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Is there or isn’t there a youth unemployment crisis?
By Oren Laurent
President, Banc De Binary
Blogging for Reuters, Zachary Karabell has dismissed the recent headlines about a global youth unemployment crisis and argues that young people are making a rational choice to hold out for their ideal job. So are the warnings from the World Economic Forum about a crisis simply misleading? Was the emergency meeting of EU state leaders to resolve this issue merely a publicity stunt? As with so many things in life, the truth is most likely somewhere in the middle.
Currently in the US, youth unemployment is around 16% while in Europe the average is 22.6%. It certainly sounds bad. In part the problem lies in the economic slump following the 2008 recession which has reduced the number of jobs available. Then you have the problem of inflexible labour markets, which are supposed to protect employees by making dismissals more difficult, but often deter companies from hiring young, new workers on permanent contracts.
The World Economic Forum has issued a report warning that “unless we address chronic joblessness we will see an escalation in social unrest.” The report argues that the lost generation of jobless youth in the Eurozone could lead to an increased crime rate and stagnating economies which in turn could ruin the single currency. At an emergency summit of European heads of state in Paris, German Chancellor Merkel cautioned that “the fate of Europe” is at stake and French President Hollande called for “fast, unified and qualitatively appealing” measures.
On the one hand, there is certainly cause for concern. In the UK for example, youth unemployment cost £4.8 bln in 2012 in addition to an estimated £10.7 bln in lost output. Plus, we should not underestimate the very real threat of an impending vicious cycle as inexperienced young people will find it increasingly difficult to obtain employment. We must work on solutions that will grant employers greater flexibility and hiring incentives. We must ensure that as the economy recovers, our educators are in tune with employer requirements and that those who are currently unemployment have access to training and apprentices in areas of new job creation.
On the other hand, the crisis is perhaps not quite as terrible as the recent, sensationalist newspaper headlines make out. Firstly, the figures do not factor in that many youths, defined by the United Nations as people between the ages of 15 and 24, are students. If we discount those still in education, the EU average youth unemployment rate is not 22.6% but 8.7%.
Secondly, to a certain extent the problem will partly resolve itself as the world climbs out of recession. The older generations will not be working forever, and employers will turn to young people to fill the new jobs being created amid the increasingly positive economic outlook.
Thirdly, as Karabell argues, many recent graduates should also not be counted among the failures. There are those who are working in successive short-term or part-time jobs and discovering their strengths, less pressured to find one career for life as their parents and grandparents. Many also make the choice to live at home, travel, intern, or work on a new start-up idea, and in doing so they develop their personal value in other ways, without the immediate financial incentive to find employment.
Karabell does admit in passing that the situation for those without higher education is more desperate, but fails to incorporate that into his concluding remarks that “young people aren’t part of a generation of despair, but rather a generation determined not to settle.”
So I’ll make my conclusion more comprehensive. Karabell is wrong to dismiss the current problem, but correct to believe that it is not the earth-shattering crisis that we are being led to believe. It is no bad thing that many young people are dedicating years to higher education and personal development. However, for the less educated in particular, unemployment could have serious repercussions, and is it likely that the longer we fail to confront this, the more people we will cause to suffer from long-term unemployment. Governments have a responsibility to young people. They should certainly be taking this problem seriously, and should be investing in training programs and promoting sensible employment policies.
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