By Malminderjit Singh
SINGAPORE - Both developed and emerging economies face a serious future challenge of generating a large quantity of jobs as well as ensuring that these are of quality, says Deputy Prime Minister Tharman Shanmugaratnam.
"If you connect the dots, across the advanced world and for much of the developing world, you have to conclude that the key challenge for the future is jobs; not just the quantity of jobs but the quality of jobs. We are now - if you look globally - in the midst of a jobs crisis, on a scale not seen in decades," he said at a conference on regional economies yesterday.
"Even in the emerging world, there is a very serious challenge of jobs - both in the quantity of jobs available to satisfy the needs of the young population as well as the quality of jobs that will enable them to keep bettering their lives."
The ability of countries to do this effectively has serious consequences on their socio-economic well- being, Mr Tharman said.
"Indeed, how well we meet this challenge of providing good-quality jobs will determine if we succeed in the higher objective of achieving inclusive societies, where everyone benefits from growth - because jobs, and the quality of jobs, are the foundation for an inclusive society."
Mr Tharman said the jobs crisis is most pronounced in the advanced economies.
"In Europe, youth unemployment is now on average about 23 per cent, which is remarkable. In the worst affected European economies like Spain and Greece, it is about 52 per cent. Even in France and the UK, it is about 22 per cent, which is extraordinary - it means that one in five young people (of working age) do not have a job. In the US, it is also much higher than it has been historically - a little lower than Europe but still extremely high, something like 16 or 17 per cent."
Such challenges also exist in the emerging world, where youth unemployment in the Middle East and North African (MENA) countries stands at about 25 per cent, Mr Tharman said.
One of the implications of prolonged periods of youth unemployment is the psychological damage on an entire cohort of society, he noted. "Once you are unemployed for an extended duration, it has permanent effects. Short-term unemployment is not so bad - you can get back into another job, learn a new skill and so on. But once you are unemployed for a long period, it has permanent effects."
Mr Tharman said the risk of having a generation of youth who do not have the experience of a job, let alone a permanent one, will result in a lost generation that finds it hard to get back into the mainstream of society. He said there was increasing evidence from phenomena in developed economies such as Japan's "ice age", when there was very little hiring of young people in the economy, causing youth unemployment to double.
"That generation of youth that went through the 'ice age' when they had much reduced hiring is permanently different from previous generations, in an enduring way. Different in their orientation towards work, different in terms of the willingness of employers to hire them . . .
Once we go through an extended period of youth unemployment, something happens that is not just for a period but for many years into the future," he explained.
Besides youth, Mr Tharman said the jobs crisis was affecting mature workers such as those doing middle-level jobs in advanced economies like the US, who are now experiencing a decline in their wage and employment prospects.
"So what used to be the bedrock of American society - a broad middle class - is now no longer there. The security is no longer there and the incomes are stagnant.
What the US is seeing now is job polarisation - polarisation meaning the top end is doing well, at the bottom end there is still some demand, but the middle is gradually disappearing.
"Less demand for workers in the middle and lost prospects for wage and income improvement. This is a very serious challenge for the advanced economies," he said.