Fabian Demicoli

Financial Transaction Tax & Youth unemployment


In
his intervention at the European Economic and Social Committee's 490th Plenary session
GRTU's Director General and EESC Employers representative Vincent Farrugia
addressed the Plenary on two very important topics at the moment; The Financial
Transaction Tax (FTT) and Youth unemployment.

On
the FTT Mr Farrugia argued that when the European Commission first introduced
the FTT in 2011 it appeared as a proposal of little concern however important
developments took place and now it is worrying even its supporters. This
especially since last February the Commission published a proposal that would
allow 11 countries to go ahead with the FTT and possibly in 2014 start charging
levies of 0.1% on equity and debt transactions and 0.01% on derivatives. The
proposed rules are designed to discourage firms from avoiding the tax by
shifting trading abroad. The FTT will be charged not just on transactions that
take place within the 11 countries, but on any transactions that involve shares
or bonds issued by them. This is indeed very worrying and a new strong wave of
lobbying has started against the FTT.

On
youth unemployment official ILO figures say that 75m young people are
unemployed, or 6% of all 15- to 24-year-olds. The OECD counts 26m young people
in the rich world as not in employment, education or training. A World Bank
database compiled from households shows more than 260m young people in
developing economies are similarly "inactive". These total to almost 290m that are neither working nor
studying: almost a quarter of the planet's youth.

Young
people have long had a raw deal in the labour market. Two things make the
problem more pressing now. The financial crisis and its aftermath had an
unusually big effect on them. In Greece and Spain over a sixth of the young
population are without a job. Second, the emerging economies that have the
largest and fastest-growing populations of young people also have the worst-run
labour markets. They also have the highest share of young people out of work or
in the informal sector. Though they are at different stages of development, the
countries all suffer disproportionately from employment's main curses: low
growth, clogged labour markets and a mismatch between education and work.

In
rich countries with generous welfare states this imposes a heavy burden on
taxpayers. One estimate suggests that, in 2011, the economic loss from
disengaged young people in Europe amounted to more than 1% of GDP. And failure
to employ the young not only lowers growth today. It also threatens it
tomorrow.

A
third problem is the mismatch between the skills that young people offer and
the ones that employees need. Employers are awash with applications-but
complain that they cannot find candidates with the right abilities. The most
obvious reason for the mismatch is poor basic education. Countries with the lowest
youth jobless rates have a close relationship between education and work while
countries with high youth unemployment are short of such links.

Some
policymakers want to transform unemployment systems from safety nets into
spring boards, providing retraining and job placement and the state paying a
big chunk of their wage. Practicality however constrains certain countries'
ability to implement such active labour-market policies. Countries like Spain
and Italy, with millions of unemployed people, could not hope to follow suit in
a time of boom let alone one of austerity.

It
is hard to be optimistic about a problem that is blighting the lives of so many
people. But it is perhaps time to be a bit less pessimistic. Policymakers know
what to do to diminish the problem-ignite growth, break down cartels and build
bridges between education and work. New technology gives them powerful tools
too. Countries that make the investments and choices needed to grapple with
their unemployed youth could see some dramatic improvement ahead.

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