High NEET Rates Threaten Economic Growth, Future Leaders

Mexico faces a structural youth employment gap driven by high NEET rates, informality, skills mismatches, and stalled productivity. The imbalance risks weakening nearshoring gains, investment flows, and future leadership pipelines across manufacturing, technology, and export industries, prompting federal reforms in technical education, work-based learning, and youth income support.

Young people worldwide face rising stress, employment insecurity, and barriers to social protection, creating long-term risks for economies and organizations, warns the International Labor Organization (ILO). In Mexico and Latin America, a growing “Junior Talent Trap” and misaligned skills threaten both productivity and future leadership.

“None of us can look forward to a stable future when millions of young people around the world do not have decent work and are feeling insecure,” says Gilbert Houngbo, Director General,  ILO, highlighting the global stakes of youth exclusion.

A Global Youth Employment Challenge

Recent data from the ILO shows that one in four young people aged 15 to 24, or about 262 million individuals, are classified as Not in Education, Employment, or Training (NEET). In Mexico, 20% of youth aged 15 to 29 fall into this category, above the OECD average of 12.5%. The problem is particularly acute for young women, who face structural barriers to education, employment, and social mobility, with NEET rates nearly double those of males in some regions.

The persistence of high NEET rates underscores gaps in youth access to stable, productive work. Although global youth unemployment has declined to historically low levels, the quality of employment remains uneven. In Mexico, 66.9% of young workers are employed informally, compared with a national average of 54.7%. This informal work often excludes labor protections, social security, and opportunities for skill development, contributing to anxiety and disillusionment among young adults.

David Blanchflower, Professor of Economics, Dartmouth College, notes a related mental health dimension: youth happiness is declining globally, reversing the typical U-shaped life satisfaction curve. “A spell of unemployment in youth creates permanent scars, not temporary blemishes,” Blanchflower says, linking early-career instability to long-term productivity and innovation losses.

Structural Skills Gaps and the “Junior Talent Trap”

Mexico possesses a demographic surplus that could offset workforce declines in aging Northern economies, yet structural mismatches in education and employment limit this advantage. According to the ILO, 47% of Mexico’s working-age population has only basic education, while 44.4% of STEM-trained workers are overqualified for their current roles. Only 26.1% of STEM workers hold positions aligned with their training.

To address these challenges, the Ministry of Public Education has launched 14 technical high school tracks in fields including AI, robotics, microelectronics, cybersecurity, and electromobility. The programs aim to align student skills with industrial demand, enabling graduates to enter the workforce directly or pursue advanced studies. Minister of Education Mario Delgado emphasized that these initiatives are part of a National Baccalaureate reform to close gaps between educational outcomes and labor market needs.

Work-based learning (WBL) programs, such as Aprendices Digitales México, integrate on-the-job training with technical curricula and certifications from companies like Google, IBM, and Cisco. These models are intended to combat the “pipeline failure” identified by the ILO, in which insufficient early-career opportunities threaten future leadership capacity, especially amid rising automation and AI adoption.

AI, Productivity, and the Risk of Deadlock

Despite the widespread integration of Generative AI, global productivity growth has stalled at 2%, a phenomenon the ILO calls “AI Purgatory.” Firms are hesitant to invest in entry-level positions and workforce training, leaving young people excluded from foundational roles that develop future leadership and technical expertise.

Jordi Cluró, Partner, Bain & Company, explains that many companies treat AI purely as a technology deployment rather than a business transformation, running pilots without measurable efficiency gains. In Mexico, while Generative AI course enrollments quadrupled in 2024 to 68,000, corporate training lagged behind, leaving workers to reskill independently. Analysts warn that this disconnect between AI adoption and effective workforce development risks converting Mexico into an execution hub rather than a center for innovation and design.

The ILO recommends a shift from automation to augmentation, using technology to enhance human output rather than replace workers. This approach could simultaneously improve productivity, retain early-career employees in meaningful roles, and ensure a pipeline of future leaders capable of managing advanced systems.

Policy Measures and the Path Forward

Governments and institutions are pursuing multiple strategies to mitigate youth employment risks. The EU Youth Guarantee program, expanded in 2020, ensures that all individuals under 30 receive an offer of employment, education, apprenticeship, or training. Similar programs have been adapted in non-EU countries, targeting NEETs and vulnerable groups, including young women and people with disabilities.

In Mexico, the Jóvenes Construyendo el Futuro program now has constitutional backing, providing stipends equivalent to minimum wage for youth not in education or work. The federal government is investing MX$144.8 billion (US$8.7 billion) in scholarships and infrastructure to strengthen technical training. Additionally, policies aimed at female workforce participation and care systems seek to close the gender gap, which economists estimate could increase GDP by 3.7% by 2035.

Other measures include expanding social security coverage for young workers in temporary, part-time, or platform-based roles; temporary wage subsidies to incentivize formal employment; housing support; and workplace wellness initiatives. The ILO emphasizes that empowering youth to understand labor rights and participate in social dialogue is crucial for rebuilding trust in institutions.

The convergence of high youth NEET rates, informal employment, skills mismatches, and technological disruption presents a complex challenge for Mexico and the global economy. Failing to integrate young people into productive roles risks long-term economic inefficiency, mental health repercussions, and a leadership vacuum by 2030.