by Piet Coetzer

Youth employment

Jobless youth becoming a new lost generation

Archbishop of Toledo, Braulio Rodriguez, earlier this month warned of social collapse in Europe due to unemployment
Archbishop Braulio Rodriguez.jpg

The Catholic Primate of Spain and Archbishop of Toledo, Braulio Rodriguez, earlier this month warned of social collapse in Europe in the wake of the protracted financial crisis, saying that soaring unemployment in Spain, and across southern Europe, has become very dangerous. As in South Africa, especially, youth unemployment has become a cause for major concern.

While Rodriguez said "we have to change direction, otherwise this is going to bring down whole political systems," elsewhere alarm bells are ringing not only about the long-term economic consequences for members of the 'jobless generation' but also social stability and security implications.

In a recent article, Time magazine wrote that “[y]outh unemployment's most potentially lethal consequence [is that] jobless youths are more likely to engage in terrorist activities and crime, studies have shown.”

In an article published at the end of April, The Economist reported that around the world almost 300m 15- to 24-year-olds are not in employment, education or training (NEET). That amounts to about 25% of the world’s youth. 

Under the headline 'Generation jobless', The Economist writes that the phenomenon is resulting in major economic and social costs. It calculates an estimated economic loss of $153 billion for 2011, arising as a result of disengaged young people in Europe alone.

In addition, social discord appears to track youth joblessness trends, with youth unemployment in the politically fraught Middle East and North Africa region said to be more than twice the world average.

Ominously, for South Africa, the figures on this front are even worse than the global average. Figures from Statistics SA for the third quarter of 2012 indicate that 71% of its unemployed are aged 25-34 and the unemployment rate among youth is 36%. About 3.3 million youth, aged 15-34, are NEETS.

Stating that low economic growth is the most obvious cause of low job growth and that joblessness in southern Europe has surged as economies have shrunk, The Economist writes about South Africa that “[i]ts high jobless rate is stoked by the fact that it is now one of Africa’s slowest-growing economies.

But rigid labour markets probably matter even more. Countries that let business cartels curb competition with high taxes on labour and high minimum wages and where regulations make it hard to fire people, are bad places for the young jobless.

In India big factories and firms face around 200 state and federal laws governing work and pay. South Africa has notably strict laws on firing. 

But among the other causes of the crisis the article lists a deeper worry, “that business is going through a particularly dramatic period of creative destruction. New technology is unleashing a storm of ‘disruptive innovation’ which is forcing firms to rethink their operations from the ground up. 

Companies are constantly redesigning work — for example they are separating routine tasks (which can be automated or contracted out) from skilled jobs. They are also constantly redesigning themselves by upsizing, downsizing and contracting out. The life expectancy of companies is declining, as is the job tenure of chief executives.

Policymakers are finding it more difficult to adapt their labour-market institutions quickly enough.” 

Even if the economy improves in the medium-term, the problems associated with their present joblessness will more than linger for the rest of their lives for the current youth generation. For them it will likely never be a short-term problem. 

Young people who cannot find jobs are likely to be scarred by the experience for their entire careers. They will have lower wages for life, according to several economic studies when they have to compete with the next generation.

That will cause social problems in addition to economic problems as these young people delay life steps such as purchasing a house, or even retiring, since they have not been able to build up much in savings. 

And, unfortunately, no respite appears to be on the horizon. In a report released in early May, the International Labour Organisation (ILO) estimates that worldwide youth unemployment will continue to grow over the next five years, reaching 12.8% in 2018. That means youth who are already without jobs are more likely to stay that way for longer, denying them crucial work skills and hobbling their careers for the rest of their lives. 

In its report Time Magazine states: “Without action, this army of young jobless could become ‘a lost generation,’ warns Gianni Rosas, the Geneva-based co-ordinator of the ILO's Youth Employment Programme. “We are in a situation where our kids are worse off than we were 20 years ago. We are going backward,” he says.

The longer the youth job crisis persists, the more severe the consequences will be. Advanced economies, which need to develop top-notch new talent to offset higher costs, could find themselves at a competitive disadvantage with emerging rivals like China and India. In aging societies, especially in Europe and Japan, youth unemployment makes the burden of funding health care and pensions for retirees even heavier, since the number of taxpaying workers is curtailed and the cost of benefits that governments must provide increases.”

For South Africa, it seems crucial to get its ducks in a row with interventions like a youth employment subsidy, Finance Minister Pravin Gordhan announced plans for a youth employment tax incentive and vigorous implementation of the Youth Employment Accord (YEA), signed in April between government, business and labour. 

In the YEA, commitments were made covering six areas, including more education and training and work exposure, scaled-up public-sector initiatives, such as a National Youth Service Programme, set-asides for youth employment in specific industry sectors, support for youth entrepreneurship and cooperatives, and promises of sustainable new private-sector jobs

All of these can go a long way in mitigating the danger of a 'lost generation'.

 

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