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Investing In Youth For A Stronger Global Workforce Economics Essay

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Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Published: Mon, 5 Dec 2016

ABSTRACT

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Unemployment and underemployment is a prevalent problem confronting youth all across the world today. It is, in fact, part of the larger and perpetual struggle shared globally by governments to provide employment for all citizens.

More than 200 million people across the world today are unemployed or underemployed. [1] Among the labour market groups, youth are particularly vulnerable as they are more likely to be unemployed than their adult counterparts at the global level. [2] 

This proposal will examine the causes of the unemployment challenges faced by youth today and explore into the possible youth-led solutions and initiatives such as:

The setting up of a global foundation managed by youth which oversees the international effort of;

The establishment of Youth Development Councils (YDCs) in communities throughout countries to provide job matching and employment opportunities for youth to stay employed in the workforce through training and skills upgrading programmes;

A global youth employment campaign to raise the awareness to youth on the importance of education and to curb the rising number of school dropouts globally.

As a blueprint for the future, this proposal represents a relentless conviction and a call to action towards the improvement of the educational competencies of youth worldwide, which – if fully implemented – will produce substantial and verifiable results.

This proposal is an audacious vision which will put countries on a path of achieving the Millennium Development Goal of “achieving universal primary education” [3] and lay the foundation for a robust global workforce of tomorrow.

UNEMPLOYMENT, YOUTH & PRODUCTIVITY

Despite worldwide efforts by governments to achieve high GDP numbers, massive unemployment is eminent even in developed countries. [4] The developed economies and the European Union saw the largest increase in unemployment by 2.3 percentage points and accounted for more than two thirds of the increase in the global number of unemployed in 2009. [5] 

Strong GDP growth necessary for jobs growth, but not answer to global employment woes:

While strong economic growth is a fundamental prerequisite in spurring the creation of jobs, simply stimulating higher exports or consumption to achieve high GDP numbers is not the answer to the staggering unemployment rate looming in countries all across the world.

The imperfect relationship between economic growth and jobs growth, as observed by Arthur Okun in the original statement of his law, known as Okun’s Law, shows that growth in GDP is not always accompanied in growth in employment (Prachowny, 1993). [6] It is estimated that a 3% increase in output will result in a 1% increase in employment rate (Prachowny, 1993).

Productivity matters, not just size of labour force:

The entry into the new millennium marked a watershed era as it saw the emergence of new industrial powers such as China, Russia, and India. It also witnessed the transformation of once manufacturing-based economies such as South Korea, Taiwan, Hong Kong and Singapore into knowledge-based economies in order for them to remain relevant to the changing global economic landscape and to avoid competition against economies with cheaper labour markets and raw materials.

As the reliance on human capital grows heavier [7] , competition among developed economies in the new millennium is now based on the premise of productivity [8] rather than the size of a country’s workforce.

China, soon to overtake Japan as the second largest economy in the world, is currently the world’s largest economy in terms of workforce size with a labour force of 800 million people. However, in terms of real GDP per capita (PPP), China only ranks 89th in the world. (2008 World Bank estimate)

On the contrary, countries with small labour workforces such as Singapore and Switzerland with workforce sizes of 2.96 million and 4.04 million respectively, rank as the 3rd and 6th richest nation [9] in the world in terms of real GDP per capita (PPP).

The productiveness of a workforce – or how skilled a country’s workforce is, is therefore, the key to tackling the issue of unemployment.

GDP per capita is derived from the combination of 2 components – the productivity of labour and utilisation of labour. Productivity gains are crucial and key to long-term and sustainable economic growth. Innovation in turn, is paramount to productivity growth.

In assessing the economic performance of an economy, one has to understand the dynamics of its productivity. Labour utilisation is determined by 3 factors – average working time (no. of hours worked), labour force participation rate and unemployment rate.

Labour utilisation is high in Switzerland in comparison with other OECD countries – Switzerland ranks third among the OECD nations, after South Korea and Iceland. [10] Singapore, in recent years, is on par with the OECD countries, ranking slightly lower than the EU-15 and EU-25. [11] 

The high rankings of both Switzerland and Singapore in this regard indicate that both countries have a very high labour force participation rate [12] and very low unemployment rate, while working time is in the OECD average.

Youth Unemployment and Vulnerability:

(Part 3 & the section following it – “Why Youth Employment Matters” is the author’s response to: How does youth unemployment affect you, your country, town or local community?)

