Part 2: Risks in Focus:
2.3 Generation Lost?
Around the world, the generation coming of age in the 2010s is most affected by the legacy of the financial crisis and slow economic growth. In many countries, dramatically high unemployment is frustrating young people’s efforts to earn, generate savings, gain professional experience and build careers. Traditional higher education is ever more expensive and its payoff more doubtful. These issues need to be addressed inclusively on local, national and global levels to minimize the risks of a breakdown in social cohesion and enduring loss of human and economic potential.
In general, the mentality of this generation is realistic, adaptive and versatile. Smart technology and social media provide new ways to quickly connect, build communities, voice opinion and exert political pressure.8 This generation of digital natives is full of ambition to make the world a better place, yet feels disconnected from traditional politics and government – a combination which presents both a challenge and an opportunity in addressing global risks.
A Generation at Risk
The generational frame in this chapter focuses on a cohort aged roughly between 13 and 23 in 2013. It will be aged about 23 to 33 in 2023. This category overlaps with the millennials or the millennial generation, defined as those born between 1980 and 2000.9
Young people entering the job market today are at high risk of unemployment or precarious job situations. Youth unemployment rates have soared since the financial crisis. The situation is especially dire in the Middle East and advanced economies, notably some European countries such as Spain and Greece. Moreover, employment statistics do not reveal that in many developing regions – where 90% of the global youth population lives – a majority of young people are employed only informally.10
In advanced economies, jobs with long-term prospects – the normal situation for previous generations – have become scarce. Young people are vulnerable to being entrapped by either long-term unemployment or the inability to move on from low-quality and temporary or part-time employment.11
Figure 2.3: Youth Unemployment Rate by Region (2007-2013)
Source: ILO 2013b.
Note: 2012 and 2013 are projections.
In advanced economies, the challenge of finding stable and remunerative employment comes on top of the burden of fulfilling the social contract with an ageing society. Today’s youth need to support a growing population of the elderly and save for their own old age. This burden is carried to extremes in Japan, a country with one of the world’s highest life expectancies and lowest birth rates, due partly to the lack of widespread support structures for young families.
Prospects for the young generation are brighter in high-growth markets, particularly in Asia, where the middle classes are rising. Yet – as explored in the previous section – the transition of these economies from emerging to advanced is not without problems, including the same demographic burden which afflicts advanced economies. Emerging markets may not have a top-heavy age structure yet, but soon will. While it took 115 years for France’s population of over-65s to double from 7% to 14%, it will take China, South Korea and Singapore only about 20 years.12
In contrast to most advanced nations, the developing economies of China, Latin America and Africa face additional pressures of population growth as rural-urban migration creates megacities with complex risks and vulnerabilities (see Part 1 – Box 1.5 on urbanization and risk).13 Africa’s youth population, for example, currently totals 200 million and is projected to double by 2045.14 Sufficient economic opportunities will need to be generated to absorb this growing and increasingly better-educated labour force. In many countries, the young need to adapt quickly as traditional societies change and new skills are required; skills mismatch is a particular problem in Africa and the Middle East. The growth of populations and cities puts pressure on food production, so the prospects for a young generation of farmers also need to be addressed.
Young people in low-income economies usually cannot benefit from social protection systems. The extent of unemployment and underemployment risks generating social instability, especially in post-conflict settings or fragile states, is evidenced by the Arab Spring. Nearly two-thirds of the youth in developing economies are not achieving their full economic potential, which holds back these economies.15
In some emerging economies, demographic shifts mean the relative supply of labour will be decreasing within a decade or two. In China, for example, the number of university graduates currently exceeds market demand in many regions, but the situation is projected to flip by 2020 with demographic change and the shift from industries to services. Very quickly, demand for skilled and educated people is expected to exceed supply.16
This will ease the problems of unemployment and underemployment for the next generation, but many of the current generation may remain “lost” in unstable, low-paid and low-productivity jobs in the informal economy. Access to lifelong education is a possible solution, but requires addressing wider problems in the education sector.
The Future of Education
As public finances come under pressure, the rising costs of higher education are increasingly borne by the individual. Many graduates in developed economies leave university not only highly educated but also highly indebted.17
Unfortunately, many then struggle to find their way into careers commensurate with their education levels or sufficiently remunerated to pay off their debts. According to the International Labour Organization (ILO), under-30s in advanced economies are far more likely than over-30s to be taking up jobs for which they are overqualified. Often they change frequently from one temporary job to another. Even before the crisis, the term “Generation 700 Euros” had become a common way to describe this phenomenon in Greece.18
If potential students perceive higher education as a risky investment, they may increasingly embark on university degrees only if their families are able to offer financial support. Higher education has traditionally been a way of reducing income disparities by enabling people to move up the social ladder, but it may now be starting to entrench income disparities instead, with potentially dire consequences for social cohesion. Some of the challenges higher education institutions face are discussed in Box 2.2 below.
