World Bank warns of a youth employment crisis as developing economies face massive job shortages threatening stability and growth

The President of the World Bank Group, Ajay Banga, on Tuesday warned that developing economies are approaching a severe employment shortfall as demographic growth rapidly outpaces job creation, raising concerns over economic stability, migration pressures and global security risks.

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The warning followed the publication of a policy blog by the Washington-based World Bank Group, which highlighted demographic shifts across developing nations as one of the most powerful yet underestimated forces shaping the global economy over the next decade.

According to the institution, about 1.2 billion young people in developing countries are expected to reach working age within the next 10 to 15 years.

Current projections, however, indicate that only around 400 million jobs may be created within the same period, leaving hundreds of millions without access to productive employment.

Ajay Banga stated that global discussions often focus on immediate crises such as armed conflicts, technological disruption and market volatility, while slower but transformative structural pressures receive insufficient attention.

“This challenge is not only a development issue,” Banga noted. “It is an economic challenge and increasingly a national security concern.”

The World Bank youth employment crisis, the institution warned, could strain public institutions and heighten risks of irregular migration, social unrest and insecurity, particularly in regions experiencing rapid population growth.

The bank observed that the issue attracted limited focus during recent global engagements, including discussions at the World Economic Forum Annual Meeting in Davos, where geopolitical tensions dominated policy conversations.

It urged governments and international policymakers to prioritise large-scale job creation at upcoming global forums such as meetings of the G-7 and G-20, stressing that early and coordinated action could transform demographic expansion into a powerful economic advantage.

As part of its response, the World Bank said it is advancing a jobs-centred strategy anchored on infrastructure investment, business environment reforms and expanded private-sector support.

The institution emphasised that reliable electricity supply, efficient transport networks, healthcare systems and quality education remain critical foundations for sustainable employment growth. Without such infrastructure, private investment and enterprise development struggle to flourish.

Highlighting practical interventions, the bank cited a skills development centre in Bhubaneswar, India, developed through public and private collaboration, which trains nearly 38,000 individuals annually in programmes aligned with labour market demand, enabling many graduates to secure jobs or establish businesses.

The World Bank also underscored the importance of predictable regulatory systems to encourage entrepreneurship, noting that micro, small and medium-sized enterprises account for the majority of employment opportunities in developing economies.

Through its private-sector institutions, the bank said it is expanding access to financing tools such as equity investments, guarantees and political risk insurance designed to unlock business growth and reduce investment uncertainty.

One example referenced was a trade finance guarantee supporting Brazil’s Banco do Brasil, expected to release about 700 million dollars in affordable financing for small businesses, particularly within agriculture.

The institution identified infrastructure and energy, agribusiness, primary healthcare, tourism and value-added manufacturing as sectors with the strongest capacity to generate employment at scale.

It further stressed that addressing the World Bank youth employment crisis should not be viewed as a competition between developed and developing nations.

By 2050, more than 85 per cent of the global population is projected to live in developing economies, creating both the largest future labour force and expanding consumer markets.

The bank argued that sustained investment in developing countries could strengthen global supply chains, deepen trade partnerships and reduce migration pressures affecting advanced economies.

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“If we get this right, demographic change can become an engine of growth and stability,” the institution stated. “If we get it wrong, the world will continue reacting to crises that were visible years in advance.”