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Confronting Youth Unemployment

By Juan Somavia, Rahul Mirchandani, Julia Taylor Kennedy, Devin T. Stewart | July 31, 2012

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JULIA KENNEDY: Welcome to Just Business. I'm Julia Taylor Kennedy.

One side effect of the global financial crisis is limited employment opportunities for youth. According to the International Labor Organization [ILO], more than 75 million young people worldwide are looking for work. The ILO has also found that youth are three times more likely to be unemployed than adults.

Today we'll hear from the man in charge of the ILO for his take on unemployment and learn about a company in India that's doing its part to provide jobs and training for young people.

Let's start with Juan Somavia, director-general of the ILO.

Somavia began his career as an economist in Chile and quickly entered politics and diplomacy. Among his many posts, he has coordinated the Third World Forum, partnered with author and Nobel Prize winner Gabriel García Márquez to represent Latin America on the MacBride International Commission for the Study of Communication Problems, and he has chaired the UN committee of Parliamentarians for Global Action. He has headed the ILO for nearly 15 years.

Somavia visited Carnegie Council to speak with senior fellow Devin Stewart in our boardroom about the growing global challenge of unemployment and how government policies can be adjusted to benefit potential workers.

DEVIN STEWART: Mr. Somavia, tell me about your opinion of managing the ILO. What was the biggest labor issue that you saw?

JUAN SOMAVIA: I think the biggest issue today is the need to reduce global unemployment, which is at the highest level ever, the need to address youth unemployment, which is also at the highest level ever. But these things are not done from one day to the other, so you have to have a vision. The vision we have developed in the ILO, which has had global support, is to acknowledge that what people are saying is, "Look, give me a decent job, give me the opportunity of a decent job, and I'll do the rest."

If I have to say something that I've learned, it is that in order for ILO policies to be relevant you have to listen to people.

DEVIN STEWART: What is the state of labor in the world today?

JUAN SOMAVIA: The situation is 200 million people unemployed, and growing, people that have got out of the labor force. If we want to begin reducing the unemployment level and being able to cope with the quantity of people coming into the labor market, we're talking about creating 50 million jobs a year.

Now, the way we are going, we're not going to make it. So certainly, we need a change of direction, we need a change of policies. This is basically what the ILO is about today, what it has been about for the whole period in which we have put the Decent Work Agenda in place. Before this crisis that we're living through, there was already a crisis of a growth and globalization model that was not producing enough jobs, that was producing a lot of inequality.

DEVIN STEWART: What are the main policy recommendations?

JUAN SOMAVIA: The main policy objective: put the financial economy that has run out of course into the service of the real economy. The problem is that over the last 30 years in which this progressive deregulation of the financial economy has taken place, it has taken resources out of the real economy and put it in the casino economy that we've finally put together as a result of this deregulation.

We have to go back to the old system: banks receive savings and they put it at the service of investments, and people who will take certain risks in that investment will create jobs, will create consumption, et cetera.

I would say that one thing that we need to do is to put the financial system under control and make sure that you begin funding small enterprises, which are the ones that really create the jobs. We need to get into another cycle in which ethics is going to play a very major role. Ethics are sort of run out of the way you manage the financial system.

DEVIN STEWART: Speaking of ethics, what are the responsibilities of employers and job candidates?

JUAN SOMAVIA: Basically we need a multi-stakeholder solution here. If we really want to have a labor market and the recognition that the quality of work defines the quality of a society, and that's the ethical link, then we have to take a look at what is the meaning of work.

Today, work is seen as a cost of production, which it is, but it has to be as low as possible in order to be competitive in a global economy. At the same time, the worker is seen as a consumer, so the hope is that he has as much income as possible in order to consume. Since there is no relationship today between profits and productivity on the one side and wages, which have been kept stable, while profits and productivity have gone up, then you deal with the vacuum through credit, and everybody is indebted in different ways.

The first thing, which is a long-term one, is: Why don't we all assume that work is much more than an economic phenomenon, and that unless we recognize that, it's going to be very difficult to have cohesive, stable, integrated societies? That's the valuation, I would almost call it an ethical vision, the recognition that work has a social value that goes much beyond its economic expression.

On the other hand, you need to have economic and social policies that actually put work as some fundamental priority in society. It is not the case today. Today the criteria for success is growth—you grow, you have a great macroeconomic policy.

