The latest unemployment rates for the UK are chilling – 8.4% of the UK population is now unemployed (the highest for 17 years) and the 16-to-24-year-old age group make up 22.2% of this unemployment figure, according to the Office for National Statistics (ONS).
Reflective of austere economic times, victims of youth unemployment are in danger of becoming a lost generation and those unemployed for long periods of time face an uphill struggle to find employment again. Without regenerating the economy and addressing the skills gap, it will be impossible to resolve the unemployment problem. But where does the responsibility lie – with the Government, corporations, or is a collaborative approach required?
Unemployment goes hand-in-hand with an under-performing economy, and not surprisingly, these two issues were trending topics at the World Economic Forum held in Davos, Switzerland, in January.
But who was taking responsibility? A PwC CEO survey, published during the Davos event, revealed CEOs are three times more confident in their own company's growth prospect than the global economy's. With faith lost in governments, political representatives at the Forum acknowledged that they needed to regain citizen and commercial confidence and work with corporations to accomplish the same type of growth that they are achieving.
The consensus at Davos was commercial businesses should not rely on cost-cutting, but innovate and invest in new business models, services and markets to achieve growth and succeed in today's and tomorrow's markets. Governments, on the other hand, must strive to achieve stability through job creation and open trading. Neither governments nor corporations can operate as silos; they must collaborate to resolve the world's economic woes, the job skills gap and the high unemployment rate that is not confined to the UK alone, but evident across Western Europe and the US.
During the World Economic Forum, there was a panel on 'Jobs and the Future of Work', which was led by New York Times columnist, Thomas Friedman. Friedman pointed out that in the "hyper-connected world", the concept of jobs and future of work is getting redefined. The key for government and business is to constantly re-skill, to increase employability. This will reduce the divide between what local governments want, which is to give jobs to local citizens, versus global economic expectations, which is to give work to the most productive and competitive. To overcome this paradox, local governments and businesses must re-skill their citizens, so that talent is in line with the local economy's demand.
This initiative must extend beyond the Government and corporations though, and into the education sector, so students are trained to have skills in line with the demands of the economy. For example, technology is the platform that helps to drive and manage business, yet the skills shortage for engineers means countries, such as the UK, are relying on overseas skills to fill the gaps.
To align the demand and supply, coherent career strategies must be developed by all stakeholders for the young, while they are still in education. This should be facilitated by businesses helping to form the structure of the curriculum and courses, and government creating campaigns to drive awareness and training programmes, with placements to build the skills.
But addressing the skills gap goes beyond working with education facilitators and the young; commercial organisations must look within their own businesses to ensure their employees' skill sets are in line with current and future business models. Change management will become the top priority for the CEO, who must have the foundations in place to be able to adapt their leadership style to catalyse growth and achieve sustainability.
Technology will be at the core of this strategy and as technology naturally becomes smarter, processes and overheads will be streamlined, so CEOs and business leaders will need to find alternative ways to grow and differentiate themselves.
Re-skilling is just one way to approach the unemployment issue. Job creation can also be achieved through entrepreneurism. At Davos, it was discussed that the culture of many nations is not to rely on existing organisations to create job opportunities but, to encourage innovation and economic growth, an entrepreneurial spirit and eco-system needs to be developed at a domestic and global level.
The best way to grow the entrepreneurial eco-system is through the creation of talent and innovation hubs. Nurturing local and young talent through initiatives such as the tech hubs in Mysore or Silicon Valley and the 'Silicon Roundabout' in East London, will help to expose talent, which in turn will encourage investment from global firms such as Google, which have recently invested in the technology hub in East London. As these local start-up businesses grow and begin to earn a positive reputation, business executives across the world will recognise the potential and will support the start-ups to expand at a global level, which will create jobs for people in those domestic countries.
Typically though, the culture, especially in the UK, is to create the business, then sell it on to make it global, and then go back to a job as an employee. In other countries, such as India and the US, the culture is to create and grow the business initiative using local talent and funds, then to take the business global, and keep these in the business for the long term.
Countries with a short-term or immature entrepreneurial vision must shift behaviour from looking for jobs to creating jobs, and perceiving a start-up business as a short-term money making scheme to a long-term business venture.
Yes, governments and businesses need to nurture and develop their own domestic economy, but an inward, localised strategy is not the approach to overcoming the issues surrounding unemployment and a poorly performing economy. Open, competitive trade and globalisation will help to resolve these problems.
Lord Mandelson opposed this by declaring at Davos that "globalisation had created greater inequality" and a report produced by the World Economic Forum stated income disparity would become a top risk over the next 10 years.
Unfortunately, opposers of globalisation are still viewing it in its first phase, whereas in fact it is reaching a new era, where old and new worlds meet. At the moment, the skills of local citizens don't necessarily match the markets of their local economy, which is why there is high unemployment, and a growing inequality in wages. By transforming existing business models and realigning and re-skilling talent, economic growth will be achieved and inequality will decline.
The second phase will be where firms shift from the original model of outsourcing and insourcing to mobilising their businesses across the globe, and this in turn will help to encourage open trade. This approach will help to create jobs across continents, fuel growth and drive the world to become more efficient.
There is no overnight solution for high unemployment and a struggling world economy, but the debate at the Forum on how to go about resolving these issues was bold, refreshing and visionary. It has helped to put re-skilling and innovation at the forefront of business and government leaders' minds as the way forward.
Nandita Gurjar (pictured) is senior VP, group head of HR at Infosys
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