Creating opportunity
Youth Unemployment: An Economic Time Bomb
Free Enterprise Staff | February 3, 2014

Business Horizons Quarterly’s John Raidt tackled the issue of youth unemployment in its most recent issue. Check out the article below and for more from BHQ, click here.

The “American Dream” is referred to routinely—almost casually—in our national discourse, so much so that we have blurred our understanding of its meaning and the strategic priorities necessary to make it a reality. Among these priorities is ensuring an ample supply of productive and satisfying work for our young people.

Youth joblessness surged in the United States and around the world following the global financial crisis—a trend that shows little sign of easing. The result is an economic, social, and security time bomb that threatens not only the quality of life for the millennial generation but for us all.

Today, more than 16% of America’s youth are jobless, a rate double that of adults.[1] For many of them, unemployment is chronic, and the ill-effects are long lasting. Jobless young people lose out on critical skills and social network development, earn significantly less over their careers than their employed peers, and strain public welfare programs.[2]

Without employment income, young people cannot pay off the staggering U.S. student debt, help sustain our deeply strapped Social Security and Medicare systems, or contribute to their own retirement savings that rely on early-year contributions to accrue returns. Moreover, the mix of high debt and joblessness fans disillusionment and frustration with our political and economic system, making the American dream seem more like an illusion and imposing huge societal costs. They include depriving our country of youth’s energy, fresh perspective, and inherent inventiveness.

Youth idleness is hardly just an American phenomenon. The Economist reports that nearly one-quarter of the world’s youth is either not employed, in training or in school.[3] Indeed, youth unemployment is on the rise in 138 countries. In parts of Europe still struggling to escape the continent’s economic malaise, youth unemployment tops 50%, with similarly appalling rates in some of the world’s most vulnerable security hotspots.

These conditions are more than sad—they’re dangerous. Studies show that teenagers who are neither working nor in school are more susceptible to criminal behavior, violence, and delinquency.[4] On the international stage, economic hopelessness is a major driver in the instability gripping the Middle East and North Africa, where youth bulges are creating a toxic economic and security dynamic in which radical ideologues and insurgents seek to exploit large numbers of needy and disgruntled youth.

What’s driving this disaster? The reasons differ from country to country, but a few common threads include anemic and uneven economic growth, poor governance, dysfunctional labor markets, the inability for economies to keep pace with rapid change, and the failure of leaders to appreciate youth unemployment as a top-tier strategic challenge. The World Economic Forum observes:

“Few countries have yet put forward comprehensive national youth employment strategies that include a vision shared by government, business, academia, and civil society, with clear metrics for success, and supported by resources that will tangibly increase youth employment.”[5]

Factors and Trends in Youth Unemployment

Adding to poor macro-economic fundamentals, several key factors contribute significantly to the problem domestically. In downtimes, when jobs are being shed, the “last in/first out” paradigm takes a heavy toll on younger workers. Additionally, older Americans are extending their working life at that same time that automation is being harnessed to perform an increasing array of tasks, particularly those formerly executed by entry-level employees.

While technology is displacing workers in certain job categories, it continues to open expansive employment opportunities in a vast number of others, particularly those in which science, math, engineering, and technology (STEM) skills dominate. These fundamental changes in the job market are exposing a yawning mismatch between the skills employers demand and those possessed by the majority of our workforce. As the Business Roundtable notes, “Major structural shifts in the economy are creating a widening disparity between the jobs and experience that workers have and those increasingly demanded by the workplace.”[6]

Of U.S. employers surveyed by CareerBuilder, 66% experienced difficulty finding qualified workers to fill vacancies.[7] A 2013 Gallup poll of public opinion towards education found that nearly 50% of Americans believe high school graduates are not prepared for the working world.[8] The pipeline does not appear primed to improve. Only one-third of eighth graders are proficient in math or science.[9] Some 30% of the U.S. student population fails to complete the twelfth grade, and that rate hovers around 50% among African American and Hispanic students, cohorts that will soon compose 40% of the nation’s workforce. As a result, by 2020, an estimated 123 million high-skilled, high-paying jobs will exist, but just 50 million Americans will be qualified to take them.[10]

America has a tradition of rising to the occasion when our interests, values, and indeed, our future are at stake. We did so when freedom was under assault in two World Wars and during the long struggle of the Cold War, in the long and never-ending march to protect Civil Rights, and in the race to the moon. These were all campaigns to keep the American dream alive—a dream that is at risk for a new generation. It’s time to rise to the occasion again.

