Governments should prioritise spending money on youth

Typically businesses, and most people, think about the short term; how they are going to live or produce a profit over the next few years. This leaves the role of thinking across broader horizons to the government. Governments need to plan to ensure the prosperity of the nation in twenty or even fifty years’ time because many of their current citizens will still be alive. This planning is also necessary because of the length of time that large scale construction projects or social changes take. For example “In the energy sector, investments are made for a period between 20 and 60 years.”[1] Decisions on what kind of power to support, coal, gas, nuclear, or renewables, will still be making an impact in half a century. Clearly when thinking longer term it simply makes sense to focus on younger people as they are going to have an impact for longer. Just the same as in energy policy if a nation makes mistakes with its treatment of its youth it will be feeling the consequences for half a century. It is clearly in the long term interest of the state to invest in its youth.

[1] ‘The Commission's Energy Roadmap 2050’, Europa, 15 December 2011, MEMO/11/914, http://europa.eu/rapid/press-release_MEMO-11-914_en.htm

It is unclear that the long term interest of the country really means investing in youth. Instead it should mean anticipating the changes that are necessary to ensure future security, health, and prosperity for every citizen. This is what happens with investing in energy; we anticipate that if we don’t invest in it for the future the lights will go out. But we also need to change along with changing circumstances so taking the comparison with energy further that means not just investing in power generation but in renewable power generation. Considering current demographics this should mean spending more to ensure that health services are ready for an older population and ensuring that pensions are on a stable long term footing rather than more on youth. 

Spending on young people is an investment. While there may be other objectives too, such as taking young people off the street to prevent trouble, when there is spending on young people this is almost always to ensure they have either a broader, or more focused skill base. This is done through education, training, and apprenticeships.  Having a better skilled workforce has a beneficial effect on economic growth. This means that there are several economic benefits to spending on youth; there is the initial fiscal benefit from the spending on youth followed over years and decades by a return on the investment from having higher skilled workers. This higher skilled workforce will then over time pay back the initial investment through paying more tax as a result of being more productive (so earning more). There is then a change from the unemployed youth being a burden on the state and the economy to a contributor.

A study in the US suggests that a 25 year old with little education past 16 and no job will cost the taxpayer $258,000 over their lifetime.[1] If trained and given a job this can clearly be turned into a gain for the taxpayer and society. This is similar to why it is more beneficial to the economy to spend on infrastructure than simply handing cash out. Both will give a fiscal boost from the money being spent but handing money out won’t bring a return decades later.

[1] Belfield, Clive R., ‘The Economic Value of Opportunity Youth’, Kellogg Foundation, January 2012, http://www.serve.gov/new-images/council/pdf/econ_value_opportunity_youth.pdf, p.2

What is best for the economy is making sure that government money is spent as efficiently as possible. This may mean taking some money away from spending on youth as well as providing more in some areas. Education for example can be changed to focus more specifically on skills needed for the workplace rather than learning for learning’s sake or could be made more efficient by transferring some learning online. This need not involve more spending on youth but better spending on youth. 

In most western countries the ‘baby boomers’ (those who were born between the end of the second world war and the mid-1960s) could be considered to have led a charmed life. They were the beneficiaries of free schooling and university education, then of an expanding economy that provided enough jobs, and finally high pensions. David Willetts, the UK Minister for Universities and Science, estimates that the boomers are set to take out about 118% of what they put in to the welfare state.[1] The current generation on the other hand in some countries are having to pay more for their education and then find there is no job available. To make matters worse they are likely to be paying more for their elders’ pensions (which come out of current workers national insurance not that which was paid in by the boomers themselves) and healthcare and then will have to work longer for a smaller pension themselves. This means that if spending remains on its current trajectory most spending will remain directed at the baby boomers for decades to come.

[1] Reeves, Richard, ‘The Pinch: How the Baby Boomers Stole Their Children’s Future by David Willetts’, The Observer, 7 February 2010, http://www.guardian.co.uk/books/2010/feb/07/the-pinch-david-willetts

It seems a little unfair to blame baby boomers for their fortune in terms of demographics. They were simply lucky to be born when they were. Most countries are already considering the impact of aging; the pension age for example is being raised almost everywhere.  And of course it is wrong to suggest that the youth are getting a raw deal in every possible area; for example they have much more technology to play with, and average incomes are much higher than they were when the boomers were young. While the government may not pay for as much for the youth parents and grandparents step in, in the UK £470million is contributed to child trust funds each year by grandparents and they provide an estimated £4billion worth of childcare each year.[1]

[1] Mitchell, Michelle, ‘Debate: Is the baby-boomer generation selfish?’, totalpolitics, http://www.totalpolitics.com/print/5278/debate-is-the-babyboomer-generation-selfish.thtml

Allowing high rates of youth unemployment and underemployment to continue could be disastrous. When people lose hope they are much more likely to turn to violence, or towards crime and drugs. There are clearly extreme examples of this; one cause of the second world war was the great depression and feeble recovery that preceded it, similarly in Africa according to the World Bank 40% of those who join rebel movements are motivating by a lack of jobs.[1] A new World War, or succession conflicts, are unlikely, though not impossible, in Europe.[2] Much more likely however are riots and social unrest aimed at government; youth unemployment was a spark for the Arab Spring. In the west youth protests such as the occupy movement or indignados have so far mostly been peaceful[3] but they may not remain that way without hope of improvement.

