Why youth unemployment is so difficult to counter

Krista Simberg, Executive Director of the European Youth Parliament (EYP), 2nd from the left, Martin Hoffmann, Chair of the 8th Think Thank of the EYP, 2nd from the right, Jasper Deschamps, 5th from the left, and José Manuel Barroso, 4th from the right, looking at the "Fighting Youth Unemployment", Policy Paper. Probably those youngsters hope to gain a position in the Commission when they graduate. That’s why they appear so friendly with President Barroso, hopping in this way to upgrade their CV. (EC Audiovisual Services, 03/06/2014).

Krista Simberg, Executive Director of the European Youth Parliament (EYP), 2nd from the left, Martin Hoffmann, Chair of the 8th Think Thank of the EYP, 2nd from the right, Jasper Deschamps, 5th from the left, and José Manuel Barroso, 4th from the right, looking at the “Fighting Youth Unemployment”, Policy Paper. Probably those youngsters hope to gain a position with the Commission when they graduate. That’s why they appear so friendly with President Barroso, hopping in this way to upgrade their CV. (EC Audiovisual Services, 03/06/2014).

With the unemployment rate of the young under 25 around 2.6 times higher than the overall percentage of people without a job in the European Union, an existential and fact-based question arises; does the EU really need a next generation of workers and consumers? Or rather, have the decision makers, in the political and economic elites alike, decided it’s cheaper to produce in China and elsewhere in the world, rather than accommodate and feed on European soil an increasing labour force?

If this is the case, it is highly probable that in this reasoning there is a major and fatal omission. Some people keep forgetting that the young vote too and as it turned out last May they voted for extremist, Eurosceptic and racist groups. The last time Europe suffered unemployment rates of the kind currently observed in a number of member states, the Old Continent was devastated by fascism, Nazism and the WWII. The French youth voted massively for National Front last month and Marine Le Pen has established very good relations with the Russian President Vladimir Putin, because, among other things, she admires his autocratic governance practices.

The long-lasting crisis

It was not like that five years ago. Unemployment rates were in the single digit region and extremists were kept at the margins of the political system. The problem is though that the reverberations of the financial crisis are being extended and extended in time, with the financial system appearing unable or unwilling to play its role as the catalyst of growth and blood-donor of the real economy. Banks have become an inwards looking system absorbing the liquidity meant for the real economy and using it for their own and hidden purposes. The result is that growth and job creation in the SMEs universe has disappeared from the horizon.

As Mario Draghi put it last week in his interview after the historic meeting of ECB’s Governing Council, the inadequate transmission of ECB’s monetary policy is one of the major impediments to growth and job creation. Obviously the culpable parties for this scanty transmission of ECB’s policies are the banks. In reality what happens is that in half the Eurozone the money that the ECB gives as a gift to banks stays with them and is not lent out to the real economy.

No growth, no jobs

Draghi stated that “In order to ensure an adequate transmission of monetary policy to the financing conditions in euro area countries, it is essential that the fragmentation of euro area credit markets declines further and that the resilience of banks is strengthened where needed. In this context, the ongoing comprehensive assessment of banks’ balance sheets is of key importance”. Unfortunately, he didn’t say that assessment will drastically reduce the financial fragmentation, obviously because it won’t.

Regrettably, there has not been any other way invented to reverse the presently appalling unemployment rates prevailing in many EU countries, than real economy growth. Whatever programs the member states may implement have proved fruitless. Even in countries like France, with high but not shocking unemployment rates, such programs cannot offer sustainable and quality jobs that only grassroots economic growth can produce, mainly in the SMEs constellation. Training and apprenticeships only artificially reduce youth unemployment rates but are not jobs.

Training is not a job

The European Commission has recently adopted the French national Operational Program for the implementation of the Youth Employment Initiative (YEI). This is the first Operational Program to be adopted as part of the €6 billion Youth Employment Initiative, for which 20 Member States are eligible. It’s the well-known and much and expensively advertised for twelve months now EU program, without the slightest action yet being realized under it. The program promises that all youths under 25 will get an offer for a job, training or an apprenticeship within 4 months after leaving the education system. The French version of it has just being approved by Brussels.

Under this Operational Program, France will receive €432 million from the YEI and the European Social Fund (ESF) to help young people not in employment, education or training (the so-called NEETs) to find a job in those regions with youth unemployment rates over 25%. The results will be known many years after the young generation won’t be that young any more. Past experience has shown that such schemes end up as a mechanism to reduce unemployment statistics. When the money is spent the youths return to the streets.

Some down to earth proposals

In view of all those problems, the European Economic and Social Committee (EESC), an institution with direct reference to society made up by employers and workers had prepared a set of down to earth recommendations. The proposal was voted in the EESC by 124 members, 1 against and 4 abstentions.

In short, the EESC has identified several measures that can help address youth unemployment, and has provided examples as recommended by EESC members:
*Reforms of the education system…
*Recognition of informally acquired skills…
*Skills and (professional) training measures (The education system must provide the vocational and personal skills needed to start a career, include vocational…).
*Promotion of mobility…
*Public employment services…
*Labour market reforms…
*Incentives for businesses to recruit young people…
*Measures to promote entrepreneurship (Entrepreneurial education and training)…

The Committee also suggests in this set of recommendations “that only a strategy geared towards growth and aimed at strengthening competitiveness and restoring the confidence of investors and households, accompanied by sustainable investment and an economic recovery plan, can stimulate demand for labour”.

Going through all those proposals it becomes evident that there is no lack of ideas about how to tackle the youth unemployment effect. The catch is, however, that if one adds up all those very thorough recommendations, starting from the very basic ideas of how to mobilize the financial and the educational systems, then there will be very few things left standing to remind us of what many EU countries look like today.

If this is the case, youth unemployment could be with us for a long time more unless Draghi invents new financial structures and our politicians rewrite the plan for the education system and the labour market.

 

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