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2013-04-30 09:10:20
The number of young people out of work globally is nearly as big as the
population of the United States
Apr 27th 2013 |From the print edition
YOUNG people ought not to be idle. It is very bad for them, said Margaret
Thatcher in 1984. She was right: there are few worse things that society can do
to its young than to leave them in limbo. Those who start their careers on the
dole are more likely to have lower wages and more spells of joblessness later
in life, because they lose out on the chance to acquire skills and
self-confidence in their formative years.
Yet more young people are idle than ever (see article). OECD figures suggest
that 26m 15- to 24-year-olds in developed countries are not in employment,
education or training; the number of young people without a job has risen by
30% since 2007. The International Labour Organisation reports that 75m young
people globally are looking for a job. World Bank surveys suggest that 262m
young people in emerging markets are economically inactive. Depending on how
you measure them, the number of young people without a job is nearly as large
as the population of America (311m).
Two factors play a big part. First, the long slowdown in the West has reduced
demand for labour, and it is easier to put off hiring young people than it is
to fire older workers. Second, in emerging economies population growth is
fastest in countries with dysfunctional labour markets, such as India and
Egypt.
The result is an arc of unemployment , from southern Europe through north
Africa and the Middle East to South Asia, where the rich world s recession
meets the poor world s youthquake. The anger of the young jobless has already
burst onto the streets in the Middle East. Violent crime, generally in decline
in the rich world, is rising in Spain, Italy and Portugal countries with
startlingly high youth unemployment.
Will growth give them a job?
The most obvious way to tackle this problem is to reignite growth. That is
easier said than done in a world plagued by debt, and is anyway only a partial
answer. The countries where the problem is worst (such as Spain and Egypt)
suffered from high youth unemployment even when their economies were growing.
Throughout the recession companies have continued to complain that they cannot
find young people with the right skills. This underlines the importance of two
other solutions: reforming labour markets and improving education. These are
familiar prescriptions, but ones that need to be delivered with both a new
vigour and a new twist.
Youth unemployment is often at its worst in countries with rigid labour
markets. Cartelised industries, high taxes on hiring, strict rules about
firing, high minimum wages: all these help condemn young people to the street
corner. South Africa has some of the highest unemployment south of the Sahara,
in part because it has powerful trade unions and rigid rules about hiring and
firing. Many countries in the arc of youth unemployment have high minimum wages
and heavy taxes on labour. India has around 200 laws on work and pay.
Deregulating labour markets is thus central to tackling youth unemployment. But
it will not be enough on its own. Britain has a flexible labour market and high
youth unemployment. In countries with better records, governments tend to take
a more active role in finding jobs for those who are struggling. Germany, which
has the second-lowest level of youth unemployment in the rich world, pays a
proportion of the wages of the long-term unemployed for the first two years.
The Nordic countries provide young people with personalised plans to get them
into employment or training. But these policies are too expensive to reproduce
in southern Europe, with their millions of unemployed, let alone the emerging
world. A cheaper approach is to reform labour-hungry bits of the economy for
example, by making it easier for small businesses to get licences, or
construction companies to get approval for projects, or shops to stay open in
the evening.
The graduate glut
Across the OECD, people who left school at the earliest opportunity are twice
as likely to be unemployed as university graduates. But it is unwise to
conclude that governments should simply continue with the established policy of
boosting the number of people who graduate from university. In both Britain and
the United States many people with expensive liberal-arts degrees are finding
it impossible to get decent jobs. In north Africa university graduates are
twice as likely to be unemployed as non-graduates.
What matters is not just number of years of education people get, but its
content. This means expanding the study of science and technology and closing
the gap between the world of education and the world of work for example by
upgrading vocational and technical education and by forging closer relations
between companies and schools. Germany s long-established system of vocational
schooling and apprenticeships does just that. Other countries are following
suit: South Korea has introduced meister schools, Singapore has boosted
technical colleges, and Britain is expanding apprenticeships and trying to
improve technical education.
Closing the gap will also require a change of attitude from business. Some
companies, ranging from IBM and Rolls-Royce to McDonald s and Premier Inn, are
revamping their training programmes, but the fear that employees will be
poached discourages firms from investing in the young. There are ways of
getting around the problem: groups of employers can co-operate with colleges to
design training courses, for example. Technology is also reducing the cost of
training: programmes designed around computer games can give youngsters some
virtual experience, and online courses can help apprentices combine on-the-job
training with academic instruction.
The problem of youth unemployment has been getting worse for several years. But
there are at last some reasons for hope. Governments are trying to address the
mismatch between education and the labour market. Companies are beginning to
take more responsibility for investing in the young. And technology is helping
democratise education and training. The world has a real chance of introducing
an education-and-training revolution worthy of the scale of the problem.