The Ticking Time Bomb of Youth Unemployment
Global youth unemployment stands at a staggering 74 million worldwide and this number seems to be growing according to the 2015 World Economic and Social Outlook report. When it comes to America the Bureau of Labor Statistics reports roughly 12% of those between the ages of 18 and 25 are unemployed. Countries like Spain and Italy have rates more than triple that of the US when it comes to their youngest eligible workers.
According to Holly Ransom, CEO of HRE Global “we are at risk of creating a lost generation” and that risk will cost the global economy dearly. In a recent talk at the EY World Entrepreneur of the Year program in Monte Carlo, Monaco Ransom pointed out that roughly $150 billion a year in productivity is lost globally due to youth unemployment. The challenge is figuring out how to combat this global phenomenon that has such diverse roots. One group many are looking to is the world’s leading entrepreneurs.
Maria Pinelli, EY Global Vice Chair for Strategic Growth Markets, believes that “entrepreneurs play a particularly important role when it comes to driving youth employment opportunities.” Pinelli believes “it’s vital that governments, corporations, and entrepreneurs work together to create an environment that encourages and nurtures the entrepreneurial job creators of tomorrow.”
Pinelli is definitely on to something. The fact is 75% of the jobs created across the G20 nations come from entrepreneurs. Furthermore, the newly released EY Global Job Creation and Youth Entrepreneurialism Survey 2015 found that 47% of the world’s entrepreneurs expect to increase their workforce over the next 12 months which far outpaces the projections of their corporate counterparts.
One bright spot is that in contrast to these startling facts the study found that worldwide 84% of young people are optimistic about fulfilling their career ambitions with a resounding 65% wanting to start their own businesses. This optimism is shared by both men and women. The challenge is providing these young people with the support they need to make the leap and it looks like the entrepreneurs of the world are leading the change.
When it comes to actually engaging young workers the report found that:
- 33% of entrepreneurs are working with local schools
- 34% of entrepreneurs are mentoring young people
- 41% are providing internships and apprenticeships
Engaging these young people is certainly a critical first step, but there is still the looming issue of the skills gap, which only seems to be growing. The EY study found that greatest threat perceived by US businesses is a growing shortage of skilled talent. Industrial automation and digital technology are continuing to replace lower level jobs while at the same time creating the need for higher level more skilled ones. This moving target is tough to keep up with particularly for those job seekers with limited resources.
“Closer collaboration between policy-makers, education and enterprise is needed to help align young people’s skills with business needs” explained Bryan Pearce, Global Leader of the Entrepreneur of the Year and Venture Capital Group at EY. The skills gap exists because governments and educators aren’t effectively communicating. Some examples of collaboration include both formal and informal internship and apprenticeship programs driven by local businesses and supported by local governments.
Companies need to give young talent the opportunity to learn the types of skills they know they will need to perform now and in the future. A joint study from EY and MasterCard on creating high impact employment experiences for youth notes that these experiences must be created very deliberately if they are to succeed. The report outlines six key elements to a successful program:
- Real – Offer actual exposure to the work
- Relevant – Build real skills for future applications
- Structured – Provide a clear path to progression
- Mentored – Expose interns to successful leaders
- Formalized – Provide some sort of certificate to recognize the training
- Paid – Demonstrate the experience the financial reward of work
In cases where youth unemployment is so high that apprenticeship and internship opportunities just can’t provide adequate coverage new approaches have emerged. A recent entrepreneurial approach to mitigating this challenge is the concept of practice firms or shadow companies. These are fabricated companies designed to simulate work situations for budding industries where future opportunities may lie. The unemployed individuals who qualify can earn an opportunity to work in a trade or role they have no experience in and learn new skills to prepare them for upcoming opportunities. The idea is to develop mock organizations that mimic successful companies in growing industries where future opportunities for skilled labor will become available. France has been experimenting with this model with a fair amount of success.
The challenge is ensuring these training programs focus on the future not the present. William Saito, Founder and CEO of InTecur K.K. notes that for those just now entering kindergarten “65% of the jobs that exist today will not exist when they are ready for the job market.” Focusing on the future will be critical.
The solution certainly won’t be a simple one. The combination of leading entrepreneurs dedicating time and resources along with an optimistic generation of young people with a burning desire to pave their own path should give us some hope. The next step will be for government and corporate leaders to find ways to reduce barriers and support these efforts so as to ensure we don’t create a lost generation.