Europe Economy

Can Business Save the 'Lost Generation?'


The International Labour Organization warned earlier this month that the world ran the risk of creating a "lost generation"’ as the number of people under the age of 25 unemployed hit 81 million globally.

"Foregoing this potential is an economic waste and can undermine social stability," Steven Kapsos, the author of that ILO report, told CNBC Tuesday. "The crisis is an opportunity to re-assess strategies for addressing the serious disadvantages that young people face as they enter the labor market."

The Organization for Economic Cooperation and Development (OECD), like the ILO, said the problem is likely to get worse as global growth remains weak.

Stefano Scarpetta, the OECD’s Deputy Director for Employment, Labour and Social Affairs, said millions are at risk of being excluded from the jobs market.

"Long spells of unemployment while young often create permanent scars through the harmful effects on a number of other outcomes, including happiness, job satisfaction and health, many years later," Scarpetta told CNBC.

Pedro De Noronha, the managing partner at hedge fund Noster Capital, said he worries that government support could simply lead young people to sit at home and pick up their government checks.

Risk of a 'Lost Generation'

Governments must support those out of work with income support as long as they search actively for jobs and be given opportunities to participate in job-placement activities and in training programs, Scarpetta said.

"Securing the school-to-work transition should go hand-in hand with lowering the cost of employing low-skilled youth in their first job," he said.

Government policy is likely to dominate this issue but the politicians in the democratic world operate within an electoral cyclethat rarely rewards long-term decisions.

Businesses across the world have been shedding jobs aggressivelysince the financial crisis began in 2007, but probably offer the best hope of getting the young into employment as government budgets come under pressure.

"It is companies that are employing, companies that are training and governments need to focus on getting companies to hire young people," according to John Studzinski, the global head of Blackstone’s advisory business.

"Offer a tax credit to a company to hire a young person and the young person gets training and a foot on the ladder," he said. "The answer will not come from giving cash transfers to young people but from getting young people into companies to work and train."

"The impact of unemployment on young people’s dignity is huge and risks social exclusion," he added. "Businesses, governments and NGOs need to focus getting young people skills and training. We have to alter the priorities and focus on training first, the issue needs to be discussed at the CEO level and not the human resources level."

"How you learn in a job environment is different from how you learn in school," Studzinski said. "Your success in a job is based in part on the team you work for, the mentor who helps you through that first year in the job, young people need the break."