Cutting youth unemployment in a digital age

 

The rapid progress in information and communication technologies has dramatically redefined how people live, work, communicate and learn. These shifts have been accompanied by difficult times for both employers and workers and create pressure on social security systems and institutions. The GES offers a variety of policy solutions.

 

One very vulnerable group is young people. Youth unemployment is soaring in many countries and, because youngsters become less employable the longer they stay out of work, social problems such as human capital erosion can arise and have a lasting impact on future growth opportunities.

 

How can we create employment opportunities that make the economy more resilient during times of disruptive change? How do we preserve and increase human capital and improve the match between the supply and demand of skills?

 

There are several other questions to address, too. Do internet platforms have a role? Should vocational training be stressed? Should job security be graded, and should policies target specific social groups?

 

These are major questions and the Global Economic Symposium (GES), an annual forum of leaders in policymaking, academia, business and civil society, has identified several innovative approaches as necessary to reduce youth unemployment and the skills mismatch.

 

To start with, the system of temporary and permanent employment contracts needs to be replaced with a single, open-ended contract with gradually increasing employment protection. Many employers hesitate to hire employees on permanent contracts due to rigid labour market regulations, but prefer to rotate workers in a sequence of fixed-term contracts rather than to upgrade them to permanent contracts. The higher turnover rate becomes detrimental for productivity, while temporary jobs become dead-end jobs instead. Replacing temporary contracts with open-ended ones, in which the level of employment protection increases gradually over time would eliminate this wasteful rotation.

 

An additional approach identified at the GES would be to improve aspiring business owners' prospects; countries should offer start-up subsidies to unemployed workers. While such policies help to reduce unemployment, their impact is subject to financial and human capital constraints, with many unemployed workers lacking the knowledge, experience or confidence needed to launch a new venture. Therefore, start-up subsidies should be combined with subsidised entrepreneurial apprenticeships.

 

The internet offers numerous possibilities, too. It can enable people to become part of the global value chain. Tasks that can be transmitted electronically can be done anywhere in the world. Young people, who are typically comfortable with new technologies, can offer their services to a much larger market. This may be particularly valuable in remote parts of the world.

 

In the long run a combination of macroeconomic policies, general labour market reforms and targeted policies is needed. As a first step, it is essential to equip students with marketable skills to improve their transition into the labour market. Governments should invest in embedding technology into pedagogical concepts to enable interactive learning experiences.

 

Technology means much more than closing the “digital divide" by equipping classrooms with computers and providing internet access. It is primarily about how well technology is applied and embedded into pedagogical concepts to enable interactive learning experiences.

 

Personal learning approaches, teacher professional learning and collaboration should play a critical role in ensuring that new pedagogies and technologies are well designed and implemented. Leaders in education should be recognised and supported as champions of new approaches through incentive programmes. All of this should go hand in hand with targeted investments in research, particularly in such areas as teaching with technology and pedagogical integration of information technology.

 

References

Dolado, J., R. Stucchi (2008), “Do Temporary Contracts Affect TFP? Evidence from Spanish Manufacturing Firms”, IZA DP No. 3832, Bonn.

Euler, D. (2013), “Germany’s Dual Vocational Training System: A Model for Other Countries?”, Bertelsmann Stiftung, Gütersloh.

Görlich, D., I. Stepanok and F. Al-Hussami (2013), “Youth Unemployment in Europe and the World: Causes, Consequences and Solutions”, Kiel Policy Brief No. 59.

 

See also “Global Economic Solutions: Proposals from the Global Economic Symposium (GES) (2008, 2009, 2010, 2011, 2012)”, Kiel Institute for the World Economy

 

OECD work on employment

OECD's Better Life Index

OECD Forum 2014 Issues

 

W Scholz
Willi M. Scholz, Member of the Executive Board, and

K KupkeKathrin Kupke, Project Manager, Global Economic Symposium (GES)

© OECD

@OECD Yearbook 2014