Youth are especially vulnerable in the labour markets all across the world. Prior to the global jobs crisis, youth were on average 2.8 times more likely to be unemployed than their adult counterparts at the global level.

On current estimates, the global youth unemployment rate rose by 1.3 percentage points from 12.1 per cent in 2008 to 13.4 per cent in 2009. [13] 

The skyrocketing level of youth unemployment all across the world has been a pressing issue which governments are trying to address because of its profound impact it has on the lives of young people. Extensive research has been done on the psychosocial consequences of unemployment; studies show that young people who are unemployed may suffer from a loss of self-esteem, diminished levels of well-being, and frequently isolation from peers. [14] 

Youth unemployment turns problematic when it becomes long-term and when it leaves young people without the means to provide for their basic needs. [15] The crisis of youth unemployment deprives young people of the opportunity to secure independent housing or the accommodations necessary for the establishment of families and participation in the life of society.

If effective solutions are not found, the cost to society will be much higher in the long run. Unemployment creates a wide range of social ills and young people are particularly susceptible to its damaging effects: the lack of skills, low self-esteem, marginalization, impoverishment and the wasting of an enormous human resource.

WHY YOUTH EMPLOYMENT MATTERS

(This section is a continuation of the author’s response to: How does youth unemployment affect you, your country, town or local community?)

Tremendous Source of Human Potential:

Firstly, it is important to clarify that young people should be valued as an asset rather than a problem as they are the future of the global economy. In the next decade, some 1.2 billion young men and women will join the ranks of the working-age population, the best educated and trained generation of young people ever with tremendous potential for economic and social development.

Youth, are a creative force for the present as well as the future. Instead of referring young people as tomorrow’s leaders; the emphasis should instead be on how they can better fulfil their roles as today’s partners. Rather than being viewed as a target group for which employment must be found, it is important to accept youth as partners for social and economic development.

Increases Global Output:

Halving the world’s youth unemployment rate (from 14.4 to 7.2 per cent), could add an estimated US$ 2.2 to 3.5 trillion to the world economy.3 This represents 4.4 to 7.0 per cent of the 2003 value of global GDP (see section 4 for more details). The largest relative gains from getting youth into decent and productive work would be in sub-Saharan Africa, with an estimated 12 to 19 per cent gain in GDP (table 7).

Reduces Illegal Activities:

The even more obvious gain in making the most of the productive potential of youth and ensuring the availability of decent employment opportunities for youth is the personal gain to the young people themselves. There is a proven link between youth unemployment and social exclusion.4 An inability to find employment creates a sense of vulnerability, uselessness and idleness among young people and can heighten the attraction of engaging in illegal activities.

Also, cohorts that face particularly depressed labour markets when they graduate from primary or secondary education are − other things equal − subject to relatively higher rates of unemployment during their whole prime-age work career.5

Eradicates Poverty:

Finally, young people without a decent income cannot support themselves and will therefore be more likely to have to stay within the family household much longer than the family can afford.

The extended financial burden on the household ruins the chance of the family as a whole to get out of poverty and sometimes hampers the chances of younger family members in gaining access to education (parents cannot afford to send them into education and forgo their limited earning potential) which then damages the future prospects of the younger siblings as well.

It is not just the current family that gets stuck in the poverty trap but the next generation as well. For the poorest economies in the world, getting young people into decent employment means giving them the chance to work themselves and probably also their families out of poverty. In fact, out of the 550 million working poor in the world, defined as people who work but do not earn enough to lift themselves and their families above the US $1 a day poverty line, it is likely that no fewer than 25 per cent, or 130 million, are young people.6

TACKLING YOUTH UNEMPLOYMENT

(This section is the author’s response to: What can you do, working together with your peers, to find a sustainable solution for job seekers through youth entrepreneurship? Think specifically about the barriers youths face in the labour market and how to tackle difficulties in accessing capital for business start-ups.)

The concerns raised in this paper reflect that of the United Nations, whose commitment to action is reflected in the Organization’s current agenda and activities. A decade ago, at the millennium summit, world leaders and head of states agreed unanimously, within the framework of the Millennium Declaration, to “develop and implement strategies that give young people everywhere a real chance to find decent and productive work.” [16] 

In this section, I will offer a series of viable and implementable solutions which will add some merit to the good work that international bodies and governments have already been doing, on curbing the rising youth unemployment rate and tapping onto the potential of youths which are a tremendous potential for social and economic development.

