by Henri Erti. Originally published on 2014/01/09

The Junior Chamber International (JCI) gathered young leaders all across Europe to Brussels in order to take action in breaking the pernicious cycle of youth unemployment. The goal of such an event was to empower the delegates from each participating nation with the appropriate tools and knowledge to improve the youth employment situation in the respective communities. With delegates from 24 European countries, the project was aptly named “(Y)Our Future Campaign. The purpose of this particular blog is to distribute the questions and challenges presented in the conference to the Pan-European stakeholders. After all, we are all involved in this quagmire one way or another.

Fundamentals

Dealing with de facto youth unemployment rate at the national level can be a daunting task. However, any policy initiative targeting a reduction in the unemployment rate of a specific group must take into consideration the statistical difference of unemployment rate and the labor participation rate. Secondly, a distinction between the different types of unemployment is pivotal. Despite the fact that youth unemployment per se narrows the issue of unemployment to a particular group, more detailed macroeconomic principles can assist in identifying the underlining source of the issue. For example, frictional unemployment occurs when people are transitioning from a job to another or are about to enter the job-markets. Structural unemployment emerges as technological developments turn specific professions obsolete and hence, exacerbates the disequilibrium between the quantity of jobs supplied and demanded. Finally, cyclical unemployment is characterized by the lack of aggregate demand deriving from unemployment and the decreased purchasing power for goods & services. A careful country-specific analysis of the abovementioned variables can illuminate the correct path to the right kind of labor market adjustment. Consequently, a consideration for the macroeconomic fundamentals is the most effective starting point for a larger plan of action.

Foundations

Even though the majority of the EU Member States share a common monetary policy, national unemployment cannot be solved through a monetary policy decided in Frankfurt by a supranational committee. Therefore, addressing youth unemployment has to be done within the framework of the different types of fiscal policies. Moreover, the attention has to be directed to the countries’ balance between the public and private sector as a generator of jobs, hence wealth. For example, Finland’s public sector spending as a share of GDP in 2012 was 56%, well above the EU (49.1 %) average . Such a number may indicate a growth in the public sector employment vis-a-vis the private sector. Therefore, any credible plan of action directed to increase youth employment at the national level must be based on the empowerment of the private sector. Investing tax-revenue- generated by the narrowing of the private sector- to enhance the public sector employment is simply unsustainable.

A second variable to examine is the changing dynamics between manufacturing and service sectors. As the Western advanced economies continue to shift away from manufacturing tradable goods, the service sector is naturally expanding. Therefore, youth employment rate is dependent on the educational institutions’ capacity to respond to the changing environment. Currently, a clear mismatch exists between the businesses and the educational institutions, resulting in the scarcity of skilled workers and over-supply of university graduates with a degree that is not in high demand. Instead of producing more psychologists, sports scientists, social workers, translators, consultants and long-term interns with a degree in European studies, the EU should focus on encouraging young people to pursue “not-so-sexy” careers that actually produce tradable and tangible products. In the near future, Europe as a single market can not be called a market when there is little production, but an abundance of services.

Attitudes

Quite frankly, we are part of a generation which has had the privilege to grow up during an economic boom. Consequently, the attitudes towards jobs that we have are much different from the previous generations. As a result, entrepreneurial aspirations are severely underestimated, perhaps due to the fear of failure and social stigma. As one of the key-speakers in the JCI event noted, we tend to expect others to solve our problems and simply give us jobs because we need them. What needs to be done is to encourage young people to entrepreneurship and focus on obtaining skills that are “marketable”. Admittedly, Europe as a whole needs to learn more about sales than technical and consultative skills. European job-markets are full of consultants, analysts, associates and researches, but only a fraction of the people know how to sell the goods and services produced from these industries. In order to understand such myopic attitude towards sales-jobs, we need to return to the educational aspects and growth of the public sector. A growing number of young people are applying to educational programs that prepare them for careers at the public sector. Such a phenomenon is a troubling sign for the economic development in Europe. The public sector often offers higher wages and benefits in comparison to the private sector simply because public sector employment entails a minimum amount of personal risk. In other words, working in the public sector does not require as much individual input, innovation, nor productivity as in the private sector.

Expectations

The previous generation can be considered lucky due to the fact that a general education was sufficient to build a successful career and reach middle-class status. Today companies are looking for specific skills from a larger pool of overly qualified applicants. Young and educated people are expected to have a Master’s degree, speak at least three languages fluently, multiple internship periods, volunteering experience and be flexible in every possible sense. As another key-speaker aptly stated:” You have to be a solution to somebody, not a walking liability for somebody.” What is meant by such a statement is that the young, educated and unemployed must take responsibilities and not expect somebody to take on this role instead. Quite frankly, crisis and difficulties are part of life and as all of us should know, life is not supposed to be a walk in a park.

Conclusions

Policy-makers and young leaders of communities must have a proper understanding of the fundamentals, transgenerational attitudes and expectations. Throwing money (often tax-payers’) at the problem is only generating ad hoc measures instead of long-term structural reforms. Solutions can be initiated at the local grass-root levels under a pro-active and dedicated leadership, which is inspired by many private-sector success stories. The youth in Europe is in desperate need to boost its confidence and strengthen its individual sense of responsibility. The government has never been able to deliver such. And it never will. Only entrepreneurial spirit can and will.

The author is the JCI Delegate to Finland and a former EST Ambassador to Croatia.

Advertisements