[1] Ighobor, Kingsley, ‘Africa’s youth: a “ticking time bomb” or an opportunity?’, Africa Renewal, May 2013, http://www.un.org/africarenewal/magazine/may-2013/africa%E2%80%99s-youth-%E2%80%9Cticking-time-bomb%E2%80%9D-or-opportunity

[2] See the debatabase debate ‘This House believes the Euro is a threat to peace’ http://idebate.org/debatabase/debates/international/house-believes-euro-threat-peace

[3] ‘The youth employment crisis: Time for action’, International Labour Conference, 101^st Session, 2012, http://www.ilo.org/wcmsp5/groups/public/@ed_norm/@relconf/documents/meetingdocument/wcms_175421.pdf,  Pp.2-3

Scaremongering is not the best way to create policy. Clearly leaving large numbers of unemployed young people could be dangerous but so could large numbers of unemployed of any age. Every government wants more economic growth and to solve unemployment but they should be focusing on how to bring the economy as a whole back to growth rather than specifically on youth unemployment. When this happens unemployment will begin to fall. Artificially focusing on reducing youth unemployment will simply prevent broader action to regain competitiveness. It should be remembered from communist states that it is possible for government action to create full employment while destroying the foundations of the economy.

Typically businesses, and most people, think about the short term; how they are going to live or produce a profit over the next few years. This leaves the role of thinking across broader horizons to the government. Governments need to plan to ensure the prosperity of the nation in twenty or even fifty years’ time because many of their current citizens will still be alive. This planning is also necessary because of the length of time that large scale construction projects or social changes take. For example “In the energy sector, investments are made for a period between 20 and 60 years.”[1] Decisions on what kind of power to support, coal, gas, nuclear, or renewables, will still be making an impact in half a century. Clearly when thinking longer term it simply makes sense to focus on younger people as they are going to have an impact for longer. Just the same as in energy policy if a nation makes mistakes with its treatment of its youth it will be feeling the consequences for half a century. It is clearly in the long term interest of the state to invest in its youth.

[1] ‘The Commission's Energy Roadmap 2050’, Europa, 15 December 2011, MEMO/11/914, http://europa.eu/rapid/press-release_MEMO-11-914_en.htm

It is unclear that the long term interest of the country really means investing in youth. Instead it should mean anticipating the changes that are necessary to ensure future security, health, and prosperity for every citizen. This is what happens with investing in energy; we anticipate that if we don’t invest in it for the future the lights will go out. But we also need to change along with changing circumstances so taking the comparison with energy further that means not just investing in power generation but in renewable power generation. Considering current demographics this should mean spending more to ensure that health services are ready for an older population and ensuring that pensions are on a stable long term footing rather than more on youth. 

Spending on young people is an investment. While there may be other objectives too, such as taking young people off the street to prevent trouble, when there is spending on young people this is almost always to ensure they have either a broader, or more focused skill base. This is done through education, training, and apprenticeships.  Having a better skilled workforce has a beneficial effect on economic growth. This means that there are several economic benefits to spending on youth; there is the initial fiscal benefit from the spending on youth followed over years and decades by a return on the investment from having higher skilled workers. This higher skilled workforce will then over time pay back the initial investment through paying more tax as a result of being more productive (so earning more). There is then a change from the unemployed youth being a burden on the state and the economy to a contributor.

A study in the US suggests that a 25 year old with little education past 16 and no job will cost the taxpayer $258,000 over their lifetime.[1] If trained and given a job this can clearly be turned into a gain for the taxpayer and society. This is similar to why it is more beneficial to the economy to spend on infrastructure than simply handing cash out. Both will give a fiscal boost from the money being spent but handing money out won’t bring a return decades later.

[1] Belfield, Clive R., ‘The Economic Value of Opportunity Youth’, Kellogg Foundation, January 2012, http://www.serve.gov/new-images/council/pdf/econ_value_opportunity_youth.pdf, p.2

What is best for the economy is making sure that government money is spent as efficiently as possible. This may mean taking some money away from spending on youth as well as providing more in some areas. Education for example can be changed to focus more specifically on skills needed for the workplace rather than learning for learning’s sake or could be made more efficient by transferring some learning online. This need not involve more spending on youth but better spending on youth. 

