Dr Nemat Shafik, Deputy Managing Director of the International Monetary Fund (IMF)
Published in June 2013
Financial markets have staged an impressive recovery in recent months. Thanks to the actions of policymakers, the global economy no longer looks quite as treacherous as it did six months ago. But in many parts of the world, there is no sense that the crisis is over. In far too many countries, improvements in financial markets have not translated into improvements in the real economy—and in the lives of people. More than 200 million people are out of work today. Many of these are young people. According to the International Labour Organisation (ILO), 73 million young people globally are looking for a job.
The result, according to The Economist, is an “arc of unemployment”, stretching from Southern Europe through North Africa and the Middle East to South Asia. In Spain, Greece, and Portugal, 40-55 per cent of all young people cannot find jobs. In the Middle East, youth unemployment is expected to reach 30 per cent. The picture in North Africa is almost as bleak, with youth unemployment at more than 23 per cent.
Youth unemployment has long-term consequences for economic growth because of the loss or degradation of human capital. It has been found to leave a “wage scar” in the form of lower earnings that can last into middle age, and has been linked to lower life expectancy and higher crime rates. Youth unemployment also has a corrosive effect on society itself—one that becomes very difficult to redress as time goes by. As the ILO noted in its most recent report, “Perhaps the most important scarring is in terms of the current youth generation’s distrust in the socioeconomic and political systems.”
The most effective way to create jobs is through growth. Policies to re-launch growth must therefore be given priority. But policymakers can also deploy labour market policies to spur job creation more directly. Options include education and training programmes, hiring and wage subsidies, public works programmes, child care subsidies, and lower taxes on labour.
In terms of near-term prospects, the outlook for growth is mixed at best. Even though global growth is showing signs of strengthening, the IMF does not expect it to be much higher this year than last year. Our latest forecast projects 3.3 per cent growth in 2013, and four per cent in 2014.
We have been advising our member countries to address three overarching issues that have been with us since the beginning of the crisis. They include financial sector reform; more balanced global demand; and more emphasis on growth, jobs, and equity.
But even if we assume that policymakers do all the right things, it will take years before growth will be enough to make significant inroads into youth unemployment. So governments need to think outside the box. This is where labour market and education policies come into play. Here, however, what may have worked five years ago may no longer work today because of the fast-changing nature of the work place.
Technology is profoundly transforming the nature of work, as argued by New York Times columnist Tom Friedman. It used to be that 85 per cent was just showing up. Now, he says, “average is over.” Everyone has to bring something extra—their own unique contribution to the value chain. Jobs are constantly re-engineered, and innovation has become a survival skill.
Is more education the answer? Across the OECD, people who left school at the earliest opportunity are twice as likely to be unemployed as university graduates. But it is also true that many people with expensive liberal-arts degrees are finding it impossible to get decent jobs, writes The Economist. In North Africa, university graduates are twice as likely to be unemployed as non-graduates.
There is also the issue of cost to consider. Will people still be willing to pay $500,000 for a degree from Harvard or Stanford? Or will more young people opt for online certificates costing $500 from course providers that provide qualifications in many different areas? Will the model of three to four years of university be replaced by true lifelong learning delivered in a more tailored way to support careers that evolve over a lifetime?
While young people in advanced countries grapple with the high cost of higher education, their counterparts in developing countries, especially in Sub-Saharan Africa, face much more basic challenges. Many young people in these countries leave school poorly educated, and enter the world of work without the knowledge, skills, or behaviors necessary to adapt to changes in the economy and their lives.
Clearly, the challenges are enormous. The future of millions of young people around the world is at stake. To solve the problems of youth unemployment, restoring global growth is crucial, as are policies to support job creation. None of this can be achieved without global cooperation. We at the IMF, with our 188 member countries, will do all we can to restore global growth.
But rethinking education is also an important part of the answer. You, the educators, can play a crucial role in charting a path out of the crisis for youth. But you, too, will need to rethink how you carry out your mandate. The world’s young people do not just need more education—they need education relevant to a very different labour market and world economy than we have ever faced before."
For more from the Knowledge Centre's Global Universities Summit blog, which focussed on the issues in higher education ahead of the 2013 Global University Summit, please click here.
The Global University Summit 2013 was hosted by the University of Warwick in Whitehall, London.
Image:Greek Riots, 2008 Source: (Flickr)
A national of Egypt, the UK, and the USA , Dr Shafik is a global citizen with a global reputation in fields ranging from emerging markets, international development, the Middle East and Africa, to the financial sector. She brings to the IMF a wealth of experience in policy-making, management, and academia.