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Young and restless: Europe’s lost generation

Published in Business Spectator (Melbourne), 4 July 2013

Of all the aspects of the euro crisis, the most worrying one is the effect it has had on the younger generation. Across Europe, youth unemployment has reached such proportions there is talk about a lost generation.

But not all hope is lost, thanks to the European Union. At their summit last week, Europe’s political leaders agreed to spend €6 billion in the fight against youth joblessness. To top it off, there will even be a so-called ‘youth guarantee’. Within four months of becoming unemployed or leaving formal education, every young European will in future be offered a job, an apprenticeship, a traineeship, or continued education. Problem solved!

Without wishing to spoil the party, fixing Europe’s most pressing social problem will take a little more than warm words and a few billion euros. Even by EU standards, to believe that €6 billion and some solemn pledges will do anything to create a few million jobs is breathtakingly optimistic. In all likelihood, Europe’s youth unemployment problem will persist for as long as Europe’s general economic problems remain unsolved.

The first problem with the EU’s plans is their disproportionate measure. Across the continent, some 5.6 million under 25 year-olds are out of work. The true figure is likely to be somewhat higher because to be counted in the statistic, people need to have been out of work for at least four weeks and ready to start new employment within a fortnight. For those who have already given up looking for jobs, there is no place in official statistics. The statistics do not count young people in poorly paid and unstable jobs either.

On the other hand, it is probably also necessary to put the horror figures about extreme youth unemployment rates of 50 per cent or more around the Mediterranean into perspective. Such figures exaggerate the problem because they suggest that half a generation is without a job. In fact, a large part of young Europeans are still in education and thus not actively looking for employment.

Europe’s statistics agency, Eurostat, is trying to make the difference clearer by publishing both a youth unemployment rate (unemployed young jobseekers) and a youth unemployment ratio (percentage of unemployed people in that age group). While the former stands at above 23 per cent for the EU, the latter is just under 10 per cent. That’s still high but not quite as catastrophic.

For Greece, for example, this means that true unemployment for under 25 year-olds is 16 per cent, not 58 per cent as is widely reported. The difference consists of young Greeks going to school, doing apprenticeships or studying at university.

Nevertheless, youth unemployment is a serious concern but the EU’s recent announcements do not seriously address the problem. Based on the official, absolute figure of 5.6 million young Europeans without a job, the new EU package leaves little more than €1000 for each one of them. Though this may be enough to put candidates through seminars teaching them how to write successful job applications, it is unlikely to do much more than that. It is certainly not enough to provide meaningful qualifications.

Qualifications are desperately needed. Across the EU, 15 per cent of all 18-24 year-olds lack secondary school qualifications. Unsurprisingly, it is these people who are affected most by unemployment but there are no quick fixes to make them employable if they are without the most basic education.

As would be expected, the qualification problem is geographically concentrated in Southern Europe. While 79 per cent of young Europeans hold a secondary school certificate, only 61 per cent of young Spaniards and 59 per cent of young Portuguese have such qualifications. In times of crisis, and in tight labour markets, their employability is limited.

So the €6 billion now promised by the EU to help the young unemployed will not make much of a difference. And the EU’s touted ‘youth guarantee’ is not going to do much either. Not only because it is not a guarantee in a legal sense – there is no recourse if young workers still find themselves unemployed. But also because it might just lead to young workers being parked in make-work schemes or training programs with the sole purpose of removing them from the statistics.

The fundamental, underlying problem for youth unemployment in Europe is something completely different. The real problem for many European countries is the lack of jobs at any education level. They can train and educate their youth all they like, but if their economies are not getting out of recession soon, chances are minimal for jobs to be created and filled by young applicants.

Italy is a case in point. Unemployment and underemployment is a serious issue for many young Italians, many of whom are tertiary educated. But rigid labour market laws and poor economic growth for decades have prevented job creation. The situation is so desperate that according to opinion polls, one in three young Italians now considers leaving the country.

The real solution to youth unemployment in Europe has little to do with education and training initiatives, as desirable as such schemes might be. A qualifications drive cannot change the general economic climate characterised by poor growth, declining competitiveness, and minimal productivity increases.

The best chance for Europe’s youth is thus a generally improving economy. The chances for that, however, remain slim for well-known reasons: The drive to balance budgets by slashing spending; the inability of eurozone members to devalue their currency; the burdens caused by dense regulations and high taxes.

For the fate of Europe’s youth to change, Europe must change.

By throwing a little money at the problem of youth unemployment and giving some nebulous guarantees, the EU’s leaders have just made clear that such genuine change will not happen anytime soon.

The best hope for Europe’s lost generation remains to leave the continent and try their luck elsewhere.

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