Highly indebted students who cannot find a career allowing them to pay back their debts will not be in a position to save for the future, storing up trouble for social safety nets. They will also be reluctant to take on more financial risk to re-educate or invest in a start-up, which could potentially reduce the dynamism of economies.
Fortunately, the disruptive role of technology may ultimately restore the equalizing role of higher education. The spread of high-speed Internet is opening up access to free or inexpensive quality online courses. Such courses also promise to help make education and further training a lifelong possibility in developed as well as developing economies, enabling people to update their skills in response to the fast-changing job markets of modern knowledge economies.
Educational establishments and businesses also need to work together to ease the school-to-work transition. The professional education system needs to be revised in many countries. A dual education system, such as in Germany and Switzerland – with professional education on the job and parallel education at a vocational school – may lower many of the barriers and risks depicted above. Other models for public-private partnerships to mitigate risks for effective investment in skills and training are at hand.19
Box 2.2: Acquiring Productive Skills without Losing the Bigger Picture
Contributed by the Global Agenda Council on Education & Skills
Demand for higher education is set to grow in the coming decades. Secondary school graduates will increase in number and a rising share will strive to continue their schooling at the tertiary level in pursuit of “good jobs”.
Unfortunately, these future students have no guarantee that their tertiary education will actually equip them with the skills they need to fill those jobs. Many current graduates are discovering that despite their academic qualifications – often gained at significant expense – they lack the specific technical and professional skills demanded by the ever-changing jobs market.
An obvious response to this problem is to reform the traditional model of academic universities aimed at the middle classes in advanced economies so that it places more emphasis on professional and vocational education and training. Many countries that score highly on the World Economic Forum’s Global Competitiveness Index have such systems, which can be adapted to the needs of emerging economies where much of the increase in demand for tertiary education will be centred.
As the resource-strapped public sector struggles to meet rising demand for higher education, it is also likely that for-profit institutions will play a growing supply role. The necessarily high tuition and fees at many such institutions may lead them naturally to focus on the preparation of jobs-ready graduates, at the expense of disciplines with less attractive career payoffs, such as the arts and humanities.
This, in turn, raises the risk of eroding higher education’s role as a vital space for social discourse. As well as producing graduates with specific skills demanded by the labour market, societies need graduates who can engage in informed and thoughtful discussions of values and norms. An interconnected world cannot afford to neglect nurturing a new generation of well-informed opinion leaders who can guide societies in beneficial directions.
The challenge is not only to prepare the future workforce, but to do so in a way that preserves the role of higher education in focusing minds on the bigger picture.
Figure 2.4: The Swiss Dual System of Vocational and Professional Education and Training (VET/PET)
Source: Federal Office for Professional Education and Technology (OPET) based on Kammermann 2010.
Pragmatism and Political Engagement
A recent global opinion survey sheds light on the awareness, priorities and values of global youth.20 All around the world, young people are well aware of the challenges, such as pressures on old-age pensions, an increase in the occurrence and intensity of natural catastrophes, meeting the energy needs of the world in 2050 or feeding 9 billion people. Indeed, this survey confirms the result of the Global Risks Perception Survey, where young people under 30 came across as more concerned with risks on average and with environmental risks in particular.
The breadth and homogeneity of their awareness speaks of their high level of interconnectedness. Global events are quickly brought to the local level, often with a personal touch due to friends in social networks.21 These personal channels filter the world of the “digital natives” – the first generation to be brought up with everyday communication and information dominated by Web browsers and smartphones.22
Another picture repeated over the world is that young people look for solutions first among themselves and second in the circle of family and friends. They are willing to invest more in private pension schemes, rely on close personal contacts in case of natural catastrophes, want to do more to prevent food waste and are willing to invest in clean energy sources. What does not appear on their radar screen of solutions is the state or government. They think independently of this basic fallback system of the older generation – governments providing a safety net.23
This points to a wider distrust of authorities and institutions. The mindset of this age cohort has been shaped by experiences such as the apparent helplessness of governments in the face of the recent economic downturn and recent revelations about online spying by US intelligence agencies.24 Anti-austerity movements and other protests give voice to an increasing distrust in current socio-economic and political systems. The young are an important constituent of the general disappointment felt in many nations with regional and global governance bodies such as the EU and the International Monetary Fund (IMF).
This generation draws confidence for taking things into their own hands from the technical developments they experienced while growing up. The digital revolution gave them unprecedented access to knowledge and information worldwide. They are used to collaborating and sharing, and addressing global issues on their respective local levels. They value collaboration and transparency, are able to build abstract networks addressing single issues and place less importance on traditionally organized political parties and leadership.
