Friday 31 October 2014

We must find jobs for our young before they become unemployable

Published 17/04/2013 | 17:00

DID you know that divorce is contagious? A recent US study found that divorce can spread through social networks, like a virus, passing among friends, siblings, even people you work with.

According to the researcher James Fowler, who followed thousands of people over 30 years, if your friend gets divorced, it increases the likelihood that you'll get divorced by about 147pc. Friends share attitudes to divorce, so that if someone close to you – let's say a good friend – gets divorced, it makes it more acceptable for you to divorce too.

This study reveals the power of context in our lives. People are influenced enormously by those around them. Things can become "normal" quite easily. We are highly social, interactive animals and we are inclined to copy those around us. We see this with all sorts of aspects of human behaviour, smokers hang around with smokers, drinkers with drinkers and, if obesity becomes commonplace, then it will proliferate because it is more acceptable.

In recent years there have been huge advances made in understanding the power of peer pressure and the willingness of humans to behave in a herd-like fashion. Our herd mentality flies in the face of economic analysis, which is based on the notion that each person is an independent entity who weighs up rationally what is in his best interest and acts autonomously to achieve the best for himself, irrespective of what those around him are doing.

The unfortunate thing for economists is that these rational, self-interested human beings don't exist or if they do they are an extreme minority. The average person is profoundly influenced by the world around them and collective behaviour – rather than individual initiative – predominates. This is called the power of context.

I want to discuss the power of context with reference to unemployment in Ireland, because the figures on unemployment and long-term unemployment are extremely worrying. Is unemployment contagious?

One more thing to bear in mind is that periods of unemployment early in a career have profound long-term consequences. American research shows that being unemployed for more than 18 months in your twenties has a permanent negative impact on your lifetime earning. You don't recover.

With that in mind, we should compare the rates of unemployment here and elsewhere in peripheral Europe with those of Germany, where young Germans are finding employment easily and young people in the rest of the periphery are not.

The question is whether unemployment – once it becomes normal or at least not unusual – becomes ingrained? Do people, when they see unemployment all around them, come to accept that this is their fate and begin the process, even when very young, of dropping out and off the radar screen? In short, does unemployment make people become unemployable, in the same way as divorce amongst your friends and peers make it much more likely that you too will get divorced?

If this is the case, then economic policy needs to be redirected toward intervention in order that young people find work quickly or, more to the point, that young people are qualified to do something when they leave school. This is where the German example is highly instructive because many German teenagers are trained in apprenticeships very early so that when they reach their early twenties they are able to actually do something. They have a skill, normally a hard skill such as a trade.

Look at the outcome of this apprenticeship policy.

Typically, two-thirds of young Germans begin an apprenticeship. Four out of five complete them. This means that more than half of all young people have completed an apprenticeship. They are work-ready when they finish. Two-thirds of these apprentices receive full-time employment at the company where they train.

Now look at the figures. Youth unemployment is 8pc in Germany, as opposed to over 50pc in Greece and Spain. In Ireland, 30pc of people under 25 are on the dole.

Not only does the apprentice system insure that young people are ready for work, it also matches the person with the company. In this way the education/apprentice system helps match the supply of young workers to the demand for them.

The situation in Ireland could not be more different. Here we have a strange state of affairs. Irish teenagers are much more likely to go to college than previous generations, but what are they able to do when they leave college? Are they qualified for something? Or could it be that they actually come out of university de-skilled?

There was a very interesting newspaper article recently addressing this issue. The writer, Ed Walsh, notes that we have dreadfully low levels of employment and yet thousands of unfilled job vacancies exist. Walsh points out that "Cisco senior vice-president Barry O'Sullivan told the Global Technology Leaders Summit last January that there are 5,000 unfilled vacancies in the hi-tech area and the summit heard that Ireland is producing only half the engineering and computer science graduates enterprise requires. Sean O'Sullivan, Avego chief executive, speaks of 20,000 jobs that could be filled if the right kind of talent was available in Ireland".

Maybe, given this skills mismatch and the success of apprenticeships in Germany, we could look at re-engineering the way we regard education and training here. There is still a snobbery in Ireland toward the trades and people with dirty fingernails. Every mammy wants her children to grow up a professional, with a white collar and a corner office. Equally, there will be a push back from the vested interests in our education system, who are doing quite well out of the present set up.

But if unemployment can be contagious and if the power of context is as strong as it appears to be, then there is the real risk that young people become unemployable after the experience of youth unemployment. If this is the case, it is essential that Ireland cops on to the world around us and does something about this.

We hear a lot about our "great education system", but what and who is it great for?

These are serious questions and every time a young person loses faith and loses hope because he or she is on the labour, these questions become more serious.

Irish Independent

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