Currently showing: Funding longer lives > Social contract


16 Jan 14 10:35

As always, the Global Risks Report, published annually by the World Economic Forum, provides government and private sector decision-makers with tools for analysing risks in a holistic manner and seeks to encourage discussions on how global risks can be addressed more effectively.

Among the risk constellations examined by the 2014 Report is one entitled Generation Lost? which examines the challenges facing the so-called millennials, young people born roughly between the fall of the Berlin Wall and the Millennium (1990-2000).This analysis has been provided by a team of experts from my company, Swiss Re.

As a parent of two millennials, let me say straightaway this subject interests me intensely.

Any examination of this topic is tricky since it will also contain observations based on anecdotal evidence not just on empirical data. Secondly, there is the thorny problem of drawing conclusions that will apply to millennials across the globe in both the developed world and in the developing countries.

For example, the expectations of 18-year-olds in Sub-Saharan Africa may not bear strong resemblance to the expectations of their counterparts, say, in Western Europe. In other words, there is no one youth in the world.

Still, this analysis is immensely valuable since it prompts us to ask the right questions about the kind of far-sighted policies needed today to address the problems facing our young people.

The report draws our attention to how chronic unemployment across many countries is preventing our youth's efforts "to earn income, generate savings, gain professional experience and build professional careers. Traditional higher education is ever more expensive and its payoff more doubtful." These issues demand attention if we are to avert "the risks of a breakdown in social cohesion and enduring loss of human and economic potential."

And if this were not enough, young people in many developed economies will also be obliged to bear the growing financial burden generated by ageing populations, this on top of saving for their own retirement.

In China, Latin America and Africa, the problems have more to do with the youth bulge, the growth of mega-cities and the needs of a young generation transitioning from rural to post-industrial economies. Here, the report says, the challenge will be to generate sufficient economic opportunities for a growing and increasingly better educated labour force.

Among the proposals the report makes to tackle these problems are to recalibrate education and immigration policies. For example, part of the educational challenge facing young people entering the labour markets in many developed economies is that they have too often been trained in disciplines that do not match their country's economic needs. One possible long-term solution might be to introduce vocational training systems that help ensure young people leave school with the kinds of skills that are actually in demand. The systems in operation in Germany and Switzerland could act as models. Their implementation in other countries would not only boost employment but also enhance a society's longer term resilience.

In tandem with fit-for-purpose educational systems, smart immigration policies could also prove beneficial both for developed and developing countries. Young immigrants with certain skill sets can help boost a country's competitiveness in international markets, strengthen its public services, create jobs by starting up companies and generally contribute to its social resilience. And because they do all of these things, they can also help offset the adverse financial impact of an ageing indigenous population by paying taxes and making pension contributions.

In conclusion, let me say that even though our analysis describes the daunting challenges facing the young generation it also points to their resourcefulness. There is reason for all of us to be hopeful and even optimistic. As the report notes: "The mentality of millennials is realistic, adaptive and versatile. Smart technology and social media provide new ways to quickly connect, build communities, voice opinion and exert political pressure. The millennials are full of ambition to make the world a better place."

Visit the link below to hear what some young people think about the challenges they will facing in the years to come and take the time to browse through the Global Risks Report 2014. Believe me, it provides very valuable food for thought.

Global Risks Report 2014 | Swiss Re - Leading Global Reinsurer

www.swissre.com

High unemployment, the rising cost of education and an aging population...


Category: Funding longer lives: Social contract


6 Comments

Alicia Montoya - 16 Jan 2014, 2:13 p.m.

And let's not forget debt! In his post entitled "Millennial Trouble", Gavin Montgomery looks at student debt (student loans are now the largest form of consumer debt after mortgages) and highlights that millennial trouble is EVERYBODY's trouble:

"After all, we expect the Millennials to foot the bill for our healthcare and welfare in retirement. It also means that we are producing a generation of consumers who are short of money and are used to living with less. We can expect them to have lower aspirations and expectations, and we can only hope that they are more idealistic. That makes me wonder who will buy and insure luxury cars in future, for instance, and where growth will come from if an indebted and impoverished generation doesn't somehow out-consume the podgy, greedy folk who came before them?"

Read the post here: https://openminds.swissre.com/stories/339/

Chewy - 20 Jan 2014, 10:29 a.m.

It seems we are only going to keep heading along this path unless there is a fundamental change to our culture/way of thinking and that can only be through fixing our education system. The current model where we churn out winners and losers is hugely outdated and does not work.

Gavin Montgomery - 21 Jan 2014, 8:32 a.m.

