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What Government, Businesses And Individuals Can Do To Tackle European Unemployment

Forbes, 3 October 2014 - Five years since the Eurozone crisis entered its deepest phase, youth unemployment remains severe. In this environment, it may seem reasonable to assume that European employers do not have to worry about finding talent. But a McKinsey survey of more than 2,500 employers across eight countries in Europe shows that this is not the case. Almost three out of ten employers with entry-level vacancies reported being unable to find a candidate with the right skills. And one-third of respondents said that their businesses are suffering from a lack of entry-level skills in the labor market. Employers in Southern Europe, where youth unemployment is the highest, were most likely to report business problems due to low availability of workers for entry-level jobs.

Meanwhile, young people are struggling to find jobs. In Greece and Spain, two of the economies most affected by the Eurozone crisis, over 50 percent of young people remain unemployed. Even in the UK, where unemployment has fallen back to its lowest level since 2008, almost three-quarters of a million people under 25 remain unemployed. Even as economies begin to recover, a generation of young people is missing out on opportunities for work. In this environment, young people are becoming disenchanted with further education. Only four out of 10 young people surveyed believed that their post-secondary education had helped them to get a job.

All of these points show a costly skills mismatch in Europe today. So what is going on?

At the root of the problem are the very different perceptions among the various players in the labor market. More than 70 percent of the European educational institutions surveyed believe that their graduates are ready for the job market, compared with only 38 percent of young people and 35 percent of employers. Closing this gap requires that educators and employers work together more closely. Employers should communicate their requirements to educators; and educators need to give their graduates the tools that will enable them to meet these requirements. Such synchronization will not be easy to achieve. Only around half of employers in Europe report being regularly in communication with education providers. Of those who are in contact, only four in 10 find this communication effective. Both sides would benefit from building strong reciprocal ties, with employers telling educators what they need (and even helping to design curricula and offering their employees as faculty) and educators providing students with practical experience and hands-on learning.

In strengthening these ties, Europe can learn from some promising initiatives at home and in other parts of the world. Many employers in the auto, tourism, advanced manufacturing, and shipbuilding industries have taken to “pre-hiring” young people – that is, guaranteeing them a job if they complete a rigorous training program.

In the U.S. AMTEC (Automotive Manufacturing Training and Education Collective) is an initiative between car manufacturers and community colleges to design and deliver training programs that equip future employees with exactly the skills required by the manufacturers. In Spain, the Mondragon Corporation, a cooperative of over 250 businesses, has set up Mondragon University to provide professional courses for those who wish to work for or are already working for one of its member organizations. Over 90 percent of graduates are employed within two months.

Europe needs more such initiatives, built at scale – which engage the largest employers and the small and medium size enterprises – to resolve the skills mismatch. Moreover, developing effective programs requires far more data about the journey of young people from education to employment than is currently available in some countries.

Governments can play a critical role in collecting the data needed to determine which skills are in demand and what kind of training is effective. For example, Colombia’s Labor Observatory tracks students’ progress – including where they attended university, what they studied, when and where they were first employed, what their starting salaries were, and whether they were promoted – for up to five years after graduation. Prospective students can use this information to gain a far more accurate picture of their future prospects.

Of course, young people must become proactive, from an earlier age, if such schemes are to be effective. Barely one third of the young people we surveyed claimed to know anything about which educational disciplines or education providers were associated with high employment rates, or about relative wages in different career paths when choosing what to study.

Employers across Europe are dissatisfied with the basic competence of young people in soft skills, such as critical thinking, oral and written communication, negotiation, and networking.

Students must take ownership of their education. Before enrolling in an academic or vocational program, prospective students should research job-placement rates and learn how and how often the institution interacts with employers. Furthermore, they should gain a comprehensive understanding of how they can build and demonstrate applied skills in their chosen field. More generally, they should use existing labor-market data to make better-informed choices.

In an increasingly competitive global economy, there is still an opportunity for Europe to distinguish itself through developing young people in the skills that employers need. Indeed, the world faces a potential shortage of 30-40 million college-educated workers in 2020, and a potential surplus of 95 million low-skilled workers.

The economic benefits of action are compelling; but the human costs of failing to do so are enormous, and rising as successive cohorts of young people enter a competitive labor market without the skills they need to embark on a career. The imperative for businesses, educators, governments, and young people to take action could not be stronger.

Mona Mourshed leads McKinsey & Company's McKinsey & Company's Global Education Practice. She has led projects in Asia, Europe, South America, the Middle East, and the United States, supporting school systems and vocational and higher-education.


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