Europe’s youth unemployment crisis stokes generational divide

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Italy is a Group of Seven industrialized country. You would not know that in Sicily, the host of the next G7 summit, in May. If it were a nation, you could be forgiven for thinking it's a failed state.

The unemployment rate on the once-wealthy island is more than 22 per cent. Far more shocking is the youth unemployment, at 56 per cent. Additionally, many young adults have given up looking for work, meaning they're dropping off the job seekers' rolls.

Take Fabrizio Augugliaro, 30, graduate of a five-year mechanical engineering program at the University of Palermo. His job? He plays the accordion on the street. In the tourist season, pumping the squeezebox might earn him €30 ($43) in coins over a couple of hours.

"After I graduated, I looked for work – nothing," he said while smoking and drinking coffee in central Palermo's Piazza Bologni. "He who has work blocks work for the young. The mentality here is a job for life, so the older workers don't want to risk bringing in younger competition for their jobs."

To be young in Sicily is to be without a job and living with your parents. The same goes for many other regions of the southern European Union, and more than a few parts of the ostensibly rich northern EU, such as de-industrialized northern France and middle England.

Some 78 per cent of Italians aged 20-29 live with mamma and papa, according to recent figures from Eurostat, the EU's statistics agency. The live-at-home figure in Britain is half that, but still high by North American standards. They do so not because their mothers' cooking is irresistible; it's because they can't afford rent.

At the height of the European crisis, in 2011 and 2012, disaffected youth, most of them without jobs or recently forced out of jobs by the deadly combination of recession and austerity, turned central Athens into a gigantic bonfire on several occasions. Many other cities in Europe – Rome, Madrid, Barcelona and Paris, among them – were paralyzed by mass protests and strikes.

This anger and tension have helped to fuel the rise of the populist parties, including France's Front National, Germany's Alternative fuer Deutschland and Movimento 5 Stelle (5 Star Movement, or M5S), which is Italy's second-biggest national party and Europe's biggest elected anti-establishment party. The Brexit and Donald Trump victories have emboldened the supporters and leaders of these parties, one or two of which could form governments as Europe embarks on a series of elections, including the French presidential vote in April.

An October report by Mediobanca Securities analyst Antonio Guglielmi notes that nearly 50 per cent of voters in the 18-to-24 age group support M5S and that support for M5S among those age 54 or younger is 10 percentage points higher than it is for prime minister Matteo Renzi's ruling Partito Democratico, the centre-left Democrats whose power base is older workers and pensioners.

Italy is not so much divided by the traditional left-right political split as by age – wealthy oldsters versus the poor young. "The country is rather split in the young-versus-old-people dichotomy," stated Mr. Guglielmi. "Older people have secured their benefits, jobs and pensions and tend to preserve the status quo, voting [for] pro establishment and traditional parties. Younger generations are sitting on large economic uncertainty …. It is not just an Italian situation."

Indeed, a July Foreign Affairs magazine article by UniCredit's euro zone economist, Edoardo Campanella, said the young-old divide threatens to rip Europe apart. "As the young are pushed to the margins of society, Europe's gerontocracy is becoming not only financially unsustainable but morally unbearable," he wrote. "Striking a balance between the conflicting interests of the old and the young is therefore necessary to ward off explosive intergenerational tensions."

Italy, the euro zone's third-largest economy, is on the front lines of the youth unemployment crisis. Sustained economic recovery in Western Europe, let alone in Italy, is unlikely unless the Italians get their youth off the sofa and into the work force. Italy, whose economy is still substantially larger than Canada's, has been in recession or flat-lining since 2008.

Italian youth unemployment is about 38 per cent, almost double the pre-crisis level, though down from its peak of about 43 per cent. The regional disparities are extreme. The rate in Bolzano, the wealthy mountain area in Italy's far north, is only about 12 per cent, less than a third of the national rate and less than a quarter of the Sicilian rate. Italy's southern regions, collectively known as the Mezzogiorno, could be on a different planet.

Last year, the overall employment rate in Sicily – measured as the number of adults age 20 to 64 who were in the work force – was reported at only 42.4 per cent. That was the lowest in Europe, even worse than in perennial basket case Greece.

