Youth unemployment seriously harms the economy as it hampers labor participation and skill development and lead to more social problems and ill-health in the long run, European Central Bank President Mario Draghi said.
In an interview to the British daily, The Guardian, Draghi said, “In many countries the labor market is set up to protect older “insiders” – people with permanent, high paid contracts and shielded by strong labor laws.”
“The side effect is that young people are stuck with lower-paid, temporary contracts and get fired first in crisis times,” he said, according to the transcript published on the ECB website on Friday.
Employers are also reluctant to invest in young people, so the incomes of this generation stay lower over their lifetime, he added.
The interview was conducted before the bank announced a raft of stimulus measures for the euro area economy on Thursday, cutting all of its three key interest rates and expanding its asset purchase programme, among others.
What might be the forces at work here – demographics / changing workplaces / fiscal-monetary policy – that mean that young adults appear to be receiving little of the rewards of two and half decades of average economic growth?
“Nobody stays young forever,” Draghi said. “The crucial question is whether a person can participate fully in the economy over his or her life-time – get a good education, find a job, buy a home for the family.”
He expressed concern that the increasing inequality might prevent people from participating in economic growth and urged authorities to explore the problem carefully.
As a central bank, the ECB aims to maintain price stability that prevents unfair distribution of wealth, he said.
“Wealth creation isn’t a zero sum game,” Draghi said. “What matters is that young people, as they move through life, have the opportunities to build up wealth, too.”
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