The first step in elevating youth employment to a bona fide national mission is to arouse America’s unrivaled passion and iron will. In applying our resolve, we must be guided by the understanding that this critical mission is not the responsibility of government, business, or academia alone. It requires mobilizing a grand “whole of society” partnership to execute a smartly orchestrated campaign—one centered on igniting economic growth. Some of the central factors in this nationwide initiative include:

Fostering Growth: By some estimates, the economy will need to expand by 3% to 4% every year in order to re-employ the millions of people tossed out of work by the Great Recession and accommodate the 150,000 young people who enter the U.S. job market every month. This level of growth is twice the average attained during the past four years.[11]

Achieving such thresholds must be private sector-driven and empowered by policies and practices that catalyze job-creating investment, entrepreneurship, and business expansion. These include reasonable tax rates, sensible regulations, ample access to affordable finance, plentiful energy, strong infrastructure, and a culture of innovation—all of which require major national initiatives to achieve. New job creation dominated by the public sector is an unsustainable palliative. It drives up the already overwhelming cost of government that taxpayers—and a large cadre of idle workers—are increasingly unable to finance, further eroding our economic fundamentals. But little growth—much less the 4% minimum necessary—can be achieved or benefit young workers unless they possess the basic tools demanded in the modern workplace.

Closing the Skills Gap: Bridging the skills gap begins with transforming our elementary and secondary school systems and centering on one clear goal—academic excellence. This will require: adopting higher expectations of our educators, students, and parents; increasing school competition, collaboration, and accountability to drive performance; modernizing curricula to develop uniquely human capabilities and critical thinking needed in the age of automation; seeing education as a continuum that leads to the workplace; advancing best teaching and learning practices; and constantly improving the quality of our teachers.

While excellence in our traditional school systems is crucial to our future, so too is great vocational education. We must better incorporate vocational training into the last years of high school and embrace a culture of apprenticeship. Countries (such as Germany) that create strong links and bridges between education and work have the lowest youth jobless rates.

School transformation must be accompanied by an overhaul of our under-resourced and poorly performing job training system. Despite the critical role that job training plays in our economy and youth employment, we continue to underfund the mission, devoting only about 0.17% of GDP in 2010, according to The Atlantic.[12] Meanwhile, Germany spends nearly five times as much of its GDP on worker training as it continues to be a manufacturing leader and global trader—despite its aging workforce, high wages, and stringent regulations.[13]

Improvement will require an approach that better aligns job training programs with local and regional work opportunities. This can be accomplished by utilizing community colleges to provide vocational and specialty training that is coordinated closely with local/regional employers, civic organizations, and economic development agencies. Greater public-private sector collaboration should include joint programming, shared resourcing, harnessing technology to enhance access to and the delivery of job training programming, and developing common foresight on changes in the job market so that skills development programming stays ahead of the “help wanted” curve.

Encouraging flexibility and mobility: The International Monetary Fund has reported the strong ill-effects that labor market inflexibility (notably, hiring and firing regulations that increase the cost, hassle, and risk of employing) has on reducing employment opportunities.[14] Policymakers need to work with employers and workers to remove impediments to job creation. Rapidly evolving markets require flexible employers and workers and greater mobility among the workforce to fill opportunities where they arise. This places a premium not only on minimizing obstacles to hiring but on fostering the portability of benefits, including pensions and healthcare.

Providing mentoring: America’s young people are independent, entrepreneurial, creative, and ambitious. We need their talent and innovative prowess. They want to make a difference and govern their own destiny. The information and communication technology (ICT) revolution—which young people understand well—is transforming our culture and economy. ICT will continue to spawn new industries, businesses, and jobs in which youth can excel. We must support their dreams and talents with access to opportunity, finance, and entrepreneurial support, maximizing youth’s capacity to be job creators, not just job takers.

Driving accountability and organization: Not all of the essentials for putting youth back to work fall on laws, policymakers, businesses, and institutions. Much of the responsibility rests in the hands of young people themselves and their families, such as through developing a commitment to hard work, a devotion to excellence, an appreciation for the dignity of labor, and greater humility. Popular culture tends to denigrate honest, entry-level work and create unrealistic expectations of instant success and its trappings. This is not a good sign; neither are surveys showing that while the U.S. student body is being outperformed on standardized testing by their international peers, our kids rate their own academic prowess generously high.[15]

Getting real must be accompanied by getting organized. Unlike older Americans, young people do not have the same powerful voice and organized advocacy in the halls of power. Even though Millennials seem averse to organized associations, perhaps it’s time for the American Association of Retired People (AARP) to be joined by the creation of an American Association of Aspiring Taxpayers, which could watch over the Millennial generation’s interests.

