Transcript Q&A Jobless Generation: Youth Unemployment in the EU Shiv Malik Journalist, The Guardian; co-author of Jilted Generation; and co-founder, Intergenerational Foundation Borja Bergareche London Correspondent, ABC newspaper (Madrid) John Springford Director of Research, Institute for Employment Studies Chair: Jim Hillage Director of Research, Institute for Employment Studies 12 June 2012 The views expressed in this document are the sole responsibility of the author(s) and do not necessarily reflect the view of Chatham House, its staff, associates or Council. Chatham House is independent and owes no allegiance to any government or to any political body. It does not take institutional positions on policy issues. This document is issued on the understanding that if any extract is used, the author(s)/ speaker(s) and Chatham House should be credited, preferably with the date of the publication or details of the event. Where this document refers to or reports statements made by speakers at an event every effort has been made to provide a fair representation of their views and opinions, but the ultimate responsibility for accuracy lies with this document s author(s). The published text of speeches and presentations may differ from delivery.
Ok, now it s over to you guys for points and questions. If you keep them as brief as possible please and we ll get the panel to respond. If you would please, just state who you are and which organization you re from. Question 1: I ll start off just by asking the panel one question which surprisingly hadn t come up. A lot of other research people have done about youth unemployment shows that one of the reasons why it varies, one of the reasons why you have that chart, John, is that there are different education systems and the transition from full-time education into full-time employment is very different across those countries. It is also partly to do with the vocational education system, partly to do with the links between employers and education and partly to do with various other things. And you can parcel countries up into various types. Obviously Germany fits with a very high vocational education system; Spain probably fits with the opposite. I wonder if you had any perspectives on the education system as opposed to the other practices people have talked about. John Springford: I think that s certainly true. If you look at the evidence, places like Spain, the UK and Greece, actually Greece is the worst offender in term of the number of people who are in education between 16 and 24. In Greece it is something like seven per cent, it s extraordinary. So there are huge problems just basically with that aggregate thing. There are too many people who just aren t training, aren t in education, aren t building up skills. But in terms of the differences between different countries, one of the reasons I m a bit leery about saying let s take the German model and apply it everywhere else is because Germany has its famed Mittelstand of SMEs and medium-sized companies which provide industrial jobs, which we just don t have. So the idea that if we just shoved everybody into that training in the UK, that we would end up suddenly with much better labour market experiences for young people is questionable. That doesn t mean to say that we don t need to have an education system which works to comparative advantage and there are lots of arguments about why the UK system doesn t do that. One is that too few people drop out between 16 and 18. We have been responding by trying to get more of them to go to university and for a service-led economy having some sort of www.chathamhouse.org 2
university degree is incredibly useful. The wage premiums of having a university degree have remained high despite the fact that so many people have been going into it. So I suppose my response is: it s not one size fits all. Actually, what s the important thing at the moment is the extent at which countries can cope in macroeconomic terms with their debt. Borja Bergareche: Spain has the opposite problem. We have too many people in university, I think, and that has historically risen. In the 1980s, Spain was coming out of a dictatorship and the socialist government at the time basically created the foundations of the Spanish social state and that included the right of access to university. So most of our under 24s go to university and that creates a huge mismatch with the actual needs of the economic system. We have a similar situation to Germany [in that] 90 per cent of jobs are created by SMEs, but we have a university [system] feeding the market with generalists, with people with university degrees that are actually not useful to the system. The previous socialist government, this government, there is always this talk of enhancing the vocational or professional training and redirecting people there. It started to work before the crisis but now it s all gone. Jim was right to point it out, because it s a key element that needs to be addressed and that can be addressed. But it s true that we still think and many still think that, I have the right to go to university. When you re 18, that s the expectation. Plus universities still are Napoleonic universities, which are very inefficient, very passive, very little research and basically they re just factories of generalists; they have a social function, they create citizens. When you re 18, you basically know nothing. You can vote, sometimes you might wonder why we allow ourselves to vote at that age, but it s not really an intermediate stage between youth or childhood and employment. John Springford: The irony being that the Germany system, I thought, is based on the UK system as it used to exist post-war. Then we gave up on that system and now Germany is reaping all the benefits, oh dear. The irony being is that we are the best trained, most educated, most innovative generation in human history and yet there is nothing for us in a sense. There are no jobs. This idea of simply if we could educate our children more it will be alright, it doesn t work; it s far more deep [sic] than that in a sense. www.chathamhouse.org 3
