365 Party Girl - the Solution to Unemployment

 

Typically speaking, a historically low unemployment rate would mean that the Government has little to worry about in the labour market. Despite the lack of worry from the Government, this is not one of those times.

Since the start of 2022, overall unemployment has remained fairly steady, decreasing by 0.1%, from 5% to 4.9%. By contrast, unemployment for young people, between 15-24 years old has went from 9.7% to 13.4% in the same period.

While it is ordinary for young people to have a higher rate of unemployment than the general population, what we’re seeing now is that gap widening, in a way that could be showing the first signs of a looming employment crisis.

Since the Crash, the unemployment rate for young people has been typically close to double that of the general population. However, this year alone we’ve seen a sharp rise in unemployment among young people, with the unemployment rate for young people reaching 2.73x that of the general population.

This is coming off the back of two things. Firstly, we’re seeing a period of economic uncertainty, particularly due to the Trump administration’s repeated flip-flopping and unpredictability around tariffs. The result of that uncertainty is that a lot of businesses are deciding to hold off on hiring, fearing an economic downturn. Normally, when businesses aren’t hiring, they’re also laying people off, however that’s not what’s happening this time.

While businesses are fearing a recession without actually being in a recession, people just entering the labour market, i.e. young people, are finding that it’s becoming more difficult to find a job. On the other hand, people already in a job aren’t losing their jobs. The result is that widening employment gap between the young and everyone else.

We’re also seeing the second problem of the use of AI, making businesses feel they don’t need to hire as many people. In particular, they aren’t hiring recent graduates to entry level jobs, either using AI to fill the gaps or hoping AI will develop soon so that it can fill the gaps.

Combined, these problems are making youth unemployment a short term worry that will develop into a long term crisis, as organisations will eventually be forced to promote for narrower fields due to the lack of experience in the workforce. When the young people of today eventually reach retirement, they will likely be retiring on a lower income than they would have if this labour market downturn didn’t happen. This means either worse outcomes in their retired life or a strain on state finances.

However, there is a solution. How can we get young people into jobs when no new jobs are cropping up? Simple; get people out of the jobs they’re already in.

We live in an era of greater productivity than ever before but yet our conversations around retirement age seem to be focused on increasing the pension age, depriving working people of more and more of their finite lives. Surely, logic would dictate we should be talking about lowering the pension age?

By reducing the pension age we can hit two birds with one stone. On the one hand, it would improve the lives of older people by getting them out of work and letting them enjoy their lives as they see fit. On the other hand, it helps young people by freeing up job, thus reducing youth unemployment. For everyone in between, it opens up promotion opportunities. Everyone wins.

In fact, we can and should go even further. Before I explain how, let me give some more context.

When the old age pension was first introduced in Germany in 1889, the pension age was 70 – three decades over the average life expectancy. The reason for this is simply because it was created as something to do with the people who has the misfortune of living a long life. This notion still confines our thinking around how we pay people to not work.

As it stands we either people to not work because they can’t find work or aren’t able to work. We should, however, pay people not to work simply because we can, as a sort of kindness to ourselves. For every seven years a person works (365 weeks) they should be given a year off from work. Such a reinvention of the phrase 365 party girl wouldn’t be unprecedented.

Following the conclusion of World War II, American veterans were rewarded with the Servicemen’s Readjustment Act 1944, more commonly known as the G.I. Bill. This bill allowed veterans to receive $20 per week (2/3 of the weekly wage at the time) for up to 52 weeks. Not only did this initiative pay for itself, it paid for itself six times over. Veterans got the money and spent it, throwing it straight back into the post-war economy.

There is no reason why we can’t replicate such an initiate now, when we have greater productivity than ever before. Especially when it would solve the issue of youth unemployment with the side effect of improving people’s lives.

Youth unemployment will become a greater issue if appropriate steps aren’t taken and the most appropriate steps to take are not by creating work, but rather simply moving it around.