Then people say, "Hey, low inflation, low interest rates, high levels of growth"—not the situation today, but it has been in the past—"so we have a great macroeconomic policy. Unfortunately, we have not created enough jobs. But we'll see what we do about that."

So you've got to change around the criteria with which you judge the success of your policies. I think that what people would like to see—and they are not seeing that today—is a decent work, the quality of work, the quality of work for everybody and the quality of work for youth in particular, approached as a key objective of policies.

DEVIN STEWART: Looking at youth unemployment, do you see a correlation between youth unemployment and political instability?

JUAN SOMAVIA: I think that the correlation is between youth unemployment and loss of hope, youth unemployment and loss of dignity, youth unemployment and loss of trust. When all of these things begin to happen to you, the way you look at society is that this is a hostile atmosphere for me, for the poorest and the most vulnerable people, clearly, in terms of simply access to essential needs. For a young person coming out of the university with a title, with the hope that that title will help that person go ahead in life, they say, "Why wasn't I told that it doesn't work this way?"

So what you are having—but not only with young people—what you're having is a disconnect between citizens and the political systems and the governance systems. It can be with political parties; it can be with governments; it is definitely today with the financial system; it can be with certain attitudes of business. But the feeling of a normal person is that you are not the key object of policies; some way, somehow, other interests are the ones that are at the heart of policies. This is producing this disconnect, which is very clear in lots of societies.

DEVIN STEWART: What do you see as the biggest ethical challenge facing the world today?

JUAN SOMAVIA: Having ethics.

DEVIN STEWART: If we don't, what's at stake? What would happen?

JUAN SOMAVIA: A progressive fragmentation. So we are going to have a global economy that is apparently more integrated. I say "apparently" because we have to see what happens in the next 10 years. We already see protectionism emerging and a number of things that can make the present setup change.

But if not, you are going to have this disconnect. If we do not have policies and visions of a future and what our societies should be like, this disconnect of citizens, of individuals, of people, from the way things are going, you are going to have a sort of an inward involution, which is a little bit there. But it has been stimulated also by the types of policies that we have been promoting for the last 30 years, because in the end you've got to manage the problems, you've got to manage your life; and life is not easy, it's difficult, so go ahead and do it; and if you don't do it, you're a failure.

These policies, this notion that it's only up to you, which is absolutely true, except that it's only up to you provided you get a basic social protection floor that permits you to enter into exercising your abilities, if those abilities and capacities have been developed. But if you tell somebody that hasn't been able to enter grammar school, "Look, it's only up to you," they say, "Hey, hey, come on, there is something that society has to put into the mix."

Society today, in order to help that person be up to living in a complex and difficult and competitive society, it has to be done through public policy. You can have all different forms of private engagement in that, which is perfectly all right and necessary, but you need the axis of private and public policies.

But when public policies are called and we're told, "No, no, no, no, no, not too much public policy because that de-stimulates the initiative." And when you say, "Well, what's the initiative of somebody who hasn't been able to get to high school; so the public policy guys can't help that person?" It's, "No, no, no, no, because then their initiative is going to be stomped." There's something wrong with that approach.

It's the values that you transmit through the policies that you implement, even the values that you transmit through language. For example, we talk today about you and me. We are human capital. You have to ensure that human capital is well educated. But it's a very funny thing that you and I have to be called capital in order to be valued.

You talk about corporate citizenship. Citizenship, according to all of our constitutions, is about people, individuals. But suddenly the notion of citizenship, with all the implications of the right of citizens to observe the manner in which authority is exercised and expresses itself through elections—suddenly the democratic process is translated into a state in which corporations play a very fundamental role, but they certainly don't have the same rights as citizens. 

So the language itself begins to change perceptions and begins to tell you that this is the way things are, and we almost don't realize that we fall into the use of that language without really questioning the deep meaning of what those formulations mean.

DEVIN STEWART: Mr. Somavia, excellent. Thank you so much.

JULIA KENNEDY: Juan Somavia is director-heneral of the UN's International Labor Organization. He spoke with Carnegie Council senior fellow Devin Stewart.

Europe and other regions may be having a hard time employing their youth, but one country that seems to be incorporating its young people into the labor force is India. So far, the country is experiencing an economic boom that has provided work for much of its youth, particularly in agriculture.