It seems that every young adult in Sicily is unemployed, or underemployed.

"I have a Sicilian friend who has a PhD in molecular biology and she does quality checks on food," said Roberta di Mauro, 30, who has a biology degree from the University of Palermo. She fled Italy to find a job and surfaced in Brighton, England, where she works at the retailer Marks & Spencer. "I knew I had to leave or, at some point, I would be 35 and living at home."

Mariangela Salamone, 33, who has an industrial engineering degree from the same university, has bounced from one temporary job to another, all of them unrelated to her expertise and all poorly paid. Since Italy does not have a minimum wage, pay for unskilled or semi-skilled labour is often heinously low.

She has not had work since last spring and says employment prospects for Italian mothers – she has a two-year-old son – are particularly grim. "The state does not pay for child care," she said. "In Italy, the grandparents are the child-care system and if you don't have willing grandparents who live close, you're in trouble."

The saddest story of Sicilian unemployment belongs to Norman Zarcone, whose suicide in 2010 instantly made him the face of Italy's lost youth generation. His death is still mourned in Palermo at public gatherings and in concerts dedicated to his memory.

Mr. Zarcone was a musician and PhD student at the University of Palermo. His specialty was the philosophy of quantum mechanics. In an interview, his father Claudio, a freelance political journalist, said his son grew increasingly frustrated by the failure to find any research work in the philosophy department; nepotism and budget cuts conspired against him. On the morning of Sept. 13, 2010, he flung himself out of a window at the top of the university's philosophy faculty.

"He killed himself at the university, not at home, to deliver a message," Claudio Zarcone said. "He became the symbol of the generation without work, who have no opportunities because of nepotism. They are called the 'Norman generation.'"

The tragedy is that the "Norman generation" is not limited to Sicily or even to southern Europe, where three countries – Greece, Portugal and Spain – sued for international bailouts during the height of the debt crisis (Spain's bailout was directed at the banks) and Italy came close.

Prospects for youth employment first started to deteriorate in the 1970s, as baby boomers flooded into the job market, greatly increasing the labour supply. At the same time, the wage gap between young and old workers began to widen. After 2008, when the Great Recession hit, youth employment went into crisis mode pretty much everywhere, though less so in Canada and the United States than in Europe.

The youth jobless rates in the rich industrialized world in 2009, a year after the start of the crisis, climbed to shocking levels. France's went to almost 23 per cent, Italy's to 25 per cent, Spain's to 37 per cent, Sweden's to 25 per cent, Britain's to 19 per cent and the United States' to 17 per cent. For the 35 generally wealthy member states of the OECD, youth unemployment reached to 16.7 per cent in 2009, up from the pre-crisis level of 12 per cent.

The good news is that youth unemployment in almost every European country is off its peak, dramatically so in a few countries, notably Ireland, Czech Republic, and Iceland, according to Eurostat. Germany has been the standout winner. Its youth unemployment has actually decreased since the crisis and now stands at only 7 per cent, thanks to fortunes thrown at vocational training, an aggressive economic stimulus program and an export boom, which was fuelled by the cheap euro and which offset relatively weak domestic demand.

The bad news is that the decline in most countries has been modest, partly because the economic recovery itself has been underwhelming and young people, many of them on temporary contacts or no contracts at all, are easier to fire than the entrenched older workers.

In Norway, which is under pressure from the oil price collapse, youth unemployment has actually edged up in recent years. In Spain, the rate has dropped 10 percentage points in two years, but at 43 per cent, is still solidly in crisis territory.

France's youth jobless rate was 24 per cent in 2014. The figure today is unchanged. No wonder the popularity ratings of President François Hollande are on a Titanic run, reaching 4 per cent in November, a record low for a president since the Second World War.

David Bell, economics professor at Scotland's University of Stirling, said countries where consumer demand has bounced back as their economies did the same, such as Ireland and Britain, have seen the greatest reductions in unemployment. A flexible labour market – the ability to hire and fire easily – helps. "Southern Europe does not have flexible labour markets," he said. "Lack of demand in those countries was also made worse by austerity."

