Globally over 300 million young people were not in employment, education or training in 2013. A new social contract is needed to generate jobs and hope for a generation of increasingly disenfranchised young people.
Edoardo Campanella, Eurozone economist at UniCredit, has recently provided a detailed overview of the global youth unemployment crisis with warnings of political and civil unrest if nation-states and global economic cooperation cannot solve the problem. (Project Syndicate, June 3, 2016)
The statistics are telling. Around 45 per cent of the world’s economically active young people are either unemployed or living in poverty, despite having some employment. This is probably a conservative figure, given that many poor countries underestimate the problem.
Rates vary. In Germany and the United States youth unemployment rates are 7.3 per cent and 11.6 per cent respectively. It’s around 50 per cent in Greece and Spain.
East Asia youth unemployment is about 12 per cent. North Africa and the Middle East have bulging youth populations, with over 100 million people under 30 years of age. The region’s “official” unemployment is around 30 per cent.
The problem has hardly improved since the 2008 global financial crisis (GFC), as the global economy remains sluggish.
There are regional differences. European economies basically favour older workers. Austerity measures inhibit growth and new jobs. In the Middle East, failed states and political turmoil stifle economic activity.
Further, the world is witnessing the fourth industrial revolution, a term coined by Klaus Schwab, founder of the World Economic Forum. A vast array of new technologies are abolishing many jobs, creating skill shortages in new and transforming industries.
Schwab has found that around 38 per cent of employers globally have difficulty finding the right talent, even among young educated people.
Not only is Germany facing a skills shortage of about 1 million by 2020, but in many emerging economies there is a mismatch between the skills needed and the new industries being created.
For example, China has become the manufacturing centre of the world. It has a shortage of skilled workers, because more and more of China’s youth prefer to be university educated. India has only one-in-three university graduates under 29 in employment.
The mismatch between education and employment is also the result of rapid technological innovations and changes in many areas – in biotechnologies, energy, information, manufacturing, financial and defence technologies. Education systems have been slow to reset their priorities to match the demands in these areas.
Lack of capital investment and gross economic inequalities exacerbate the problem.
Replacing the highly managed global financial system created after World War II with a system of free-flowing capital has played a role. “Hot capital” flows destabilised the global financial system resulting in the GFC and a long global recession, where mounting global debt inhibits economic growth and job opportunities.
Leaving a generation waiting for jobs has consequences.
Economic growth suffers because valuable economic contributions are lost when there are large numbers of idle young workers. And educated workers leave for other regions where they can find employment. This “brain drain” limits the capacity of a country to develop its economy and to provide future employment.
The “brain drain” is a well-known phenomenon in Africa, but it has also affected China and India. And since the GFC and the euro crisis, millions of highly educate people have left places like Greece, Italy, Spain, Portugal and Ireland for stronger economies like Britain, Germany, the U.S. and Australia.
More generally, global mass migrations are under way from the countries without opportunities to those that offer prosperity and jobs.
Others disaffected by the lack of opportunity have turned to various forms of disestablishment protests.
In the U.S., the Occupy Wall Street movement was an expression of frustration, but without effective solutions.
The Middle East had it’s Arab Spring, an attempt to overthrow the ancien regimes of the regions. They were slow or incapable of evolving their economies fast enough to provide meaningful work for the bulging populations of increasingly educated young people. This has degenerated into civil unrest and major conflict in various countries.
Others, particularly the least skilled, remain loyal to existing cultural and economic systems. But this leads to economic stagnation, political paralysis and discontent.
Feeding social and political discontent are the growing inequalities in places like the U.S. and Europe. Cynicism was fed by the release of the Panama Papers, which exposed the way international financial deregulation had allowed those who greatly befitted from economic globalisation to avoid financial scrutiny and taxation.
After the Great Depression, which paved the way to World War II, a global social contract among Western nations created prosperity for all. Today, the world faces different challenges from the 1930s, but once again a new social contract is needed to create prosperity for future generations.