In most western countries the ‘baby boomers’ (those who were born between the end of the second world war and the mid-1960s) could be considered to have led a charmed life. They were the beneficiaries of free schooling and university education, then of an expanding economy that provided enough jobs, and finally high pensions. David Willetts, the UK Minister for Universities and Science, estimates that the boomers are set to take out about 118% of what they put in to the welfare state.[1] The current generation on the other hand in some countries are having to pay more for their education and then find there is no job available. To make matters worse they are likely to be paying more for their elders’ pensions (which come out of current workers national insurance not that which was paid in by the boomers themselves) and healthcare and then will have to work longer for a smaller pension themselves. This means that if spending remains on its current trajectory most spending will remain directed at the baby boomers for decades to come.

[1] Reeves, Richard, ‘The Pinch: How the Baby Boomers Stole Their Children’s Future by David Willetts’, The Observer, 7 February 2010, http://www.guardian.co.uk/books/2010/feb/07/the-pinch-david-willetts

It seems a little unfair to blame baby boomers for their fortune in terms of demographics. They were simply lucky to be born when they were. Most countries are already considering the impact of aging; the pension age for example is being raised almost everywhere.  And of course it is wrong to suggest that the youth are getting a raw deal in every possible area; for example they have much more technology to play with, and average incomes are much higher than they were when the boomers were young. While the government may not pay for as much for the youth parents and grandparents step in, in the UK £470million is contributed to child trust funds each year by grandparents and they provide an estimated £4billion worth of childcare each year.[1]

[1] Mitchell, Michelle, ‘Debate: Is the baby-boomer generation selfish?’, totalpolitics, http://www.totalpolitics.com/print/5278/debate-is-the-babyboomer-generation-selfish.thtml

Allowing high rates of youth unemployment and underemployment to continue could be disastrous. When people lose hope they are much more likely to turn to violence, or towards crime and drugs. There are clearly extreme examples of this; one cause of the second world war was the great depression and feeble recovery that preceded it, similarly in Africa according to the World Bank 40% of those who join rebel movements are motivating by a lack of jobs.[1] A new World War, or succession conflicts, are unlikely, though not impossible, in Europe.[2] Much more likely however are riots and social unrest aimed at government; youth unemployment was a spark for the Arab Spring. In the west youth protests such as the occupy movement or indignados have so far mostly been peaceful[3] but they may not remain that way without hope of improvement.

[1] Ighobor, Kingsley, ‘Africa’s youth: a “ticking time bomb” or an opportunity?’, Africa Renewal, May 2013, http://www.un.org/africarenewal/magazine/may-2013/africa%E2%80%99s-youth-%E2%80%9Cticking-time-bomb%E2%80%9D-or-opportunity

[2] See the debatabase debate ‘This House believes the Euro is a threat to peace’ http://idebate.org/debatabase/debates/international/house-believes-euro-threat-peace

[3] ‘The youth employment crisis: Time for action’, International Labour Conference, 101^st Session, 2012, http://www.ilo.org/wcmsp5/groups/public/@ed_norm/@relconf/documents/meetingdocument/wcms_175421.pdf,  Pp.2-3

Scaremongering is not the best way to create policy. Clearly leaving large numbers of unemployed young people could be dangerous but so could large numbers of unemployed of any age. Every government wants more economic growth and to solve unemployment but they should be focusing on how to bring the economy as a whole back to growth rather than specifically on youth unemployment. When this happens unemployment will begin to fall. Artificially focusing on reducing youth unemployment will simply prevent broader action to regain competitiveness. It should be remembered from communist states that it is possible for government action to create full employment while destroying the foundations of the economy.

The government should not be playing favourites when it comes to government spending. It should not prioritise one age group over another, just as it should not prioritise one ethnic group or religion over another. The government has just as much responsibility to the middle aged or elderly as it does to the young. Rather than artificially deciding to spend more on certain age groups government spending should clearly just be based on what provides the most value for taxpayers’ money. In some cases this may mean spending on youth but it could also mean spending on the elderly. 

In theory it is great to say that government should treat all people equally, but we all know that in practice this does not happen. Government spending is determined by what programs already exist and where there spending is regardless of current need while new spending is based on where the government thinks it will get votes. Because older people are more likely to vote, and there are more of them, the political system is clearly prejudiced against providing for youth.

Those who are retiring today were promised good pensions that they could draw from their early sixties. They paid into national insurance, and other pension schemes on the assumption that they would get a good pension at the end of it. Doctors are a good example of a group that have paid a large amount into their pensions and expect to get a large pension in return. At the moment the UK’s NHS pension scheme pays more than £2billion per year into the treasury than it takes out.[1] The public purse has gained from boomers payments for pensions for years and they are responsible to pay the boomers back with what they were told they would be entitled to.