It s also partly to do the attitudes of employers. In this country, they are absolutely terrible towards young people. They simply say young people can t read, they can t do anything, they are utterly useless, they re feckless, they re lazy, and the list of complaints goes on and on. Well hang on, where do you want to get these people from? Oh, we will get them from abroad, that s fine. Well, what are we doing as a community to improve the standing of young people in society? The answer is nothing. The answer from the government tends to be well they are pretty useless so we will force them into work some way or another. In Germany, they have a completely different attitude. They say, Ok look, this is our future. How do we work with this, how do we improve this as a community, i.e. businesses and employees working together? In a sense, it s a much more a family-oriented view on things. Here it s every man for himself, or every person for themselves. Ok, we ve got some questions. Firstly, name and organization please. Question 2: I was wondering if the panel could unpack young people for me, so what you mean by that phrase. In particular, are there any demographics or genders or ethnicities that are disproportionately harmed? John Springford: Very quickly. In the UK, there is a demographic lump. It s the echo baby boomers if you want. When the baby boomers themselves had children, this is the spike that exists. They are aged between I keep having to move their year every year so it must now be between 20-32. So you can see the spike and it spikes around the age 26/27. So there is a spike, a demographic lump, there and they have had a very interesting time especially those people aged 26. If you look at their political what happened to them with September 11, they ve had a very different existence from perhaps generations above them anyway. And of course they ve come out into a recession. That s what I would mean by young people. Question 2: But specifically within that are there different types of young people? www.chathamhouse.org 4
Generally people with no qualifications, people with a disability, people that come from some racial backgrounds, a minority of racial backgrounds but not all, are more likely to be unemployed than others. OK, I m going to bring some other people in. Question 3: Two very quick questions, the first one directed to Shiv. You started by saying how the Anglo-Saxon model may not be the best when it comes to planning and then we were talking about the need to innovate. Do we have another model that is better at innovating? First point. And another very quick one to John and as somebody who works in universities, I couldn t agree with you more. It would be great to be able to, as you pointed out, take from pensions and put it into education; you know, more jobs for us. However, is that going to solve the problem now? Question 4: I just wondered if you could give a few more practical examples, maybe not at a wider government level, but more a sort of grass-roots level of what can be done to help the issue of youth unemployment, particularly among more disadvantaged groups of people. I work for a grant-giving organization and we re looking to develop a programme supporting disadvantaged young people, helping with unemployment and I would be interested to hear where you would recommend we invest our money. Question 5: Shiv, you spoke about this scarring effect and the long shadow cast by youth unemployment on the individuals involved. But if you extrapolate out the aggregate individual effects to a macro level, how structurally damaging do you see this current period to the UK s long-term competitiveness. And if we could also get the Spanish angle. And also placing it in a global context with the BRIC economies becoming more diversified and direct competitors in industries which have traditionally been very European-dominated. www.chathamhouse.org 5
