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A lost generation

  • 2013-05-29
  • By Karina Oborune

Unemployed, depressed, with no future – this is not a portrait of a home-less person you can find sheltering under a bridge, but an average youngster in the EU. The youth unemployment rate has heated up to a record - every second youngster in the EU is unemployed.
‘Neets’ – youngsters not in education, employment or training – will have a tremendous effect on the future long-term economic and social issues in the region.

According to the World Bank data, every fourth youngster in the world is job-less – a population equal to the total of North and South America! This is a situation that has never occurred before. Youngsters today are unpaid, or work in the informal sector and, even after economic recovery, this will remain a routine part of economic life. Also, the youth unemployment rate in Europe is at record – every second youngster is unemployed. The unemployment rate in Greece was even at a 65 percent rate. The situation in Latvia is also alarming. According to Eurostat data for the youth unemployment rate in 2012, Latvia is in 7th place in Europe. On average, every third youngster is job-less here.

There are three reasons for high youth unemployment in Latvia. First, no job means no experience. This is a vicious circle which the average youngster nowadays lives in. The later a youngster gets his first job experience, the later he or she gets into the real job market. Those who begin their careers without work experience are more likely to have lower wages and stay unemployed again later in life. They end up working at a lower productivity than might otherwise be expected.

Second, most young people who graduate come out with university degrees that may have expanded their intellectual facilities, but not their productivity. There is a growing mismatch between the skills that youngsters have and the vacancies that employers need to fill. Therefore in a time of high overall unemployment, an employer would rather hire an older person with much more experience.

Third, youngsters are keen to have higher wages, and in a situation in Latvia with minimum wage earnings, they would rather leave the local job market and move abroad, seeking a higher salary.
How to improve this situation? Certainly flexible labor markets, the ease of starting up a business and eliminating entry barriers to work are all important. First, lower taxes should be provided for those companies who employ first time workers. For example, from 2014 to 2020, the EU will offer 60 million euros for supporting employability, especially those being paid while being on an internship. Students need offers for internships through summer vacations, on a yearly basis to develop skills.

Second, universities should collaborate more with industry. There should be a mentoring program between the elderly (60-65 years old) who would mentor the 18-30 year olds.
Third, there should be more opportunities provided for young people to start their own businesses.
There have been success stories. The situation has seem improvement in Latvia recently with a vast number of opportunities provided, mainly by organizers of business idea or business plan competitions such as Big Idea LV, Jump into business (Lec biznesa!), Take off (Atsperiens), Goblet of Ideas (Ideju kauss), Going in the Air (Ejam gaisa), Company Secret (Firmas noslepums), Business Escalator (Biznesa eskalators), Become a Business owner (Esi uznemejs).

The organizers of these events are mainly banks (Hipoteku bank, Swedbank, SEB) or NGOs and start-up grants sponsored by European Union. The hardships of unemployment might be one of the key drivers for ideas into new businesses, and investment in innovative projects, along with all the usual motivating factors, but what we can see is that opportunities abound.