The youth are our future. The future is for our youth. Poverty used to be a problem of the aged as they left employment and entered retirement. Shorter life spans than now meant it was a relatively short-lived but deplorable state for people to end in. All that has changed. The youth are still our future but there is a much diminished future for them. Poverty risks and burdens have also shifted from the older members of the population to the younger members. From the retired to the jobless and casualised worker. And we get angry when young people get lured away by what they see as attractive, hope-filled futures, that may or may involve remaining alive in the here and now, and wield guns and bombs. Yet the policies we support close the door on any future that might be more acceptable to the rest of us. Neo-liberalism is creating a ticking bomb. The GFC was just the first act. Societies around the advanced world are undermining their own longevity as they accept that fiscal austerity is the only alternative. To what?



Last June, the OECD released a report – Income Inequality Update – which provided recent data on trends in income distributions and the demographic impacts of rising inequality.

The results are well known now although the implications of the trends exposed are less appreciated.

The OECD found that:

1. “The distribution of ‘market income’ (gross earnings and capital income) kept widening even as many countries recovered from the crisis.”

2. The largest rises in inequality “occurred in those countries hit hardest by the crisis: Spain, Ireland, Greece, Estonia and Iceland but also in France and Slovenia. In Spain and Greece, inequality of market income widened considerably in the aftermath of the crisis, and kept increasing more recently as the crisis persisted”.

3. “Lower income households either lost more during the crisis or benefited less from the recovery.”

4. “In Greece … poverty increased by almost 15 percentage points over the four years to 2011, with large increases (between 9 and 3 points) also experienced in Ireland, Spain, Iceland, Hungary and Mexico.”

5. “Over the four years since the onset of the crisis, young people (aged 18 to 25) suffered the most severe income losses, while elderly people (over 65) were largely shielded from the worse effects of the crisis.”

The OECD use the so-called relative income poverty measure, which is “the share of individuals with an equivalised disposable income below 50% of the national median”.

They also compute “income-poverty risk” for different groups, which is measured relative to the total population.

As the neo-liberal policy dominance emerged over the last 3 decades or so, the OECD has consistently found that “youth replaced the elderly as the group experiencing the greater risk of income poverty”.

The latest data shows that:

The recent crisis has accentuated this trend.

The trends since the mid-1980s are shown in the following graph (Figure 8 The risk of poverty has shifted from the elderly to the young – in the Report).

It shows different age cohorts on the horizontal axis against the poverty rate on the vertical axis. The OECD average is scaled in each year to 100 (grey horizontal line) and then relative poverty rate of the different cohorts are expressed for different years (differentiated by colours).

The clear point is that youth have experienced increased relative poverty rates as a result of the crisis and the subsequent policy response while the older workers have improved their relative position during the crisis.

The OECD Report decomposed the poverty rates into household types. It will be no surprise that in this neo-liberal era it is not retirement that is a dominant factor in generating poverty.

The OECD notes that:

… the risk of income-poverty was four times higher among jobless households than for the reference population (all individuals living in a household with a working age head … [and in the face of increasing job insecurity and casualisation] … One-worker households also experienced a risk of poverty around 50% higher than for the reference population .. [and] … the risk of poverty among singles and single parents remains disproportionally high.

Data from the latest – EU Employment and Social Situation – Quarterly Review – published for December 2014 on January 8, 2015, shows that the so-called NEET (Not in Education, Employment or Training) rate has been rising in most EU nations since 2008.

The following graph is drawn from the Report’s database and shows the – NEET Rate in EU Member States for 2008, 2012, 2013 – in terms of the 15-24 years cohort.

So there is a rising proportion of young people who are now totally alienated from the education and training process and are not working.

Where are they? Filtering around the blackmarket, selling themselves for sex, selling drugs, living of their parents, stealing, and engaging in other pathological uses of their time.

What they are not doing is gaining skills that will enable prosperous participation or incomes to manage their own risk.

As part of the – Europe 2020 – which was the “EU’s growth strategy for the coming decade”, set in place on March 3, 2010. It replaced the largely failed Lisbon Strategy, that ruled policy making between 2000-2010.

Europe 2020 had five main targets:

To raise the employment rate of the population aged 20–64 from the current 69% to at least 75%.

To achieve the target of investing 3% of GDP in R&D in particular by improving the conditions for R&D investment by the private sector, and develop a new indicator to track innovation.

To reduce greenhouse gas emissions by at least 20% compared to 1990 levels or by 30% if the conditions are right, increase the share of renewable energy in final energy consumption to 20%, and achieve a 20% increase in energy efficiency.

To reduce the share of early school leavers to 10% from the current 15% and increase the share of the population aged 30–34 having completed tertiary from 31% to at least 40%.

To reduce the number of Europeans living below national poverty lines by 25%, lifting 20 million people out of poverty.

Thinking about the poverty and employment targets in this blog, one would conclude that there is little chance the strategy will be even remotely successful.

The pledge to “bring at least 20 million people out of poverty and social exclusion by 2020” will fail dramatically.

In 2010, there were 118,294 thousand people living in poverty in the EU which comprised 23.8 per cent of the EU population.

By 2013 (the latest data), that number had risen to 122,649 thousand or 24.5 per cent of the EU population.. So an addition 4.4 million people entering poverty over the first three years of the plan. The situation will get worse not better unless there is a dramatic shift in policy.

Data from the latest – EU Employment and Social Situation – Quarterly Review – shows that there is little chance of achieving the employment target of achieving employment to population targets of at least 75 per cent.

See also the – Press Release – that accompanied the release of the report.

The following graph (Chart 11: Employment rate in the EU28, the euro area and in Member States, second quarter 2014 from the report) shows the deviations from that goal across the Member States.

The horizontal blue line is the EU Target under Europe 2020.

In terms of the EU as a whole, the current shortfall is around 21.5 million jobs in a base of 210.7 million jobs. Employment would have to expand by more than 10 per cent on its current value to meet the EU total goal.

These updated reports help us gain a quick impression of the underlying trends in Europe.

The policy arena and debate seems to be totally dislocated from the reality. European politicians show no urgency to address what is a massive crisis that will worsen as the young NEETs and unemployed move into adulthood, having never worked nor gained sufficient experience to gain work should demand increase.

What are they going to do? Well, more of what they are doing now. Festering on the – Les Banlieues – that surround the large cities in France, and are replicated throughout Europe in one form or another.

The term ‘les balieues’ is now usage for the low-income housing projects where the immigrants to France have been confined.

During the riots of 2005 (before the crisis) we saw images like the one following in the low-income area of Trappes (west of Paris). More than 220 buses were burnt as an expression of protest and hopelessness.

Most of the protesters were youth of Muslim origin of North African or black African origin (Source)

A picture from last week’s events would suggest that things have become more serious since 2005 and the crisis and the resulting fiscal austerity has exacerbated matters.

Conclusion

A dramatic shift in policy is required. The most imaginative the Europeans appear to be at the present is cogitating about QE, a policy change that will do virtually nothing to alleviate the crisis. And even that placebo-intervention is causing incredible angst among Germans who consider the sky will fall in if the ECB acts.

Well the sky is already falling in and huge increases in fiscal deficits are required – much more than just a few billion euro of bond purchases by the ECB.

And I haven’t been swimming lately in the Nile, nor do I know any mobile phone numbers of CIA agents!

That is enough for today!

(c) Copyright 2015 William Mitchell. All Rights Reserved.