A two-speed economy for Europe’s youth
A new dimension to the currency crisis is upon us. First there was the two-speed growth – with richer, predominantly Northern European economies performing well while the weak south was on the cusp of recession. But in recent months an even more worrying divide has started to emerge in youth unemployment.
In Spain the number of under 24-year-olds out of work is 50 percent, in Italy nearly a third of young people are without a job and in France the figure is a quarter.
However, in Germany youth unemployment is expected to sink to record lows over the coming months and is currently well below 8 percent.
If you are a young person in Germany your prospects for work and the future are brighter than they have been for generations. But for their peers in Spain things have never been worse.
So what is Germany doing right and can Spain learn a few lessons? In an article written for the Centre for European Reform, John Springford lays the problem out clearly. In EU countries where rates of unemployment are high levels of participation in higher education and vocational studies is approximately 40 percent. In Germany, Norway, the Netherlands, Denmark and Finland, where youth unemployment is fairly low, rates are closer to 60 percent in some cases.
Education and training is key to reducing youth unemployment. Not only does it help deal with young people when jobs are not plentiful, but it also boosts skill levels and could increase productivity in the long-term while also avoiding a “lost generation” of young adults who become reliant on benefits.
There is also another pressing reason from an economic perspective. Spain and Italy have huge structural challenges to address in the coming years to ensure they don’t slip behind well-educated and fiscally healthy emerging market nations. This means they must concentrate on equipping their young people with the skills they need to thrive in an ultra-competitive global economic landscape. If youth unemployment becomes a structural issue then long-term economic rot will set in.
So how can Spain and others do this? Interestingly, it’s not the level of government subsidy or easy access to loans that determine the percentage of under 24-year-olds who remain in higher education. Spain, like Norway, Germany and other EU nations, offers free third level education. The UK also has high levels of youth unemployment and vocational and higher education participation levels are also low; however it has very attractive loans to help students go to University, which they can pay back through the tax system once their earnings have crossed a certain threshold.
So what is Germany’s secret? Maybe it’s the structure of the education system in Spain relative to Germany. In Spain the system takes longer and traditionally there hasn’t been a “course structure” as such, although that has changed recently with the Bologna Process. In Germany, the third level education system has moved to an Anglo-Saxon model based on Bachelors and Masters, and has always been more structured than its southern European neighbours. Crucially, it takes a shorter period of time to gain a qualification in Germany than it does in Spain or Italy. Thus, if you are unemployed in Spain you may not want to sign up for a University course if it could take six years to complete.
As we said there are some changes to the European education system and Spain and Italy signed up to the Bologna Process, which is designed to standardise academic degrees across Europe. But the UK has a structured education system and its youth unemployment level continues to deteriorate. While education is a bit part of dealing with this scourge, there is a bigger challenge: to re-structure economies and make them productive, relevant and less vulnerable on unsustainable asset bubbles to grow and thrive. This requires huge sea changes that will take many years to achieve. When Germany went through its re-unification process it took the best part of two decades to bring down unemployment and become a competitive economy. Spain and others like Italy, and to a lesser extent the UK, need to address this urgently and also be willing to wait many years to reap the rewards of hard work.
Youth employment is the sign of a healthy economy, and right now some parts of Europe are looking very poorly.