How we can prevent a new underclass
Youth unemployment is a scourge. Languishing on the dole is among the worst fates that could befall those starting adult life. But discussion of joblessness among the young is often confused.
One frequently reads, for instance, that youth employment in Greece and Spain is over 50pc (which is correct) followed by a statement that half of all young people are unemployed (which is utterly incorrect). While the second statement might logically seem to follow the first, it doesn't. The reason it is wrong is because, in developed countries, a majority of young people are neither employed nor unemployed, but investing in their futures by staying in education and undertaking training.
So, how should we best think about the lot of the under-25s? Arguably, the most important measure is the proportion of 15-24-year-olds neither learning nor earning. Those unfortunate enough to be mired in that grouping have become known as NEETs – Not in Employment, Education or Training. They include those formally unemployed and, importantly, those who are not looking for work and thus not counted as being part of the labour force.
How has Ireland fared in ensuring that the young do not become excluded from the world of work? The answer is mixed, at best.
To see this we must go back to the good times when jobs were plentiful and resources to invest in teenagers and 20-somethings abundant. As the chart shows, in 2007, the percentage of Irish 15-24-year-old NEETs was around average for the 28 EU countries, at just more than one in 10. That may seem reasonable, but given the intensity of the jobs-rich boom, lots of further education opportunities and the €1bn annual budget of FAS, the state training agency, Ireland should have had a NEET rate similar to the northern Europeans who dominate the good end of the chart.
Having started from such mediocrity, it is unsurprising that the NEET rate here soared to Mediterranean levels when the economy went pear-shaped. As of 2012, almost one in five of all 15-24-year-olds were neither learning nor earning. Although there are no more up-to-date EU-wide figures, the positive labour market trends throughout 2013 suggest that the NEET rate has fallen, even if it is still much too high.
Reducing the number of NEETs is an imperative. Lots of evidence from many countries shows that the youngsters who spend any significant length of time as NEETs suffer negative effects over the course of their entire lives – earning less than those who have never been NEETs, enjoying fewer job opportunities and experiencing more social hardships of various kinds.
Apart from an economy that generates more jobs for the young (and everyone else) there are a number of policy-related aspects to tackling the issue. One is keeping as many teenagers in education until they complete their Leaving Cert as possible. Some progress has been registered in recent years and programmes such as Youthreach have contributed, but there is further to go.
Keeping teenagers, and particularly those who come from jobless households, in education for longer periods is vital. Put in blunt terms, badly designed policies and a political inertia has allowed a large welfare-dependent underclass to emerge. Having children who have the misfortune to be born into such circumstances spend more time in learning environments outside the home – both as teenagers and in early-learning preschool environments – will be essential if that underclass is to shrink.
Another aspect to crunching the NEET rate is what happens to young people after they leave school. In terms of third-level, Ireland does exceptionally well, with one of the highest rates of third-level qualifications among younger age groups in the world. There may be issues around inadequate funding and the kinds of degrees and diplomas some young people are obtaining, but overall Ireland's success in tertiary education counts as a major achievement and something that the political class has broadly got right.
A third part of the jigsaw in cutting the number of NEETs is training outside academia. In any society there will also be a proportion of people who don't want to go to university and equivalent higher education institutes, or who don't have the aptitude to do so.
In providing this group with skills, Ireland has performed quiet appallingly, with vocational training and the apprenticeship structures often more geared to those providing the training than those being trained.
Of the limited amount of evaluative work the State has commissioned on the effectiveness of its training schemes, a study by Professor Philip O'Connell, Ireland's leading labour market economist, even found that some programmes, interventions and measures resulted in the people involved in them being less likely to find jobs than those who got no help at all.
Ensuring the overhaul of FAS amounts to more than a name change (it is now Solas) so that it becomes a provider of market-relevant, high-quality training agency for all age groups could hardly be more important. Almost as important is how the recommendations of the review group on apprenticeships, published a few weeks ago, are implemented.
A final piece in the NEET picture involves the welfare system. Helping the jobless match their skills with available jobs has traditionally not happened in Ireland, with the welfare system amounting to a passive payments system rather than an activating job-search resource for the unemployed.
The Government is changing that with the transformation of dole payment offices into more modern job search and assistance centres call Intreo offices, even if that transformation has been too slow given the jobs crisis.
Its Jobsbridge scheme is also a useful initiative in giving the young their first taste of work in a still very depressed labour market, though such schemes involve careful policing to ensure that an unscrupulous minority of employers do not abuse it.
Interacting with the welfare system requires stick as well as carrot because there will always be a minority who prefer a handout to a hand up. The social contract involves both rights and responsibilities and those who want the former but not the latter require tough love from the system.
When launching the Youth Guarantee Implementation Plan in January, the Government announced that unemployed young people who repeatedly refuse offers of training or education will have their benefits reduced by 30pc. In my view, this does not go far enough. A taper should apply so that further reductions kick in later if a person continues to refuse job or training offers.
To some this will sound harsh and many social justice groups opposed even the one-off 30pc cut. It is a curious feature of the Irish charity sector that while the Nordic countries are viewed as the ideal model for this country, the way their welfare systems combine stick with carrot, which is as advocated above, is condemned. If you really want to help the people you purport to care so much about, Nordic tough love must be part of the mix in order to minimise the risk of creating welfare dependency traps with all of the awful implications for those involved and for wider society.
PS: To see more on a range of issues affecting the young, my colleagues at the Institute of International and European Affairs have this week been publishing a slew of EU-level data and graphics that help illuminate the differences in various labour and training issues across the continent. They are available at www.iiea.com/unemployment-puzzle