According to the 2017 PwC Young Workers Index, countries that do not offer sufficient education and training opportunities to young workers are missing out on massive boosts to their GDPs.
Young people often end up in the crosshairs of those who came before them. It’s part of the time-honoured tradition of previous generations insisting their descendants are both more terrible and more fortunate than they were.
In reality, those who fall into the 16-24 age bracket have had a lot of obstacles thrown at their feet.
They grew up during a time of global economic depression and have clear memories of grim roundtable discussions in their family homes about financial hardship.
Kimberly Greenberger, an analyst at Morgan Stanley, even posits that the recession left a “very significant psychological scar” on the minds of the young.
The reality of youth employment
The 2017 edition of the PwC Young Workers Index lays bare the reality of employment and how the future of work will affect the young. It found, among other things, that those aged 16-24 are on average 2.5 times more likely to be unemployed than their counterparts in the 25-54 age bracket.
The unemployment rate, the report explains, remains above pre-crisis levels in most OECD countries.
The report also delves into the risk posed to jobs by automation, noting that while job destruction will be offset by greater productivity, automation will disproportionately affect less-qualified young workers in sectors such as retail.
But the study is not entirely doom and gloom – quite the opposite, actually. Economists at PwC explain that the OECD could gain a staggering $1.2trn in the long term if policymakers put systems in place to make education and training more available to young workers.
Socioeconomic factors
As it stands, socioeconomic background is still a large mitigating factor in determining opportunities and earning potential for young people in OECD member countries.
The consequences for young people not in education, employment or training (NEET) can be significant and long-lasting. Citing research completed by the University of Bristol, the report explains that NEET individuals experience 10-15pc lower wages into adulthood compared to non-NEETs.
Research undertaken in 2001 also found that NEETS are 2.8 times more likely to be “unemployed or economically inactive” 10 years later. In addition, students from lower socioeconomic backgrounds are three times more likely not to achieve a baseline level of proficiency in science.
Mario Draghi, president of the European Central Bank, is quoted in the report extolling how youth employment leads to productivity growth and, conversely, disrupts this “virtuous cycle”.
“When firms become more productive, they are more likely to employ young people. And when young people have such opportunities, they can capitalise on their skills, adding to productivity growth, which – among other benefits for society – will lead to higher wages.”
“Youth unemployment breaks this virtuous circle; it is a drag on innovation and impedes knowledge diffusion by decreasing mobility.”
NEETs across the OECD
Taking a holistic view of the labour market, PwC endeavoured to create its Young Workers Index across the OECD by combining eight key indicators into one comparable metric.
It looked at things such employment and unemployment rates of 15-24-year-olds, number of school dropouts aged 20-24, incidences of long-term unemployment in those aged 15-24, enrolment rate of 15-19-year-olds, and the aforementioned relative unemployment of those aged 15-24 compared to their counterparts in the 25-54 bracket. All figures were sourced from the OECD.
Infographic: PwC Young Workers Index/OECD
Switzerland, regarded as one of the world’s most stable economies, ranked No 1 on the index, followed by Iceland at No 2 and Germany in third.
Countries in southern Europe, such as Italy, Spain, Greece and Portugal, fared worst in the index. Italy took the lowest spot, and has done so consistently over the last decade.
It is easy to assume that the global financial crisis of the last decade impeded growth and therefore universally affected NEET rates negatively.
However, countries such as Israel and Turkey (though the latter still performs badly on the index) have made gains.
Infographic: PwC Young Workers Index/OECD
Germany as the standard to which countries are held
Though Germany was beaten out for the top spot on the index, the report concludes that the country is a more relevant benchmark due to it being a larger economy.
If other countries in the OECD could lower their NEET rates to that of Germany, the gains could be massive across the board.
Of course, the potential gains are relative to the necessary improvement. While Italy’s GDP could shoot up 8.4pc if the rate of NEETs is lowered, Luxembourg (which already performs well on the Young Workers Index) would experience a gain of just 0.1pc.
Infographic: PwC Young Workers Index/OECD
Vocational training is the key
The report is unequivocal in its endorsement of vocational subjects.
Offering these, it states, is essential to lowering NEET rates, and the countries that perform best are those that offer dual education systems, such as Switzerland and Germany.
“These systems create better opportunities for apprenticeships and alternative career pathways to university, opening up more doors to successful and gainful careers,” the report explained.
Germany’s dual education system puts more than 50pc of school students in one of more than 300 training opportunities. The Vocational Training Act, first enacted in the country in 1969 and amended in 2005, provides more than 500,000 company-based training contracts a year.
In Switzerland, more than 70pc of young people participate in the Vocational Education and Training System (VET), which offers apprenticeships and qualifications in more than 200 different occupations. Around one-third of Swiss companies engage in apprenticeship training programmes, which allow young people to forge connections with employers at a young age.
PwC’s report also indicates that this early engagement is essential to lowering NEET rates.
Risks to jobs in the age of automation
While industries in which young workers are employed are “only marginally more likely” to be at risk of automation than “core adult workers”, and while younger people may be in a better position to take advantage of new opportunities due to their status as “digital natives”, education levels are still a large determining factor in whether young people can avail of positions created in new areas such as AI.
“The disparity in automation risk for those less educated (GCSE or lower in the UK and equivalents elsewhere in the OECD) is especially pronounced for young men, who could be at 50pc risk of automation, compared to 10pc for higher-educated (graduates) men,” the report finds.
Reducing attainment gaps and promoting social mobility
The Young Workers Index report concludes that governments must invest in education systems in disadvantaged areas to “reduce attainment gaps and promote social mobility”.
The provision of vocational schemes will “provide better opportunities for those less suited to academic learning”.
“Policymakers should also make sure that appropriate careers advice is provided to disadvantaged youths so that they can make a well-informed decision about their future career path.”