John Springford, director of research at the Centre for European Reform, a London think-tank, said countries that underwent painful internal devaluations – a wage-crunching exercise – have had better luck in reducing their jobless rates (Greece is the exception). In Britain, where overall unemployment hit an 11-year low of 4.8 per cent in October, real wages are down about 8 per cent since 2008. Real wages have not fallen in Italy, which helps to explain its terrible, post-crisis job-creation record and rapid de-industrialization.

Youth unemployment's pernicious factor is that the longer you're out of a job, the chances of finding a job diminish. It also means that any job you do find can carry a wage penalty. This is called the "scarring effect" and it can trigger depression, ill health and even suicide. "There is a wealth of literature showing that unemployment is a stressful life event that directly reduces individual wellbeing," Mr. Bell and David Blanchflower wrote in a 2011 report called Young People and the Great Recession. "Unemployment increases susceptibility to malnutrition, illness, mental stress and loss of self esteem, and increases the risk of depression."

There is no easy solution to the high levels of European youth unemployment, since each country is burdened by made-at-home conditions that can impede job creation. Greece is still gripped by austerity. Italy is hopelessly weighed down by excess bureaucracy and regulations, a dysfunctional judiciary that makes contract enforcement nearly impossible, and the Mafia's influence in the south. France also suffers from deadening bureaucracy and has had enormous problems integrating its immigrant populations, in which unemployment is rife. Empty factories that will never be reopened litter northern Europe. Norway's prime source of income – oil revenue – is in rapid decline.

All hope is not lost. The European Central Bank's €80-billion-a-month quantitative easing program is, finally, nudging up growth and inflation rates in the euro zone countries, suggesting that unemployment will not get worse. Austerity is in decline in some countries, such as Spain. But there is no guarantee that youth employment will return to normal. Mr. Springford, of the Centre for European Reform, said governments "should end austerity and make guarantees into training or government-subsidized jobs."

Governments are running out of time. The United Nations' International Labour Organization (ILO) has drawn a direct line between social unrest and high unemployment; the memories of the riots and mass protests of 2011 and 2012, a few of them deadly, are still fresh. Recent images of unemployed youth in nearby Tunisia engaged in violent protests brought home the message again.

The populist parties have expertly exploited the lack of opportunity among millions of young people.

Beppe Grillo, the firebrand former comedian who leads Italy's M5S, which is polling at 30 per cent, wants a referendum on the euro in good part because he thinks the currency is killing Italian jobs. He has Italian prime minister Matteo Renzi on the run. Ahead of Italy's Dec. 4 referendum on constitutional reform, Mr. Renzi has been campaigning hardest in the job-free zones of the Italian south, where his support is crumbling while M5S's surges. "Those who dare, the stubborn, the barbarians will carry the world forward, and we are the barbarians," Mr. Grillo said, predicting that Mr. Renzi would lose the referendum and go on to lose the next election to M5S.

In Sicily, young people seem to be losing hope that the job market will revive. Almost every day, there is news of another employer shutting down.

Five years ago, Fiat (now Fiat Chrysler Automobiles), closed its Termini Imerese factory in Sicily, killing 1,600 jobs. For a while, call centres were coming on strong. "Sicily has 20,000 people in call centres, but now they're closing and going to cheaper places such as Albania and Tunisia," said Andrea Gattuso, the youth employment representative in Palermo for CGIL, the acronym for Italy's biggest trade union.

Adam Asmundo, chief economist for Fondazione RES, a Sicilian economic and civil research institute, says some smart young Sicilians are becoming entrepreneurial and launching tech companies but almost anyone with ambition is hitting the road. "The only thing they can do is get away, take a flight and go," he said. "The problem is that the ones who flee are the most creative and dynamic."

In Palermo, Fabrizio Augugliaro, the engineer who became a musician, is making his peace with his freestyle life on the street, playing his accordion for tourists and picking up music-teaching gigs here and there. His rent and meals are cheap and stress levels are low, he says, even if he often finds his work tiresome. "We are of the generation whose parents told us to get a university degree and all our problems would be solved," he said. "You know what? It wasn't true."