Europe paying price for lost generation of unemployed youth

By Shiv Malik  /  The Guardian, LONDON

Fri, Oct 26, 2012 - Page 9

A lost generation of 14 million out-of-work and disengaged young Europeans is costing EU member states a total of 153 billion euros (US$198.6 billion) a year — 1.2 percent of the EU’s GDP — the largest study of the young unemployed has concluded.

The report by the EU’s own research agency, Eurofound, discovered that Europeans aged 15 to 29 who are not in employment, education or training (known as NEETs) have reached record levels and are costing the EU 3 billion euros a week in state welfare and lost production.

The Organisation for Economic Co-operation and Development (OECD) said Europe was “failing in its social contract” with the young, and rising political disenchantment could reach levels similar to those that sparked North African uprisings during the Arab spring.

The research, which will be presented at a high-level EU presidency employment meeting in Cyprus on Monday, backs such fears: A survey of EU NEETs included in the report found much lower levels of political engagement and trust compared with those in employment.

“The consequences of a lost generation are not merely economic, but are societal, with the risk of young people opting out of democratic participation in society,” the report says.

The number of young adults in work across 26 member states is the lowest on record, the report’s authors found. Those in employment were working fewer hours and in less secure jobs.

Last year, 42 percent of young working Europeans were in temporary employment, up from just over a third a decade ago. A total of 30 percent, or 5.8 million young adults, were in part-time employment — an increase since 2001 of nearly 9 percentage points.

Since the global downturn in 2008, there has been a 28 percent increase in associated NEET costs across the EU, with Italy facing an annual bill of 32.6 billion euros a year, France 22 billion euros and the UK 18 billion euros. The new EU report calculates that as a proportion of annual national output, Ireland is estimated to have lost 2.8 percent of its GDP to inactive young adults last year, while Greece lost 3.28 percent and Poland 2.04 percent. The UK, the report concludes, lost 1 percent of GDP to an inability to engage potential young workers — a figure that contrasts with last year’s growth of 0.8 percent.

The report’s authors warn that the total EU costs associated with NEETs — 10.8 billion euros in public finance and 142.1 billion euros in estimated loss of output — are “very conservative,” because they do not include extra spending on crime or health or the likely long-term scarring effect of unemployment.

However, they add that it is unrealistic to expect all NEETs — who make up 15 percent of the total young adult population in the EU — to be integrated into the workplace because the figure also includes those who might be looking after children or suffering from ill health.

“[The] 153 billion euros is a hypothetical situation if all young people could be integrated into the labor market,” said the report’s lead researcher, Massimiliano Mascherini.

“But another way to see it is that if just 10 percent of NEETs could be reintegrated, 1.4 million people, it will represent a saving of 15 billion euros [every year],” he said.

Of those out of education, training and employment, 73 percent of 15-to-19-year-olds had no experience of work at all, dropping to 43 percent for those aged 20 to 24 and 28 percent for 25-to-29-year-olds. In southern European countries, such as Italy, Bulgaria and Greece, the figure for NEETs aged 25 to 29 with no experience of work rose to more than 40 percent. Stefano Scarpetta, the OECD’s head of employment analysis and policy, warned that disenchantment within Europe’s young adult population was reaching dangerous levels.

“We are failing in our social contract,” he said. “We are not giving option or opportunity to those who have invested in their human capital ... [and] if we don’t address these issues ... soon social and political tensions will increase.”

Scarpetta added: “The parallel in the Maghreb region is telling because there there was in some cases significant economic growth, with major investment in education. So the generation of young people who were in education were much better trained than the previous generation and yet there were no jobs waiting for them.”

“The only jobs were low paid and service sector jobs. That was one of the major triggers, that of political social unrest, that then led to the revolutions in those countries. I don’t think we are there in Europe, but some dissatisfaction, and with our economic model, is building up,” he said.

While tertiary education is still a shield against unemployment, Mascherini said his team discovered that 30 percent of Greek graduates were NEETs. In Italy, it was 20 percent — twice the EU average.

Paul Gregg, professor of economic and social policy at Bath University in southwest England and an expert in the scarring effects of long-term unemployment, said that according to his own study in the UK, the EU report’s stated annual costs could rise significantly.

“For young people, the time when you’re gaining the experience and skills which lead to rapid advancements in your earning potential really focuses between 18 and 30,” he said.

“[So] if you’re out of work for a year or so, what you’re doing is forgoing that experience, so you are permanently delayed. When people are in their 30s, they don’t catch back up [with peers] who don’t have that absence from the world of work,” he said.

Peter Matjasic, president of the European Youth Forum, the representative body of more than 90 national youth councils and international youth NGOs, said: “The Nobel committee talk of the success of the ‘European dream’ and European leaders this week spoke about strengthening it, but without investing in youth now, it is in danger of becoming a lost dream.”