The Global Youth Employment & Development Initiative:

In order to effect a substantial change on the employment situation of youth worldwide, it is vital that there is an international commitment and a global concerted effort by governments and international bodies to resolve the problem.

Therefore, I propose the setting up of the global youth employment and development initiative – a foundation which will be run and managed by youth which oversees the international effort of 1) assisting unemployed youth find suitable employment, and ensure that 2) employed youth continue to stay in the workforce and earn decent wages to support their families and finally, to 3) tap into the productive capacity and potential of youths and 4) improve the educational competencies of youth worldwide.

This initiative will be established as a joint collaboration between local governments and international bodies such as the United Nations, the World Bank and the International Labour Organization and will begin its operations in 30 countries across the globe with a proposed endowment fund size of US$1 million. This funding will be a one-off funding to provide the foundation and its local community branches with a good head start; the foundation will have to seek for alternative forms of future funding through avenues such as social entrepreneurship or seeking sponsors and partnering with government agencies or tapping on the support of local grassroots organizations (GROs) in order to sustain its outreach efforts.

The foundation will oversee and ensure the setting up of smaller and local branches – the Youth Employment & Development Councils (YEDCs), in countries throughout the world. Every YEDC will be given a minimum and intial funding of US$40,000 – US$50,000 (amount will vary depending on country) and this sum of money will be subsequently divided and allocated to the different state or community branches. Each community branch is to make the best use out of the funds allocated to them and is to find their own means of raising more money for their future operations and outreach efforts. Doing so, will provide aspiring youth entrepreneurs and intrapreneurs with a development platform which they can use to advance themselves with and subsequently, spur a spirit of entrepreneurism among youth.

At the end of each financial year, each YEDC will be required to do an annual reporting of its current and future agenda, operations, financial status, and achievements to the executive committee at an annual youth summit. The executive committee will then lay out the future goals to be achieved for the organization as a whole.

Considering the importance of the tasks and that failure cannot be an outcome, the YEDN is to be led by a team of competent young men and women with strong integrity of character. The executive committee will be made up of elected members whom will be voted in by members at an annual youth summit. The executive committee members will then nominate and elect its members to the various executive positions. It is also crucial that good Business Continuity Management (BCM) exists within the organization, so that it is prepared to deal with any crisis or unforeseen circumstances.

Helping Youths Find Employment:

A highly productive workforce is the primary competitive advantage developed economies have against developing economies with cheaper labour markets. It is therefore, imperative that youths have the necessary skills in order to be employable. By improving the productive capacities and skill competencies of youth, more and more youth can find suitable employment and earn a decent wage which is able to provide for their basic needs.

The presence of the YEDC in the grassroots and community level throughout the world represents a bottom-up approach which will help to eradicate the root of the problem. By infiltrating into local communities, youth are in a better position to receive help and find employment opportunities.

For our youth to remain competitive and employable in today’s fast changing workplace, it is crucial that they must have both knowledge as well as skills that are relevant, current and sought after by employers to meet the changing needs of the economy.

In response to these needs, YEDI will help to lead and drive workforce development throughout the world. It will help to enhance the employability and competitiveness of youth in the workforce, from rank-and-file to professionals, managers and executives.

Funding, Job-Matching and Scaling-up Training Programmes:

The role of the YEDC can be comparable to that of a large-scale job agency except with a different intention of opening more doors of opportunities for youth through subsidizing and sending youth for training and skills upgrading courses. Using the funds available to them and through additional sources of funding, a funding scheme will be developed to scale up training programmes to help firms and youth during the economic downturn and to build strong capabilities for the recovery.

By tapping on the available funding, youth will be able to upgrade skills (up-skill) to do better in current job or acquire new skills (re-skill) to take on jobs in a new industry. The goal is to help youth remain employable, save their job and strengthen their capability to prepare for the economic upturn.

When Employers Benefit, Youth Benefit:

Employers will also enjoy a competitive edge through the subsidized skills-based training for their employees. This will help companies build capabilities and remain competitive, contributing to stronger economic growth for economies around the world. Each local YEDC will work with partners including employers, industry partners, the Unions, Government agencies and training organizations to build the infrastructure needed to help our youths upgrade and acquire new skills.

