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Entrepreneurs and Small and medium-sized enterprises are drivers for any economy- Kris Gopalakrishnan, Managing Director and CEO of Infosys Technologies Ltd.

Team YS
posted on 10th November 2010
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A group of top CEOs from leading global companies urged G-20 leaders to help create more jobs for the youth around the world. The call came top executives from 120 global businesses before the Seoul G-20 Business Summit and finalize their policy recommendations for G-20 leaders, who will hold their own two-day summit in Seoul, South Korea here from 11 Nov . The working group on youth unemployment was headed by Kris Gopalakrishnan, managing director and CEO of Infosys Technologies Ltd.

A preliminary report from the working group listed recommendations for G-20 leaders in four major areas that also included promotion of entrepreneurship. "We all know those entrepreneurs and small and medium-sized enterprises are drivers for any economy in terms of job creation. Micro finance as well as provision of small loans will help entrepreneurship to double up in all parts of the world," Gopalakrishnan said. The preliminary recommendations also included the creation of more effective unemployment welfare and social protection systems and efforts to identify high-growth sectors by geography. The recommendations will be finalized and delivered to the G-20 leaders this week, along with some 60 recommendations in 11 other areas, including promotion of free trade, investment and regulatory reforms in the financial sector.

Short Report on Youth Unemployment

ADDRESSING THE IMPACT OF YOUTH UNEMPLOYMENT

CONVENER: S. Gopalakrishnan, Managing Director and CEO, Infosys Technologies Limited

WORKING GROUP MEMBERS

Hari Bhartia, President, Confederation of Indian Industry (CII)

Mr. Akio Mimura, Representative Director & Chairman, Nippon Steel

Dong Bin Shin, Vice Chairman, Lotte Group

Mr. Chang-Jae Shin, CEO, Kyobo Life

Mr. Eli Leenaars, Member of ING Management Board Banking, ING

CONTEXT

The global economic crisis has brought to the fore the problem of youth unemployment. In a scenario where jobs are hard to come by for even seasoned skilled workers, across the globe, the youth cohort – those just out of school between ages 15-24 with few skills – is finding it hard to compete with other job seekers for the limited vacancies.

Unemployment is rampant. It has more than doubled in the US since December 2007. In the euro zone in 2009, it increased by 2%. And it has moved higher in transition economies and developing countries, in particular in the Commonwealth of Independent States (CIS) and Central and Southeastern Europe, where the number of unemployed increased by as much as 35% in 2009.

In the long term, the effect will be a drop in the level of participation among youth in employment and in enrolment for higher (secondary) education as the perceived benefits of schooling will be lower. The costs of these developments are high. Whether unemployed or under employed, the youth cohort loses out individually, socially and economically. The economic and social costs include loss of income, loss in output and productivity, and the erosion of skills, resulting in a long-term loss of human capital that can be significant.

To reverse this trend, we identified three broad areas in which the G20, governments and the private sector can act to address youth unemployment:

The creation of opportunities to enhance employment qualitatively that are secure and long term·

The creation of opportunities for furthering education and options for reskilling·

The promotion of income-generating opportunities including entrepreneurship development and apprenticeship.·

RECOMMENDATIONS

We make the following recommendations to the G20:

Create public-private academic partnerships to train youth for jobs that are available immediately or in the short term

The economic crisis brings the focus back to our educational systems and points to reskilling as the shortest route to near-term employment. Growing skill gaps are already a concern, requiring a concerted effort by policymakers, private-industry players and academic institutions to address. Education and training impact individual productivity, the capacity for innovation, and the ability to adapt to innovation. These in turn promote economic growth.

Technical Vocational Education and Training (TVET) is already an important part of the policy agenda of governments in many countries. This is paralleled by a growing opportunity for youth to learn required skills and enter the work environment through apprenticeships in the informal sector and internships in the formal sector. A first step would include identifying and mapping the willingness and preparedness of youth to join the workforce.

Formalizing informal modes of vocational training and offering standardization of curricula and certifications are ways to ensure that quality requirements are met. Another way is to focus on programs that train the trainer, including increased capital investments in programs that will help modernize and improve the quality of teaching and learning.

Additionally, incentives for vocational training for jobs that are necessarily localized – for instance, those in intensive care in hospitals, hospitality services including hotels, cooking, entertainment, equipment and vehicle repair, and gardening – will also help address the problem.

Forging strong partnerships between academia and industry to allow students increased access to mentorship and internship opportunities will allow them to hone their skills and acquire workplace-ready skills while the job market recovers.


