The United Nations Development Programme (UNDP) released a Business Integrity Toolkit for Young Entrepreneurs created during the pandemic but also meant to encourage youth entrepreneurs to run their business ethically. According to a report from the United Nations Sustainable Development Group (UNSDG), “special emergency public procurement procedures” can be introduced, highlighting business opportunities for women and youth.
In March, The World Bank approved a $200 million loan to help youth and micro-entrepreneurs in Bangladesh to improve “earning opportunities and resiliency” by offering services including counseling and trainings.
Youth play an integral role in the economy. They drive forward ideas and innovation and are front and center driving key economic changes throughout the global economy, including digitalization, automation, and climate action. According to USAID, half of the world’s population is under 30, and “educated, employed, and civically engaged youth drive economic growth, prosperity, and democracy.” It is vital that organizations continue to support youth entrepreneurs, especially during this challenging time.