As the global economy heads for recovery, small businesses and firms will begin re-hiring once again and it is important that we equip our youth with the skills needed to fill those job positions when they become available.

Global Youth Campaign for Education:

Education opens doors for all individuals and communities. It is a foundation for reaching all of the Education For All (UNESCO, 1990) and Millennium Development Goals (United Nations, 2000) because it is central to giving children, youth and adults the knowledge and skills to make informed decisions and acquire better health, better living standards and safer, more sustainable environments. As the 1996 Delors Report expressed, education enables us to know, to do, to live together and to be. In other words, education allows us to reach our full potential as human beings. A world of peace, dignity, justice and equality depends on many factors – education is central among them.

Among one of the objectives

Campaign against Gender Discrimination:

Discrimination still persists against girls and women in education. Today, more than 55% of out-of-school children are girls, and two-thirds of adults without access to literacy are women. Special efforts – from recruiting female teachers to supporting poor families to making schools more girl-friendly – are needed to redress the balance. Other groups have also been neglected, including indigenous populations and remote rural groups, street children, migrants and nomads, the disabled and linguistic and cultural minorities. New approaches must be tailor-made for such groups – we cannot expect to reach them just by increasing opportunities for standard schooling.

The six EFA goals place special stress on enabling everyone to benefit from basic education – from young children at home and in pre-school programmes, through primary education, to adolescents, young people and adults. Education for all emphasizes that no person is too young to start learning or too old to acquire basic literacy and numeracy skills. As learning does not always occur in formal education situations, begins well before primary school and continues throughout life, families and communities must be encouraged to foster environments that set the stage for education. In fact, basic education strengthens what families and communities can undertake and prepares the way for greater opportunities and choices in the next generation.

Inclusive quality learning

The motivation to learn or to overcome learning difficulties only comes when education is seen to be worthwhile – and this depends on its quality. Going to school or attending a non-formal adult learning course should result in knowledge, skills and values that the learner can put to good use, with a sense of being able to accomplish goals that were unattainable before. A quality education is crucially dependent on the teaching/learning process as well as on the relevance of the curriculum, the availability of materials and the conditions of the learning environment. Thus, importance is placed on providing education that is responsive to a learner’s needs and relevant to their lives.

CONCLUSION

Raise the awareness of the importance of education

High levels of youth unemployment are always a source of concern because of the profound impact unemployment has on young people’s lives. Research on the psychosocial consequences of unemployment is extensive. Studies of young people show that unemployment leads to a reduction in self-esteem, diminished levels of wellbeing, and frequently isolation from peers.

Youth unemployment turns problematic when it becomes long-term and when it leaves young people without the means to provide for their basic needs.

In the Eastern European transitional economies, long-term unemployment among youth tends to be relatively widespread. In some countries in this region, for example, more than half of the young people who are unemployed have been out of work for over a year, a situation the ILO describes as “alarming”.33

Given the link between long-term unemployment and the processes of marginalization

and exclusion among youth, it makes greater sense to focus on this phenomenon than

on short-term unemployment.

Impact on Society:

More than 100 million new jobs will have to be created within the next two decades in order to provide suitable employment for the increasing number of young people in the economically active populations of developing countries.

The crisis of youth unemployment deprives young people of the opportunity to secure independent housing or the accommodations necessary for the establishment of families and participation in the life of society.

If effective solutions are not found, the cost to society will be much higher in the long run. Unemployment creates a wide range of social ills and young people are particularly susceptible to its damaging effects: the lack of skills, low self-esteem, marginalization, impoverishment and the wasting of an enormous human resource.

Youth Vulnerability:

Youth are often in a disadvantaged position in labour markets. Preceding the economic crisis, youth were on average already 2.8 times more likely to be unemployed than adults at the global level, and this ratio showed little change in 2009. On current estimates, the global youth unemployment rate rose by 1.3 percentage points from 12.1 per cent in 2008 to 13.4 per cent in 2009

Many of these young people are in the process of making, or have already made, the transition from school to work.

The difficulty of finding suitable employment is compounded by a host of problems confronting young people, including illiteracy and insufficient training, and is worsened by periods of world economic slow-down and by overall changing economic trends.

Advances in technology and communications, coupled with improved productivity, have imposed new challenges as well as new opportunities for employment. Young people are among the most severely affected by these developments.

Impact on the Economy:

More than 100 million new jobs will have to be created within the next two decades in order to provide suitable employment for the increasing number of young people in the economically active populations of developing countries.