Picking up on those points, let s try and focus on some of these ideas about solutions. We ll start with John, how practical is it to transfer OK you ve been saving all your life for pensions but we re not going to encourage that any more, we re going to switch over there. And then we ll talk about other people s ideas about practical solutions. John Springford: Ok, the thing that I didn t have time to say in the talk is that the countries that are really struggling, including the UK as it happens, all order their pensions incentives like this: they say, Ok, we ll give you tax-free savings now and then we ll tax your pension when you take it down. One simple thing that you can do, which other countries do, is just reverse that. You basically say, We are going to tax your pensions now and all of your pension up till now you can just continue with but from now on, all money that you put into your pension, we are going to tax. And that will raise a significant amount of money and then you can make that tax-free later. So this should help deal with what is the biggest bust in 80 years. We do need to be radical about this. It s going to create a big tax lump now which you re going to have to pay for later, but if you can invest that tax lump into education, and it would have to be part of a big investment plan in terms of infrastructure, and that helps. But the reason why investing in education does have some demand-side effects is because you have teachers salaries and so on but you also make the labour market quite a lot easier for people who are struggling to find a job. Because if you can take, I don t know, 30 per cent of people out of the labour market, it really relaxes it for those people who are left in it, which helps them to be able to find work. And as part of a broader investment package, construction has to be a big part of this for the UK. As part of a broader investment package, then you ll see that there will be more jobs in construction, many young people can work in construction, and this should really help. It is only a small part of what has to be a broader package but I think it will help with demand. And just coming to the other speakers, coming to the questioner down there, if you had a plan to try and invest in something to try and help young people back into the labour market or enter the labour market for the first time, what would advise them to do? www.chathamhouse.org 6
Shiv Malik: In terms of practical examples, I think the best thing that this country can do, and every country will have different examples, is to build houses. I think that is probably the single greatest silver bullet that we can do. Borja Bergareche: Don t do that. Shiv Malik: [Laughter] That s why I stressed this country. Because literally, if there was some way of transporting Spain s housing stock to here, it would all work out. Mind you it s not very well built, I hear. Borja Bergareche: Move to Spain then. Shiv Malik: Move to Spain. Yes well, that is kind of the liberal answer as well. Just move around until you find somewhere that s economically beneficial and don t worry about family or culture or community. But for here it would be about building housing, and especially building homes where there are jobs. We have some wonderful cities in this country and yet we seem to strangle them at birth, or as they grow. One contentious thing is to say get rid of the green belt because it s a kind of fictitious construction. But the main point being, look, young people need somewhere to live, young people don t want to spend more than half of their income on housing costs. Why? Because, it s a really bad idea for any economy to simply hand money to landowners, who tend to be older and at this point quite wealthy as it is. I mean, this is why most people here, I m assuming, are renting, and probably renting in and around London given the time of morning which you ve all arrived. It s atrocious isn t it? In terms of what disposable income you re left with, it is almost nothing. People work hard for this stuff and yet it s going up. We can reduce those costs. As a charity, as a grant-giving charity, that might not be very helpful. But there is another thing which is that there is about 750 billion wrapped up in UK companies, which they are saving and they are saving it, leaving it on www.chathamhouse.org 7
their books, because they are afraid because there is this crisis of security, both in business and in ordinary people s lives. So they don t know whether they are going to be employed or not employed or if their pay cheques are going to work out for them. That s when you need community or government intervention to stop and dampen that. I think making sure that some of that money goes to young people, who have some of the greatest economic demands generally in society because they re starting out with their lives, is really important. Internships are part of all of that. That s why I write about all of this, I think it s important. Just to answer that question: is there another model? Well yes, there is another model. There are lots of different models. Are they practical? No, not really. My thing is I m still a capitalist so I m not anti-capitalist in that sense, but capitalism is a varied thing and the model that we have at the moment is nuts, if you want. And the non-sexy way of saying this but the quickest way of saying it is that we need to find a way of managing the discount rate in society. Not many people may know what that means but it s essentially about how we take long-term decisions and long-term investment spending. At the moment, government has stood back for the last 20 years and said we don t do that kind of thing, we leave it to the market. It turns out that the market is not very good at taking long-term decisions, i.e. in the 20-40 year horizon. Partly because those people don t exist, as in they are not even born yet, or they re minors, but they will live; they will live probably on average to 90 years, which also in itself is quite new in society. We ve only been dealing with this for the last 30 