A good part of the effort involves businesses themselves. Industry and commerce have an interest in leaning forward to provide young people with work and training opportunities, not as a matter of philanthropy but as a strategic investment in our country’s future—a bottom line in which we all have a stake.

Looking abroad: Our interests are served not only by improving youth employment at home but across the globe. Overseas markets where we hope to sell our goods and services cannot blossom in the shadow of idle and disgruntled youth. We must modernize U.S. global engagement to foster stronger bilateral economic relationships that help create broad opportunity abroad. It is time for our public and private sectors to work better together to broaden and deepen our economic and commercial ties. Engagement with a strong commercial component that helps developing markets and societies emerge—and with them, the prospects of their youth—will benefit our economy and security for many years to come.

Human capital is America’s (and humanity’s) most precious resource, and none is more valuable and important than our youth to whom we bestow the American dream. The dream has become a global aspiration that, if realized, can transform the future of our world.

It has become patently clear that in a highly integrated, trade-based global economy, youth poverty and idleness anywhere is a problem for us all. Putting youth to work at home and promoting the prospects of youth worldwide through wiser economic policy and more effective global engagement stressing participatory economic growth is a priority U.S. interest. It is time to make youth employment a true national mission. If history is any guide, once we do, we are sure to make America and the world a better place to live.

 

[1] Sarah Ayres, “America’s 10 Million Unemployed Youth Spell Danger for Future Economic Growth,” The Center for American Progress, June 5, 2013. <http://www.americanprogress.org/issues/economy/report/2013/06/05/65373/americas-10-million-unemployed-youth-spell-danger-for-future-economic-growth>

[2] “Generation Jobless,” The Economist, April 27, 2013. <http://www.economist.com/news/international/21576657-around-world-almost-300m-15-24-year-olds-are-not-working-what-has-caused>

[3] Ibid.

[4] Hanan Morsy, “Scarred Generation,” Finance & Development, 49.1, March 2012. <http://www.imf.org/external/pubs/ft/fandd/2012/03/morsy.htm>

[5] “Global Agenda Council on Youth Unemployment 2013,” World Economic Forum. <http://www3.weforum.org/docs/GAC12/IssueBrief/IB_YouthUnemployment.pdf>

[6] The Springboard Project, Getting Ahead-Staying Ahead: Helping America’s Workforce Succeed in the 21st Century, The Business Roundtable (December 2009): 11. <http://businessroundtable.org/uploads/studies-reports/downloads/BRT_Getting_Ahead_online_version_1.pdf>

[7] Diane Kurtzleben, “Surveys Find Employers Have Too Few and Too Many Qualified Workers,” U.S. News and World Report, March 28, 2013. <http://www.usnews.com/news/articles/2013/03/28/surveys-find-employers-have-too-few-and-too-many-qualified-workers>

[8] William Bushaw and Shane Lopez, “Which Way Do We Go: The 45th Annual PDK/Gallup Poll of the Public’s Attitudes Towards Public Schools,” September 2013. <http://pdkintl.org/noindex/2013_PDKGallup.pdf>

[9] The National Science Board, Science and Engineering Indicators 2012, National Science Foundation (2012). <http://nsf.gov/statistics/seind12/c1/c1s1.htm>

[10] Edward Gordon, “The Global Talent Crisis; Contrary to Popular Opinion, There are Plenty of Open Jobs. What’s Missing are Candidates with Skills.” The Futurist, (Sept-Oct 2009): 38. <http://commons.wvc.edu/jminharo/pols206/Article%20to%20Choose%20From/Global%20Talent.pdf

[11] Bernard Baumohl, The Secrets of Economic Indicators: Hidden Clues to Future Economic Trends and Investment Opportunities. New Jersey: Pearson Education,  2008, 32.

[12] Bruce Stokes, “Is There a Future for ‘Made in America’?” The Atlantic, December 9, 2010. http://www.theatlantic.com/business/archive/2010/12/is-there-a-future-for-made-in-america/67752/

[13] Ibid.

[14] Lorenzo E. Bernal-Verdugo, et al., “Labor Market flexibility and Employment: New Empirical Evidence of Static and Dynamic Effects,” International Monetary Fund, 2012.

[15] Secretary Arne Duncan, “Secretary Arne Duncan’s Remarks at OECD’s Release of the Program for International Student Assessment (PISA) 2009 Results,” U.S. Department of Education, 2010. <http://www.ed.gov/news/speeches/secretary-arne-duncans-remarks-oecds-release-program-international-student-assessment->