The challenge for those in positions of authority in existing institutions is to find ways to engage the young generation. Young people’s enthusiasm to address global risks is there to be tapped, but they will engage in conventional governance only if mechanisms to do so can be devised to fit with their new ways of operating.
Investing in the Future
What can be done to mitigate intergenerational tension arising from demographic and economic pressures on welfare systems? How can the millennial and post-millennial generations be socially better protected?
First, youth must be prioritized in political agendas. The younger generation needs jobs and career opportunities and adequate education, as discussed in Box 2.3 below, as well as power in political forums and discourse. Only if young people see and get a chance to make a living, a career – or just a liveable life – will they integrate into the global society. This will be a prerequisite to regain the trust of the youth and encourage their participation in societal and political institutions, authorities and leadership.
Second, a systemic environment that fosters long-term investments will be crucial to prevent this young generation from being lost. To bridge the pension and social protection gap affecting the young, countries will have to strengthen both the economic security of the young generation and ensure robustness of old-age pension systems. In emerging markets, the challenge is to put systems in place to ensure that the current youth will not have to face the same problems as their counterparts in advanced economies.
Third, political and regulatory conditions need to be adjusted to strengthen and incentivize investments with a long-term perspective.25 Companies and financial systems need to give greater priority to their long-term resilience and look beyond short reporting cycles, as explored in Part 2.5.26 At the same time, opportunities must be enhanced for individuals to build assets, to save and to invest.
The public and private sectors can work together to foster lending and investment with long-term perspective. The insurance industry can play a central role in risk mitigation for entrepreneurs and collectives, but governments and international institutions have to facilitate intergenerational asset transfer as well. Only fair and sustainable systems of tax and subsidy redistribution will ensure growth that also encompasses social protection, remedies poverty and allows for resource-friendly and environmentally sound development.
Finally, migration needs to be managed with a long-term and global perspective. Migration can reallocate skilled workforces, providing an opportunity to address the skills mismatch, but with the risk of brain drain in the countries from which skilled labour migrates.27 To make migration a win-win situation for the country of origin and the receiving economy, it is crucial to incentivize a subsequent return of the skilled emigrants to their country of origin and to strengthen the related international agreements.
Box 2.3: The Challenge of Youth Unemployment
Contributed by the Global Agenda Council on Youth Unemployment
Urgent, bold and collective action is required to promote job creation and address the skills mismatch. Government, business, education, civil society and the financial sector all have a role to play.
About 300 million young people – over 25% of the world’s youth population – have no productive work, according to World Bank estimates.28 Add low-paid rural and urban self-employed workers, and the estimates rise to 600 million. An unprecedented demographic “youth bulge” is bringing more than 120 million new young people on to the job market each year, mostly in the developing world. 29
Youth unemployment on this scale is not only a waste of human capital and potential but also threatens to halt economic progress, creating a vicious cycle of less economic activity and more unemployment. It also raises the risk of social unrest by creating a disaffected “lost generation” who are vulnerable to being sucked into criminal or extremist movements.
Part of the problem is that economic growth is no longer generating enough of the skilled and stable jobs that previous generations took for granted. This is a by-product of years of technological advances and globalization, along with labour market regulations that incentivize companies to prefer retaining older workers to hiring new ones.
Of course, technology is also creating many new jobs, businesses and even industries. These jobs demand more from workers than basic skills, but there is a growing skills mismatch. In a recent global survey, one in three employers claimed to have trouble filling open positions with qualified candidates. Many school leavers lack both the specific credentials and “soft” skills – such as critical thinking, problem solving, time management and communication – they need to compete for jobs or become entrepreneurs.
Concerted effort is required to match education and training to the new digital opportunities. Technology is a significant aspect of the employment landscape and opportunity for young people, and one that government and the private sector can directly nurture and support at both the national and sub-national levels. Governments, for example, can mobilize stakeholders behind properly funded national action plans with measurable outcomes, and look for ways to incentivize employers to hire younger workers.
The private sector can guide curriculum and training programme design by communicating about projected skills needs. Businesses can work with the educational sector to establish partnerships with schools and improve apprenticeship opportunities. Educational and civil society organizations, in partnership with industry, can prioritize entrepreneurship education, soft skills and earlier delivery of sector-relevant and professional skills in schools, all of which promote employability.
There are encouraging examples: Serbia’s National Action Plan for Youth Employment has been cited as a model by the Council of Europe, while Germany’s apprenticeships programme has helped cut its youth unemployment rate to less than half the European average.
Successful initiatives need to be urgently replicated and scaled up to solve this complex, cross-sector challenge. Youth employment policies must also be designed and implemented with the experience of the youth in mind to understand their attitudes and abilities.
Source: For more details on the recommendations made by the World Economic Forum’s Global Agenda Council on Youth Unemployment, see The Future at Risk, available at http://www.weforum.org/content/global-agenda-council-youth-unemployment-2012-2014.