or 40 years, that stretch in longevity. So government needs to come in and say, Look we do have a role and our role is primarily managing the discount rate so we can leave something better for our children. That s the short way of saying it. Question 6: It s been interesting to hear the solutions that have been put forward so far, ranging from the kind of absolute macroeconomic down to the little, more granular stuff, but what s been the link across the group is that young people have always been passive in this. It s always been something that s going to be done to young people either by [inaudible] or by government, or by changes in the education system. It seems to me that there s another side to this and that s what young people can do for themselves. As an under 35, I m not entirely confidant that the current generation is going to necessarily take it on themselves to solve this in any kind of short-term time horizon where a www.chathamhouse.org 8
difference can actually be made. So what is it? Is it about upskilling? Is it about looking abroad? What are the options for young people who want to take it upon themselves to actually do something about the situation? Question 7: We live in a global society and the crisis is global and what happens in Brazil is affecting Europe and vice versa. Don t you think that maybe the solution will be a bigger perspective? Because you have been talking about British ideas, Spanish ideas shouldn t it be global ideas, European ideas at least in this case because we re talking about youth unemployment in the European Union? Question 8: Just a couple of points, one of which is probably very reactionary. Have there been any comparisons looking at the impact of things like national service, social service on these things, where you re actually training people? Germany, for example, pretty much everyone does their national service. I m just wondering if there was any comparison between those. The second point I suppose is picking up on the generational war issues. How do you actually make sure that young people are able to play a role in the kind of political system which enables us to extract things from the government in the same way that, for example, pensioners have managed to extract free bus passes, winter fuel payments, TV licences, etc. It seems like I remember 10-12 years ago in the Scottish Parliament, there was one of the parties that was elected was the Senior Citizens [Unity] Party. But the idea of something similar happening as a sort of cross-party pressure group, but for young people seems like something that would be great in theory and probably impossible in practice. Borja Bergareche: Let me just react to some of the questions that have come up. They re not really beyond the obvious subtypes of demographics, but there is one which is interesting, gender. Employment is a women s issue but not under-25 employment, which I thought was interesting going back to the figures. Extrapolating the costs I can give you an economist s answer but the cost of opportunity is huge in Spain at the moment. I ve said it already but the www.chathamhouse.org 9
brightest generation is unable to evolve, deploy its knowledge and skills and change the country. I have a bit more provocative answers to some of the questions. What can under 35s do? Here s a thought: the generation that is running Spain at the moment government, media, companies were trained in the 1950s and 60s when Spain was basically a third-world dictatorship. The quality of their training necessarily was third-world, whereas now we are a totally first-world compatible generation. Give us the power. And I mean it. More under-35 members of parliament, more under-35 business leaders, more under-35 everything, you name it. And that s my only reason for hope, in a way, and I really think it will have an impact in the sense that we are compatible. We are used to working in multilingual environments and multicultural environments. Ethnicity is not a social variable in Spain. I mean, yes, it has started in the last ten years, but you see what I mean. Back to the cost: this under-35, bright enough generation, what are we losing? We are losing a lot of self-confidence, a lot of belief in the system, which is very important, and basically the narrative of self-improvement and we mentioned it before is vanishing. My brother graduated from Harvard two weeks ago and I was at the Harvard commencement. I went to Columbia myself. That narrative is so powerful. But I came back with one different thought than when I graduated myself in 2006. I had the idea I was talking to my brother, he s in London now that only if you go into finances will you be a rich guy, in a way. So in a way the world, the civilization we ve built for young people, there are two perspectives. Go to finance, make the money, or struggle. And I think there is a bit of that. Just a thought. OK, we re running out of time so I am going to ask our other two speakers to just have one minute, final couple of points please. Shiv Malik: I m going to answer the question perhaps in a minute with my final point which is to say, what do young people do for themselves and how do young people play a role? In a sense, it is true: we are the most creative, most innovative generation in human history and this shouldn t be overlooked in any small part. This is our greatest strength. One thing about why young people don t vote: there s another explanation, which is that there s nothing www.chathamhouse.org 10