Rahul Mirchandani is executive director of the board of Aries Agro, a specialty fertilizer company, and he helps the firm with marketing. With 85 brands, 650 employees, and serving 8 million farmers, Aries Agro has won a variety of awards for its fast growth and innovative practices.

Based in Mumbai, the company is also looking to bring together young Indians and farmers to train them on improving crop yields.

Mirchandani started our conversation by telling me about the youth piece of the Indian labor market.

RAHUL MIRCHANDANI: Close to 60 percent of our population of a billion-plus people are under the age of 25. So this is really a major demographic advantage that we have here in India, that 60 percent of the probable employees are all young.

As far as we are concerned, 314 out of our employees, almost 50 percent of our staff, are also under the age of 30.

I've been involved in this organization for the last 12 years. In these 12 years, we have also been fortunate to have a very high phase of growth. With high growth has come a high amount of recruitments. Most of these take place from universities and research institutions across the country. Since we are a specialty agri company, we look at agricultural graduates across the country.

JULIA KENNEDY: So as someone with a 50 percent staff under the age of 30, going to a conference like the UN's International Labor Organization conference recently in Geneva that tackled the question of youth unemployment, what did you learn there and how did you think that India is measuring up against all these concerns about youth employment around the globe?

RAHUL MIRCHANDANI: I think India is measuring up fairly well. But there are a lot of areas that need very urgent correction.

I think one of the major things that did come out—and I highlighted it, and so did others—was a skills mismatch. India has a very unique situation where we have jobs without people and people without jobs existing simultaneously. So we have a lot of graduates coming out of graduate schools and universities, but they are not employable. I think this is the major, major risk that young people face, is that they are actually getting a degree but they're not getting an education.

JULIA KENNEDY: What degrees are they getting versus what jobs are available?

RAHUL MIRCHANDANI: Jobs are available in almost all sectors. India has a very, very burgeoning services sector. We have a strong manufacturing sector as well. So there are jobs available everywhere.

But the problem is that the people who are coming out of graduate school are getting their degrees in commerce, art, science, management, or any of the other social sciences, but they are not having the skillsets which make employers believe that they are worth taking up as employees. So a lot of them are taking up, perhaps, occupations, which are not directly related to their own education, in effect wasting five to seven years of work, because that's the only option that they have available.

I know when India went through the IT boom, you would have engineers going into work into business process outsourcing. A lot of our private sector is working together with universities to actually revamp the curriculum and the delivery of courses.

An example is my own company, for instance, has launched its own MBA program in partnership with a university that we work with. We said that the best example would be, instead of actually getting on the rooftop and crying until I'm hoarse that I'm not getting the right people, that if I can actually get myself involved right from the curriculum design stage, teacher training stage, and get the right output of students from universities and show them how it's done, that's the best way of tackling the problem.

JULIA KENNEDY: Now tell me also about your national farmers network for young Indians and how that's helping young farmers across India be educated about how to best use the specialty fertilizers that you're developing, as well as other products that will improve their crop yields.

RAHUL MIRCHANDANI: The young farmers network is something that we started with the Confederation of Indian Industry's youth arm. It involves today 11,000 very, very progressive young farmers under the age of 40, and involves them primarily as a knowledge sharing platform. So we are a knowledge sharing platform that not only educates them and trains them on best practices but also uses these farmers as force multipliers in those respective geographies.

We also train them on things like output price discovery, where and how to discover the best price for their output, market access. We also provide them a host of information on the mobile phone, including crop advisories, weather reports, output price information. It's a whole gamut of activities that go into knowledge sharing.

We also use a lot of training programs. These happen with partnerships with universities. We train farmers' children in rural schools. We go to more than 100 rural schools every year and we train young children in the ninth and tenth grades on future practices, best practices, in agriculture because we want to create a whole group of future-ready farmers. We believe that agriculture needs to be positioned as a profitable, very, very remunerative profession. For lack of a better word, we need to get the glamour into agriculture if these young people have to stay back in the fields rather than move to the cities.

We see a lot of successful examples in a few states where this is happening, where agriculture is extremely respected as a profession. This pride in agriculture needs to be instilled. That's another thing that the farmer network focuses on.

JULIA KENNEDY: So it seems that between this MBA program and also this national farmers network, a lot of your focus is on really skills-based practical education stemming from this mismatch that you see.

Now, when you were at the conference and when you talk to employers around the globe, do you hear the same kinds of concerns? This is something that we hear about in the United States all the time, that there's a mismatch between, say, a liberal arts education versus an engineering position that's open that's difficult to fill.

