Unemployment poses big challenges for governments and citizens worldwide. Its negative consequences don’t just stop at economies. In addition to lost wages and tax revenues, unemployment also results in negative societal consequences affecting citizen wellbeing and health.
Rising rates of unemployment cited in a recent IBM report highlight the urgency of this issue. According to the International Labor Organization (ILO), by 2018, the global youth unemployment rate is projected to rise to 12.8 percent. One of the most threatening unemployment segments is within the global youth workforce (individuals between ages 16 and 25 years). Young people continue to be almost three times more likely than adults to be unemployed.
The Cost of Unemployment
The costs to society are great, both in terms of economic and societal loss. Side effects include increased rates of violence, rising healthcare costs, and other serious detriments to the wellbeing of society. Included in the report are more specific costs to both the unemployed and to government.
To the Unemployed
Unemployed individuals are immediately affected by a reduction in income, which is often sudden and severe. In addition, the Center for American Progress estimates that for a six-month unemployment period, a young person could miss out on long-term wages by having to accept reduced wages beyond that six-month period.
Young people who have been unemployed for six months can expect to earn about $22,000 less over the next 10 years than they could have expected to earn had they not experienced lengthy unemployment. Estimates from the same study also show that young Americans who experienced long-term unemployment during the worst of the recession will lose more than $20 billion in earnings over the next 10 years in total.
We see the impact on a daily basis. Young Americans are increasingly forced to live in their parents’ homes, struggle to make payments for huge student-loan debts, and fail to adequately save for retirement.
Governments face immediate costs, as unemployed citizens are typically entitled to benefit payments and enabling programs. According to the Congressional Budget Office (CBO), paying emergency and extended unemployment benefits cost taxpayers about $520 billion in the years 2007 to 2012. Additional funds are also used to attack the structural causes of unemployment.
In Europe, the EU initiated the Youth Guarantee, a program to help member states offer all young people up to age 25 a quality job, continued education, and an apprenticeship or traineeship within four months of leaving formal education or becoming unemployed. ILO estimates the cost of setting up this program is €21 billion per year.
Finally, the World Bank and the Organization for Economic Co-operation and Development (OECD) believe the aggregation of tax policy and tax decisions directly affect the rate of growth of an economy. If full employment is not realized and the tax base in an economy is threatened, this also harms growth and stability for society.
So how does government address and mitigate the many factors contributing to unemployment, particularly for unemployed youth? IBM’s report suggests that governments evolve from a “curbing unemployment” mindset to a “managing employability” approach by embracing technology solutions that help identify unemployment patterns, drive personalized employability solutions, and integrate services to support sustainable employment.
The following three recommendations are outlined in the report:
1. Leverage analytics to design and deliver early intervention services. Rather than adopt a one-size-fits-all approach or a narrow training strategy, governments should focus on analyzing individuals for better intervention. For young people, an individualized approach could help identify the right training courses and qualification measures to ease the transition from general education to the workplace. Knowing what training makes sense and what job opportunities will be available after helping individuals acquire new skills can help boost confidence and engagement levels in the workplace.
2. Encourage labor organizations to harness innovation and technology to drive new citizen-centric solutions. Current technology can be leveraged to raise citizens’ levels of engagement with their own careers. Examples include communities sharing best practices, online assessments and games to explore and understand skills (particularly soft skills), as well as “employment fitness” programs to help unemployed individuals achieve self-sufficiency
3. Allow labor organizations to promote full employment and economic development. Government can play a critical role in designing early intervention plans and managing players who might be involved in a citizen’s employment life. Such plans, however, can include all organizations from all sectors, including NGOS, to offer services for specific individual weaknesses or needs. Citizens ultimately own their own success, but ownership of the plan could be managed in a single place, potentially by a public entity or an NGO.
Focusing on long lasting, sustainable employment does not take a broad-based approach. Helping the unemployed simply find jobs should be viewed as a “last remedy.”
The primary goal for government should be to focus on supporting individuals in keeping or raising their individual employability. As the European Commission suggests, focusing on education and economic inactivity as well as sustainable employment can help further empower citizens to take command of their own careers, and ultimately, their lives.
Image Credit: Flickr/Tax Credits