on offer for them and politicians haven t been offering them anything. But it is incumbent on everyone in this room being under 35, a few of you who may not be, but anyway, join the club. We are responsible for not just our own fates in that sense our collective own fates because we realize this is a collective problem, it s not something that we can individualize and go away and read a self-help book about and go on a yoga retreat and come back all fine and dandy because it s a systemic problem, so we ve got a collective aspect to this. But also we re responsible for everything else. We re responsible for those debts that need to be paid off, those pensions that will have to be paid, and that s the point: we are responsible for almost everything. This is our system, so we already are responsible for it, we have to claim the power and create those ideas which will make the world a better place, and it sounds so trite, but it s our world to create. John Springford: I was just going to sum up by saying, a lot of the questions and the solutions that people have put are, not to put a too fine a point on it, tinkering around the edges young people s passivity or what can young people do for themselves, national service, social services, trying to get young people to play more of a role in decision making. What really matters is restoring demand and stabilizing our economies, that s what s going to resolve this problem. So if there is one thing that we can all do it is trying to get our respective governments to change course. In terms of the euro area, this means that Germany has to change course, and in terms of the UK, this means that the government needs to do more to stabilize output. We re still in a slump. OK, Borja is going to make one last point and then I ll try to sum up briefly. Borja Bergareche: Just to introduce you mentioned the global perspective but the European perspective as well. What happened to the myth of freedom of movement and freedom of establishment in the European Union? I don t mean it in the neoliberal way of global adjustments of the workforce moving from one place to the other, I mean it in the more positive way of, we are all Europeans, we went to university together for a year in whatever country, I went to Belgium www.chathamhouse.org 11
myself what happened to that? I haven t looked at the figures for a long time, but it was below 5 per cent of the EU population that actually moves around and seeks a new life or a different life elsewhere. So the fundamental EU freedoms are just a myth and I think there s a bit of room for solution if we looked at that as well. John Springford: Can I jump in and say thank you so much for the questions. They were all absolutely insightful and brilliant and I m sorry we didn t get more time to answer them. And I m going to say thank you very much to our speakers for a really excellent leading into a discussion and the questions. Nobody can leave this room without realizing the nature that this is a really big problem but also it s a really complex problem that looks different in different parts of the world, but it s a global problem. We ve talked a bit about solutions. It s not surprising now that we haven t come up with the solution. There are also some shortterm things that can be done, whether it s paying people for internships, whether it s subsidizing employers to take on young people, whether it s the youth contract or whatever this government is trying to do or what other governments are trying to do. There are also some other shorter-term measures about taking younger people out of or encouraging them to delay entry into the labour market and increase their human capital. I was interested in the idea of global internships, of sponsoring young people to go around the world, and picking up on your point about getting people moving around more might be an interesting solution to that. It s also absolutely crucial, I think nobody would disagree, it is long term; it s big issues that are going to do it. It s demand, stupid must be the first thing. I think there is something about the education system and making sure that it is suitable for the modern labour markets. Does this mean to say we have to copy what Germany does or whatever? We have to make it suitable to our own labour market and our own conditions, but it is about reforming. There is probably something about changing the attitudes of employers to young people. If you look at the data, most employers think young people aren t very suitable for the labour market these days apart from the ones they www.chathamhouse.org 12
have taken on themselves. They re really good actually! If you ask most employers they will say, It s literacy and numeracy, young people have got really low levels of literacy and numeracy apart from our last recruit, who was actually really quite good. [Laughter] So I just think it s an inferred problem for a lot of employers and I blame the journalists for that. Finally, I think the other point that came across to me very quickly was about young people themselves getting involved. I thought that was really interesting about creating and managing your own solutions to this problem. Thank you all very much. I wish you a good day. www.chathamhouse.org 13