[1] ‘Our response to government claims about the NHS pensions dispute’, British Medical Association, http://bma.org.uk/working-for-change/negotiating-for-the-profession/industrial-action-pensions/dh-rebuttal

Pensions are not paid by what the retiree paid in during their lifetime but by those who are earning and paying taxes and national insurance while the pensioner is drawing their pension. Current pensioners did not pay for their pension but for their parents’ pensions. In the UK “In 2008 there were 3.2 people of working age for every person of pensionable age. This ratio is projected to fall to 2.8 by 2033.”[1] With fewer workers for every pensioner pensions are clearly unsustainable and so should be reduced.

[1] ‘The ageing population’, parliament.uk, http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/value-for-money-in-public-services/the-ageing-population/

There is simply no room to be increasing spending on young people as an Ageing population means that western nations are going to have to focus more resources on the elderly. A larger elderly population will mean less tax take for the government as there will be less people working, at the same time there will many unavoidable costs. The average cost of retires households to health services is £5200, compares to just £2800 for those who are not retired.[1]  The expansion and progress of medical science has been amazing, we can treat many conditions that were incurable. But this means many more are living longer with medical support, which is costly. A US study estimates total healthcare expenditures “increase substantially with longevity, from $36,000 for persons who die at the age of 65 to more than $230,000 for those who die at the age of 90”.[2]  Clearly the government cannot both increase spending on youth and pay more on healthcare for the elderly at the same time.  With healthcare a matter of life and death it seems clear which should be prioritised.

[1] ‘The ageing population’, parliament.uk, http://www.parliament.uk/business/publications/research/key-issues-for-the-new-parliament/value-for-money-in-public-services/the-ageing-population/

[2] Alemayehu, Berhanu, and Warner, Kenneth E., ‘The Lifetime Distribution of Health Care Costs’, Health Services Researech, vol.39, no.3, June 2004, pp.627-642, http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1361028/ (does not show pages but near the end)

In health services where much care is provided for free there has always been a question of balancing resources. Some treatments are just too expensive, when this is the case the individuals are free to pay for private healthcare. Clearly then if there is less money to be spent on healthcare there just needs to be a rethink about which treatments are affordable as a part of free healthcare. In the United States deciding what treatments are worth the cost is left to the market, in more centrally organised health systems as is the case in Europe there is a regulator or commission that decides. In the UK this is NICE (the National Institute for Health and Clinical Excellence) which decides what drugs are worthwhile based upon quality-adjusted life years and usually does not recommend treatments that cost more than £20-30,000 per QALY.[1] The answer then would be to drop this down to a lower figure.

[1] Dreaper, Jane, ‘Researchers claim NHS drug decisions ‘are flawed’’, BBC News, 24 January 2013, http://www.bbc.co.uk/news/health-21170445

It may be true that there is little spending specifically on ‘youth’ but that does not mean there is not a lot of spending young people more generally. Government education budgets in Europe vary but are generally between 10-15% of government spending,[1] added to this should be the 2.3% of GDP spent on family/child benefit[2] (since European governments typically spend about 50% of GDP this generally means about 5% of spending). While this may not seem like much compared to 26.89% of the population being under 25[3] we need to remember that most other government spending (with the exception of pensions) is not age targeted and so also goes pretty proportionally on youth; children and youth are as likely to use healthcare, young people use roads and public transport, many in the military are under 25 etc. Since young people are more likely to be unemployed they are also getting a larger proportion of welfare spending on them. Added to this there are areas of government spending which don’t really go on any age group, such as interest repayments on European government’s debts. It is difficult to see why the government should be spending yet more on youth when they already receive a large amount of spending.

[1] UNESCO Institute for Statistics, Public spending on education, total (% of government expenditure), The World Bank, http://data.worldbank.org/indicator/SE.XPD.TOTL.GB.ZS

[2] Mossuti, Giuseppe, and Asero, Gemma, ‘In 2009 a 6.5% rise in per capita social protection expenditure matched a 6.1% drop in EU-27 GDP’, Eurostat, 14/2012, http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-SF-12-014/EN/KS-SF-12-014-EN.PDF, p.5

[3] European Union, The World Factbook, 6 May 2013, https://www.cia.gov/library/publications/the-world-factbook/geos/ee.html

It is difficult to see why there should be large amounts of public spending on ‘youth’ directed through the education system that then simply stops as soon as education is left behind. When young people are finished university or particularly school when they are not going on to university they are suddenly left on their own with no clear path to transition into work.[1] Those not in the education system get very little spending on them and this is clearly where the problem lies. There needs to be much more spent on ensuring that young people get a first job both in ensuring that they have the right skills and ensuring a good standard of living until they get a job.

[1] ACEVO Commission on Youth Unemployment, ‘Youth unemployment: the crisis we cannot afford’, ACEVO, 2012, http://www.bristol.ac.uk/cmpo/publications/other/youthunemployment.pdf, p.46