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Work and the young - Generation jobless

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.