Impact on the Community:

The situation of girls and young women, as well as of young people with disabilities, refugee youth, displaced persons, street children, indigenous youth, migrant youth and minorities warrants urgent attention, bearing in mind the prohibition of forced labour and child labour.

Impact on Society:

The crisis of youth unemployment deprives young people of the opportunity to secure independent housing or the accommodations necessary for the establishment of families and participation in the life of society.

If effective solutions are not found, the cost to society will be much higher in the long run. Unemployment creates a wide range of social ills and young people are particularly susceptible to its damaging effects: the lack of skills, low self-esteem, marginalization, impoverishment and the wasting of an enormous human resource.

Figures published by the ILO shows that halving the global youth unemployment rate (from 14.4 to 7.2 per cent) could add an estimated US$ 2.2 to 3.5 trillion to the global economy.

YOUTH UNEMPLOYMENT

How does youth unemployment affect you, your country, town or local community?

Why Youth Employment Matters

Figures published by the ILO shows that halving the global unemployment rate (from 14.4 to 7.2 per cent) could add an estimated US$ 2.2 to 3.5 trillion to the global economy.

Impact on the Society

More than 100 million new jobs will have to be created within the next two decades in order to provide suitable employment for the increasing number of young people in the economically active populations of developing countries.

The situation of girls and young women, as well as of young people with disabilities, refugee youth, displaced persons, street children, indigenous youth, migrant youth and minorities warrants urgent attention, bearing in mind the prohibition of forced labour and child labour.

The crisis of youth unemployment deprives young people of the opportunity to secure independent housing or the accommodations necessary for the establishment of families and participation in the life of society.

Advances in technology and communications, coupled with improved productivity, have imposed new challenges as well as new opportunities for employment. Young people are among the most severely affected by these developments.

If effective solutions are not found, the cost to society will be much higher in the long run. Unemployment creates a wide range of social ills and young people are particularly susceptible to its damaging effects: the lack of skills, low self-esteem, marginalization, impoverishment and the wasting of an enormous human resource.

TACKLING YOUTH UNEMPLOYMENT

What can you do, working together with your peers, to find a sustainable solution for job seekers through youth entrepreneurship? Think specifically about the barriers youths face in the labour market and how to tackle difficulties in accessing capital for business start-ups.

Around the world today, there are more than 1.2 billion people aged 15 – 24, 17.6% of the total world population, and 12.8% of them from the more developed regions. [17] 

In many countries, education and vocational skills provide some protection, with young people who have advanced qualifications being far less likely to experience unemployment – particularly long-term unemployment. In the more developed countries, the differential chances of unemployment for qualified and unqualified young people have been increasing, leading to a greater differentiation in experiences among young people.31

Conversely, in the less developed countries, it is educated rather than uneducated young people who are most vulnerable to unemployment, as there is insufficient demand for skilled higher-wage labour. Other factors that make young people more susceptible to unemployment include a lack of basic skills (especially literacy and numeracy), disabilities, criminal convictions, membership in ethnic minorities, and responsibility for the care of children or other relatives.

INTRODUCTION

Impact on Worldwide Employment – The 2009 Global Economic Crisis

The collapse of Lehman Brothers, an American financial institution on 15 September 2008 triggered a paralysis in the global financial system which transitioned into a global economic and jobs crisis that plagued the world through 2009.

The United States, being the epicentre of the financial implosion, saw a near-collapse of its financial system. The effects of the meltdown spreaded rapidly throughout the globe, crippling economies, reducing enterprise capacities, and forcing millions of people out of work. In addition, many workers have fallen into more vulnerable forms of employment which in turn has worsened decent work deficits, precarious employment situations have swollen and the ranks of the working poor have increased.

As the impact of the crisis deepened, government stimuli began to slow the decline in economic activity and lessened the initial impact in terms of global job destruction. [18] Although there have been signals indicating an economic turnaround in some countries, there is concern that investment and consumption patterns may take a long period to recover to pre-crisis levels.

Decline in Employment & Labour Productivity

Impact on Labour Force Participation

Apart from the impact of the economic crisis on employment and unemployment, declining or negative economic growth also affects labour force participation.

However, partly because there are both upward and downward effects at the country level, global and regional trends in participation rates tend to remain relatively stable over time, even in times of crisis. Nevertheless, effects on labour forc


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