Drawing on his experience creating his own web-app platform, Angus Waite reflects on young entrepreneurship as a solution for youth unemployment.
A “national embarrassment”. That’s how John Longworth, director general of the British Chambers of Commerce, described the level of youth unemployment in the UK. “The EU’s biggest challenge” is how Michael D. Higgins, Ireland’s poem writing President, characterised the problem. Such rhetoric is symptomatic of the recognition that youth unemployment is one of the fundamental failings of our time. The focus is now falling increasingly on youth entrepreneurship as a way, not only to directly create more employment for young people, but to give them a way of acquiring the skills needed to succeed in paid employment.
The EU Commission has described youth entrepreneurship as high on the “political agenda” and sees it as a “tool to combat youth unemployment and social exclusion”. So, it is with high ambitions and worthy ideals that EU initiatives such as Junior Achievement Europe (or JA Europe, known as Young Enterprise in the UK) and Erasmus for Young Entrepreneurs are being run. But, as Michael D. Higgins and John Longworth state, youth unemployment remains an issue now as it did in 2001, when JA Europe was founded. It would seem that these initiatives (and not just young people) aren’t working.
What exactly is the scale of the challenge?
Well, in the final quarter of 2014, youth unemployment in Britain stood at a whopping two and a half times the overall unemployment rate – 14.4% against 5.7%. Comparable figures for the EU at the end of 2011 showed a youth unemployment rate of more than 22%, against an overall unemployment rate of less than half that and in Italy this summer, to take one example, youth unemployment hit a record 44.2%.
But, in case you were wondering, the current problem of youth unemployment is not simply the result of more recent and transient events, like the 2008 financial crash and subsequent Euro crisis. Youth unemployment has historically remained at roughly double the overall rate of unemployment – a trend that can be seen from 2001 until the present day.
It is worth being reminded, as well, of the effect that extended unemployment has. It is estimated that one year of unemployment during youth can reduce annual earnings at age 42 by up to 21%. An extra three months of unemployment prior to the age of 23 results in, on average, an extra two months of unemployment between the ages of 28 and 33. Prolonged unemployment amplifies these problems. This would seem unfair enough without the social exclusion, depression and poverty that also accompany extended joblessness.
How do EU initiatives intend to help?
JA Europe provides education programmes for young people in entrepreneurship, work readiness and financial literacy. Erasmus for Young Entrepreneurs is an exchange programme between young entrepreneurs and established small and medium sized businesses.
The youth unemployment rate belies any success that these initiatives have had. The inability of Europe to budge the historical problem of double the rate of unemployment for the young suggests that both the strategy and the scale of these programmes is inadequate – they have failed to change either the rate of youth unemployment or the disproportionate impact of unemployment on the young.
But, you might ask, if there were more of a focus on paid employment, wouldn’t the problem be solved more quickly?
The answer is no. There are myriad reasons why youth entrepreneurship should have greater focus. The skills and experience gained by people, on an individual level, is something I can personally attest to being hugely valuable – the first graduate job I managed to get came as a result of the website I had co-founded and been running whilst I was at University. And it goes without saying that if a young person finds employment through their own means, they are directly lowering the rate of youth unemployment.
But there is another far more interesting fact surrounding youth enterprises: of those businesses that survive longer than three years, the employment growth rate is an impressively high 206%, which is nearly double the growth rate of businesses run by those over 40. This means that when youth run enterprises succeed, they create more jobs more quickly (and thus spread more wealth and positively affect employment rates faster) than enterprises run by older people. So, not only do businesses begun by the young take them into employment, they are also far more effective at creating more jobs and thus taking others into employment.
What is wrong with the EU’s approach?
For starters, the Erasmus for Young Entrepreneurs scheme, whilst boasting some successes, is on far too small a scale to ever seriously affect the rate of unemployment – in the last five years they have helped a lowly 2500 young people. Secondly, of the people whom Erasmus for Young Entrepreneurs took on, only 15% were inspired to take part by the lack of a job– suggesting that they are helping those for whom unemployment is not a major concern.
These figures are disturbing given the propensity for young people to lean towards self-employment as a desirable thing – 48% of young Europeans view it as such. The highest proportion of any age group. Thus, for the unemployed young, self-employment could be a truly attractive way out. The fact that, according to the OECD, 56% of 15-25 year olds view self-employment as not, or not very, feasible indicates the lack of support available .
This is not to say, of course, that this lack of support is a problem of the EU’s making.
National government’s clearly hold much responsibility for helping to rectify the situation. This comprises changing education systems so that they are not so geared towards paid employment and teachers are encouraged to embolden their students to aim to start their own business. It involves rectifying the bias against businesses started by young people trying to secure loans and the bias in the market where, according to the OECD, youth-owned businesses face discrimination, with customers being skeptical about the reliability of their products . It also should include more support for those who didn’t follow the route of higher education. Currently, those with graduate degrees are significantly more likely to be active in entrepreneurship, something I can attest to with my own experience of starting a website – all of my co-founders and the support and funding we have so far received came through the university that we all attended, which is great, but having to attend university (and take on a load of debt in my case) in order that you might gain the funding, contacts and support needed to make starting a business at a young age seem genuinely feasible is not fair, not progressive and not, fundamentally, an option for many people.
Whether it is the EU or national governments who are better placed to improve the youth unemployment situation, one thing is for certain: the situation as it has been for the last fifteen years or so cannot continue. What loyalty should young people have to a system that habitually retains a youth unemployment rate at double that of the overall one? Why should the youth of Europe, hungrier than any other age group to reach self-employment, have to endure not only a lack of opportunity in the workplace, but a lack of support to branch out on their own? Why, when youth driven businesses succeed in creating more jobs more quickly than others, should the majority of the young have to view starting their own business as unfeasible?
Youth unemployment must be solved. Youth entrepreneurship must be given a chance to help do so.