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.