RAHUL MIRCHANDANI: Yes, I think it is fairly common. I think there is a demand/supply mismatch. There is a lot of lack of counseling of students when they enter degree courses. You typically find that students would enter courses because their friends are doing it or because a whole lot of them got good jobs in the previous year. It doesn't necessarily reflect the demand situation and the employment market as it stands at the point of time when they will graduate. They rather focus on what's happening on the demand side at the time at which they enroll. That's a major problem, because there's a three-year or a four-year gap before they're actually going to come out with their degree.

A lot of my students who enrolled a few years ago, before the recession, ended up finishing their degrees in perhaps one of the worst employment markets that existed at that point in time, and they were trained for industries that sort of went through the cracks during the recession. They hadn't got the skills to select industries which would be recession-proof.

JULIA KENNEDY: We've been talking a lot about the challenges that exist in the Indian market. But again, if you look globally, as you pointed out at the beginning of the interview, India is one of the markets that is doing quite well in terms of growth and finding jobs for its huge youth population.

Europe is going through all kinds of crises in terms of finding employment for its youth, and then the Middle East is having issues as well. What do you think other regions can learn from what India is doing to provide jobs for its enormous youth population?

RAHUL MIRCHANDANI: One of the first things is a lot of our youth are involved in agriculture, so that's one good starting point. Unfortunately, the Western world doesn't have that sector, which is as vibrant here as it is. It's a major cushion, because a lot of the rural youth get employed. A lot of the farms are actually owned by their own families. So that's one major issue.

In India we also have a very strong family business culture. I think close to 90 percent of our businesses are family-owned. Therefore, they do provide employment to a lot of the people of the family and the extended family.

These are two major buffers that India in its own cultural context has which perhaps the Western world doesn't. So the entrepreneurial culture that exists here does end up absorbing a lot of the young people. We do not have a lot of jobs here which are either part-time or the internship kind of sector.

JULIA KENNEDY: Well, you know, people who are bouncing from internship to internship might think that's a good thing. But I guess it depends on your perspective.

RAHUL MIRCHANDANI: In fact, I heard a lot about unpaid internships. That was like a big thing in the ILO Forum, that people are coming out of jobs and students are going in for unpaid internships because at least they're doing something.

JULIA KENNEDY: Right, exactly.

Before we end, I just wanted to talk to you a little bit about corporate citizenship and, in terms of Aries Agro's projects, the national farmers network, where you see its role. There are clear incentives in terms of your consumer market and your employee pool to do this. But do you also see your role as a corporate citizen? Do you do more in these areas because you think it's the right thing to do, or are there other sort of citizenship motives that are driving you here?

RAHUL MIRCHANDANI: We are a publicly traded company, so therefore our corporate governance structures do dictate a lot of our corporate citizen work. But beyond that, as far as involvement with the community is concerned, our knowledge sharing and education is crucial to our business as well as to develop the sector.

We spend a lot of time and effort in developing the agricultural sector, farming communities. All of these do impact the kind of market because we are actually creating demand for our products, a demand that necessarily doesn't exist. Unless we educate, unless we train, we cannot sell. So it is a strategically important objective for us to involve the community and train them and spread knowledge as fast as we can in various parts of the country.

Beyond that, we do believe that as corporate citizens we have a role to play in conserving our own soil structures. Indian soils are highly deficient in various nutrients. The soil actually gets diminished further. Our existence as an organization becomes difficult.

All of this, of course, has made us build a lot of loyalty and trust amongst our farming community. At the same time, we are recognized as very responsible corporates and not mavericks in the sector.

JULIA KENNEDY: Wow. Well, it's really fascinating and it seems like you've built a wonderful enterprise. Thank you so much for joining me here on Just Business.

RAHUL MIRCHANDANI: My pleasure. It's a pleasure talking to you.

JULIA KENNEDY: That was Rahul Mirchandani. He's board executive director at specialty fertilizer company Aries Agro.

That wraps up this week's look at youth unemployment.

I'm Julia Taylor Kennedy. Thanks to Terence Hurley and Emil Chireno for their contributions to this week's podcast. Thanks to Tony Higgins and Lido Pimienta for this week's music. And thanks to you, our listeners, for joining us. We're happy to hear from you. Please post comments on the Carnegie Council's iTunes page.

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