The International Labour Organization has just published Global Employment Trends 2014: The risk of a jobless recovery. You can download the full report here: http://www.ilo.org/global/research/global-reports/global-employment-trends/2014/WCMS_233953/lang--en/index.htm

It’s sobering reading. Global unemployment rose by 5 million to almost 202 million. Of that number, 74.5 million are under the age of 25, a global youth unemployment rate of over 13%, twice the global average.

The report also notes that fewer people are being lifted out of poverty in developing countries – the number of workers living on less than $1.25 fell by 2.7%, one of the lower rates over the past decade.

It is likely that things will get worse before they get better. While the global economy is showing signs of recovery, the current projection is that only 200 million jobs will be added over the next four years, far too few to absorb new entrants into the workplace, let alone absorb the current excess capacity.

One key implications of this is that real wages are likely to be under pressure for the foreseeable future, particularly as the emerging middle class in developing economies compete for white collar and service jobs with their peers in the developed world.

As Ian Johnson observes in these pages, we are also seeing inflationary pressure on basic commodities like food and energy. As a result, consumers are being squeezed from both sides with rising costs and declining spending power.

That has to be bad news for businesses hoping for a recovery in global consumption and it is also likely to fuel sentiment against globalization. We are already seeing signs of that in Europe, with the rise of far right groups and the likelihood that anti-EU parties will mop at least 30% of the seats in the upcoming European elections.

All of that will play into the narrative of growing protectionism and nationalism that is already pushing governments to introduce market-distorting regulations to favor local businesses. The real risk is that this new tide of regulation will contribute to slowing global growth at a time when we desperately need to accelerate it, worsening the job situation and ironically prolonging the agony.

Alicia Montoya - 31 Jan 2014, 9:15 p.m.

Just came across by this report by McKinsey, which found that:
-- Businesses need to work closer with educational institutions to ensure graduates acquire the right skills (David's point above)
-- Few young people have a successful journey to employment. Only one of the segments, the so-called high achievers, which represent 10% of the youth surveyed, achieves a good employment outcome.
-- Less than half of employers are satisfied by their workforce’s skill levels. Companies, especially SMEs, find it hard to find the right skills.

To remedy this situation, McKinsey suggests we:
-- Innovate with design, course delivery, and financing to make education more affordable and accessible. A modular, flexible approach would enable young people to combine and sequence training modules in the order that makes most sense for their career aspirations.
-- Focus young people, employers, and education providers on improving employment readiness. In the most effective interventions, employers and education providers work closely to design curricula that fit business needs; employers may even participate in teaching, by providing instructors.
-- Build the supporting structures that allow the best interventions to scale up. Use technology to simulate real businesses cases so trainings can offer the right practical skills to join a business and 'hit the ground running'.
-- Involve the European Union. The European Union could develop and share a more comprehensive labor-market platform incorporating the most relevant data to capture employment trends in each sector and region, enable mobility and share relevant practices on matching labor-market demand and supply on a pan-European level.

It all seems to make perfect sense to me and the business, government and societal benefits are obvious so... what are we waiting for?

Read the report here: http://www.mckinsey.com/Insights/Social_Sector/Converting_education_to_employment_in_Europe

PJayEmm - 2 Feb 2014, 5:05 p.m.

Many years ago I had an excellent senior manager of radical persuasion who had on his door a quote from Tolstoy - to the effect that 'I will do anything for the poor man except get off his back'. [Incidentally that was the seventies, and I guess few managers would dare any such gestures nowadays!]. It seems it might be appropriate to the way the Millennials now end up being treated?

Despite the wonders of economic growth we saw for 50 years to 2000, the ongoing reality is that the major issue of lifetime income and wealth is based on the starting distribution- by country/ generation/ family unit/ region/ occupation/ training and so on. Education is one of the few levers to seek improvement- and indeed most of the evidence is that as a result society is healthier/ happier and indeed more economically efficient. There is no reason I can see why that efficiency gain to economies from education and training becomes 'too expensive' at times of downturn. In fact if you take a Keynesian view perhaps it is the best possible investment for the future at the weak points in the cycle.But you do need to invest in the right places- and the perhaps haughty view to concentrate most on graduates may miss a whole raft of good technical and training opportunities.

We can all agree the current social and economic waste in Europe of educated young people resulting from staggering levels of unemployment. The last thing we should do is reduce the educational input, but it does seem to need more feedback from the employment market so that people starting to focus their interest can take more informed decisions.

And there is the reality, that most politicians fight shy of while effectively 'advance taxing' tertiary education in the UK, - perhaps some of 'us' have to give up economic shares to 'them'- for all our future benefit. Not a popular message.

Yuezhang Qu (Yvonne) - 30 Dec 2014, 2:05 a.m.

Brain drain from the developing countries to the developed countries will enlarge the knowledge and skill divide.


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