Business chiefs fear ticking jobless time bomb

People in Spain gather outside an unemployment registry Keystone

The nascent global economic recovery is failing to trickle down to the man or woman on the street in the shape of new jobs or improved incomes, the World Economic Forum’s (WEF) Davos meeting has heard.

Another five million people were added to the unemployed ranks last year to reach a total of 202 million job seekers worldwide. At the same time, prosperity is concentrated in the hands of the few, with NGO Oxfam calculating that the 85 richest people have the same wealth as half the world’s population.

The growing divide between the haves and have-nots had already been identified by the WEF Global Risks report. But while the well-heeled delegates in Davos have recognised the problem, they are less enthusiastic about doing something about it, according to UNI Global Union Secretary-General Philip Jennings.

“The benefits of economic recovery are not widespread; they are gravitating towards the elite,” the head of the Geneva-based international trade union movement told swissinfo.ch. “Business people are not going to open their wallets voluntarily.”

A sustainable economic recovery can only be led by consumer demand, stimulated by improving incomes across the board, Jennings argued. To achieve that, businesses and governments need to collaborate to get more people into work, he said.

Grim job market

According to the International Labour Organization, 202 million people were jobless in the world last year – a rise of 5 million from 2012.

The ILO forecasts unemployment levels to reach 215 million by 2018 under the current climate.

Some 74.5 million young people, aged between 15 and 24, are out of work – up by 1 million from 2012, according to an ILO report issued in January. The rate of global youth unemployment stands at 13.1%.

Youth unemployment rates differ drastically from country to country: 57% in Spain and 6% in Switzerland.

In all age groups, 23 million people dropped out of the labour market last year because they were too disillusioned with their prospects.

The ILO estimates that if OECD countries double average spending on active labour market policies (such as boosting apprenticeship schemes), some 3.9 million extra jobs would be created in the next two years.

Young and unemployed

With some 74.5 million young people aged between 15 and 24 currently out of work, youth unemployment is a particular concern, according to the International Labour Organization (ILO).

“A generation not reaching their potential is a wholesale waste of talent that will impact on future economic growth,” ILO Director-General Guy Ryder wrote on the WEF website. “It may lead to increased social unrest in some countries that could spill over into the political arena.”

Swiss Foreign Minister, and this year’s President, Didier Burkhalter told delegates that youth unemployment was a “cancer on society”. In his keynote speech on Wednesday, he said that “The human and social costs are dramatic”.

Burkhalter put forward Switzerland’s apprenticeship system as a possible answer to the problem. Swiss experts are already advising India and Myanmar on setting up a similar system while Switzerland will host an international vocational education summit in September.

But such schemes might not work in many countries, cautioned Klaus Kleinfeld, chairman and chief executive of United States manufacturing company Alcoa.

“The apprenticeship model has worked extremely well in some countries, but it originates from a 500-year-old guilds system,” he said in one Davos session. “If you try to bring it over to the US you will face the situation that we don’t have this tradition that has public support.”

“It is much more complicated than it sounds to get a program like that transformed into another region.”

Kleinfeld argued that alternative models partnering businesses, schools and local government bodies could be set up in different countries to stimulate the job market.

Too educated?

Another stumbling block to raising employment levels is that too many higher education graduates are trying to enter the job market without having the skills that companies are looking for, the forum heard.

The Open Forum, a series of sessions held outside of the Davos Congress Centre that are open to the public, heard the story of US entrepreneur Zach Sims, who dropped out of Columbia University to found the software coding tutorial website, Codeacademy, in 2011.

Sims said the $200,000 (CHF185,000) needed to fund a four-year university course in the US represented a “poor return on investment” when, a year after graduating, half of students were either out of work or doing jobs they did not need a degree to accomplish.

“We are seeing degrees that are not worth the paper they are printed on,” he said. “Most of the material we are teaching isn’t relevant. Education is always delayed from what the workplace needs.”

“There has to be another way for people to learn skills that are relevant to them.”

The disconnect between employers and the newly emerging workforce can cut both ways, according to Coca-Cola chairman and chief executive Muhtar Kent. While employers are struggling to find the right skills in job seekers, young people are looking for a different type of workplace than that offered by many companies.

“The definition of work is going to change in the Western world,” he told Davos delegates. “In today’s world, you don’t need to get up and go to a work place to create value. Much more work is going to be done from home.”

“We need to better leverage technology and social media.”