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The rising youth unemployment and working poverty highlight the need to rethink our economy. How could it look like in ten years?

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The current economic model, including taxation and trade union bargaining system, was conceived for the world of the twentieth century: a world in which work played a central role in the well-being of companies. With the advent of a much more capital intensive economy in the last decades, we have witnessed a worrying growth in youth employment and working poverty rates, which risk starting a vicious circle of economic polarisation.

Several Western countries, including EU member states, have lost many low- and mid-skilled jobs in recent decades. The reasons are many: from the decline of unionisation to the growth of automation and the massive delocalisation to lower-income countries, made more convenient by increasing globalisation. The consequent contraction of the labour market led to a downwards flattening of wages due to the simple law of supply and demand. Taking from a recent article by Ángel Gurría, former Secretary-General of the Organisation for Economic Co-operation and Development (OECD) and member of Re-Imagine Europa’s Advisory Board, “Despite all the wealth creation and reductions in global poverty in recent decades, economic opportunity has remained elusive for many people, irrespective of their abilities. The resulting fracturing of society poses a grave threat to the long-term health of businesses, citizens, and economies”.

Increasing economic polarisation already had significant effects on the weakest groups, such as young people and women, leading to growing unemployment rates and rising working poverty affecting these categories above all. These effects were already present before 2019 and have been amplified by the changes brought about by the pandemic crisis. In the short term, the increasingly unequal distribution of income in Europe is undoubtedly jeopardising the internal social cohesion of Member States and marring European integration.

Young people (and young women in particular) struggle to achieve economic independence and cannot plan important milestones in their lives as previous generations did. If these trends are not reversed, it is not difficult to imagine that they will become structural and endemic, negatively influencing the behaviours and perspectives of an entire generation. Their impact on the EU economy will be further amplified by the significant ageing of the population from which many European countries are affected. These gloomy prospects are made even more negative by the evident contrast with those enjoyed by previous generations: affordable education, sheer expansion of the labour market, the consequent increase in wages for all categories of workers, and significant improvements in healthcare are only the more obvious.

There is an urgent need for policy proposals to create a more even and inclusive distribution of wealth. At the same time, building new models to ensure that future generations benefit from the same values of equity and inclusiveness that have characterised the European project from its inception is even more crucial. The needs that emerge from the European Commission’s priorities make this rethinking even more urgent. Policies like instituting citizens’ income or raising the minimum wage can be useful as buffering measures, but there is no silver bullet to solve this problem. Work has radically transformed in the last twenty years and will probably change even more in the next few decades, but it should continue to be a means of personal fulfilment.

Adapting the economy, involving young people to be the engine of this change is therefore very important. For this reason, Re-Imagine Europa is building a Task Force to propose innovative solutions for their future. We decided to start from “A new, more equitable fiscal system for the 21st century” since we believe that current tax systems do not sufficiently incentivise the creation of new jobs and are unsuitable both from taxpayers’ point of view and to meet the needs of governments. The new Task Force’s kick-off meeting is scheduled for the second half of October, so stay tuned: more information will follow soon!