Governments should also take the lead in creating a “pipeline” based on the human-capital requirements of enterprises, identifying such training programs as a primary source for their workforce needs. Governments should also facilitate the creation of a “youth advisory” to follow through and lend a voice to the youth agenda.

The public sector could strengthen, promote and support such partnerships through different means including:

o Providing adequate incentives such as tax breaks and other concessions

o Leveraging and directing public-sector efforts, grants or investments towards similar ends

o Re-assessing policies that increase the cost of employing entry-level workers (e.g., minimum-wage hikes) or carry the risk of undermining employment levels (e.g., mandated benefits, increased payroll taxes, etc.).

o Facilitating needed data capture and analysis

o Providing technical assistance.

The private sector could also consider global partnerships to help contain this problem.

Create effective unemployment welfare systems

While there are a few examples to show that the existence of a strong welfare system can be counterproductive in tackling the problem of youth unemployment, the opposite is also true, as in the case of Korea. An important part of designing an effective program to encourage entrepreneurship in the longer term is to create adequate safety nets, including social benefits to provide income support where required. The definition of conditionality in designing these should ensure that such benefits are only awarded to youth that are engaged in job search, training or the improvement or addition of new skills. This should help encourage entrepreneurship and also mitigate any negative effects of a strong social welfare system.

A first step would be to catalogue best practices from existing welfare systems for policymakers to identify methodologies that can be replicated locally. Private industry partners can work with them to help roll these out as pilots for testing.

Foster entrepreneurship

Governments across the globe need to recognize the role entrepreneurship can play in increasing employment opportunities while buoying up the economy. Policies are required that support the creation of new enterprises that can grow to create more opportunities for employment. Young entrepreneurs should ideally have a low barrier for access to funds to allow for an environment where innovation and growth can flourish. Microfinance, including the provision of small loans, savings.

Accounts, insurance and transfers, will play a vital role necessary for development. In fact, there should be avenues for government as well as enterprises to support the creation of new businesses. Additionally, policies that focus on creating demand for the products and services that these enterprises offer will be crucial in creating sustainable recovery.

Policymakers should support the creation of “special economic zones” where there are concessions and special privileges such as tax breaks and incentives for private industry to encourage entrepreneurship. Both the private and public sectors could provide apprenticeship and internship programs that give people on-the-job experience and ease entry to the workforce through self-employment. Enterprises could also provide the impetus for entrepreneurship through training, mentoring and internship programs.

Public-sector enterprises can mediate between policymakers and young entrepreneurs to ensure that any inadequate policies are addressed. They can also play the role of informers, bringing to light business opportunities in the public and private sectors. Policies should be designed to help grow the entire spectrum of labor-market programs, spanning from job-search facilitation and training that targets the disadvantaged to the passive end of the spectrum, including early retirement schemes and exemptions from job searches for older workers.

Identify high-growth sectors by geography

There is a need to create a baseline report on the job scenario by country and region based on long-term economic and political transformations. While past predictions indicate that there may have been some disconnects between actual and predicted job growth, there is a greater need to understand which geographies have created net new employment and to see how best to learn from such examples to replicate successful strategies in other geographies to ensure growth. There should be an increased focus on a systematized effort to catalogue insights and best practices that can be scaled up across nations to leverage opportunities for growth.

For instance, India leveraged the growth of the IT industry to create a lot of jobs. Understanding this phenomenon and leveraging best practices from this case to identify other sunrise sectors and apply similar approaches to them should be an area of immediate focus.

Businesses thrive on their ability to predict future growth. Identifying the best ways to leverage these is an area where policymakers can partner effectively with private enterprise. This should be followed by proactive government policies that foster growth in these areas.

CONCLUSION

With over 30% of youth today listed as unemployed, government and private enterprise need to join hands now to ensure that this trend is contained and turned around before it engulfs the labor market as a whole. The next step for this G20 Business Summit working group and other participants is to create a consortium of like-minded public and private players to help define the scope of a joint project to take forward the recommendations made here.

Key to this will be:

Effective partnerships between public policymakers, private enterprises and academia to assess the expected demand in labor markets and the trends shaping them·

Mapping of the preparedness and willingness of youth to begin employment across geographies and programs to help youth find productive employment opportunities easily·

Accelerated routes to create employment and foster entrepreneurship·

Cataloguing of insights and the sharing of best practices in defining policies and programs that can be scaled up across nations to bridge the gaps.·

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