How Neoliberalism Turned the World Against Its Young

UPSC Syllabus: Gs Paper 3- Mobilisation of resources, growth, development and employment.

Introduction

Young people across France, Albania, Spain, India, Bangladesh and Sri Lanka have taken to the streets, although their demands differ. Their anger reflects deeper economic problems, including unemployment, low growth, rising living costs and falling real wages. The neoliberal economic model, with its emphasis on reduced public expenditure and welfare spending, provides a broader explanation of this discontent, particularly in developed economies and Group of Seven (G7) countries.

Global Youth Unemployment and Economic Discontent

1. Youth Protests: Young people in several countries are protesting against economic hardship, unemployment and declining living standards. Although their immediate demands vary, their protests reflect growing dissatisfaction with existing economic conditions.
2. France’s Economic Discontent: France faces high unemployment, low economic growth, rising living costs and falling real wages. Public expenditure cuts have added to dissatisfaction. Protests were triggered by a lack of resources and staff at Lycée Antoine-de-Saint-Exupéry in Créteil.
3. Rising Youth Unemployment: Youth unemployment in G7 countries is nearly twice the overall unemployment rate or higher, highlighting the difficulties faced by young job seekers.
4. Demographic Contradiction: Developed societies are ageing, and the youth population forms a shrinking share of their population. Yet, youth unemployment continues to rise, suggesting that the problem may lie in inadequate labour demand rather than an excessive supply of young workers.
5. Generation Z: Generation Z generally refers to those born between 1997 and 2012. Young people entering the labour market face growing economic insecurity and uncertainty about their future.

Economic and Political Roots of Youth Unemployment

1. Labour Market and Full Employment: Capitalists create labour demand, while workers supply labour. In a simplified labour market model, their intersection represents full employment at the prevailing wage rate, assuming the model’s conditions hold.
2. Involuntary Unemployment: When labour demand is lower than labour supply at the prevailing wage rate, some workers willing to work remain unemployed. This represents involuntary unemployment, where available jobs are insufficient for all job seekers.
3. Orthodox Explanation: Orthodox economists often attribute unemployment to rigid labour markets, high wages, restrictive labour laws, powerful trade unions and skill shortages. They argue that greater labour market flexibility can improve employment opportunities.
4. Heterodox Explanation: Heterodox economists emphasise capitalists’ hiring and investment decisions. They argue that unemployment cannot be explained merely through workers’ wages, skills or labour market restrictions.
5. Investment Deficiency: In the heterodox framework, investment drives economic activity and employment. Higher investment generates demand, production and jobs, while low investment reduces labour demand, leading to unemployment and slower growth.
6. Consumption and Investment Relationship: Under the simplified assumption that workers consume their entire wages while capitalists save profits, consumption depends on employment and the wage bill. Investment becomes crucial because insufficient investment weakens demand and employment.
7. Keynesian Fiscal Expansion: John Maynard Keynes emphasised the role of government expenditure in addressing deficient demand. Higher public investment and fiscal expansion can increase employment, production and profits by filling the investment gap.

8 Kalecki’s Disciplinary Argument: Michal Kalecki argued that permanent full employment could weaken employers’ control over workers. When jobs are readily available, workers become less dependent on employers, challenging the existing balance of power.

9 Golden Age of Capitalism: The period 1945–1973 witnessed high economic growth in the global North and an increasing working-class share. Greater government intervention and public welfare supported economic expansion and improved workers’ position.

10. Monetarist Counterrevolution: During 1973–1980, inflation increased amid oil price shocks. Monetarists, led by Milton Friedman’s ideas, blamed excessive government intervention and advocated controlling inflation through monetary discipline rather than expansionary policies.
11. Rise of Neoliberalism: Ronald Reagan in the United States and Margaret Thatcher in the United Kingdom implemented neoliberal policies. These emphasised reduced welfare expenditure, privatisation, flexible labour markets and restrictions on trade unions, shifting economic power towards capitalists.
12. Declining Working-Class Share: Neoliberal policies weakened workers’ bargaining power and reduced their share of national income. Falling wage shares weakened consumption demand, contributing to underconsumption and slower investment.

Consequences of Neoliberalism for Young People and the Economy

1. Underconsumption: Falling wages reduce workers’ purchasing power. Since workers constitute a major source of consumption demand, declining incomes can weaken demand for goods and services.
2. Declining Investment and Growth: Weak consumption demand reduces business sales and profits. Idle production capacity discourages further investment, creating a cycle of low demand, low investment and slow economic growth.
3. Persistent Unemployment: Insufficient investment limits job creation. Weak economic growth and the replacement of workers by machinery further intensify employment challenges.
4. Growing Youth Insecurity: Young people face unemployment, low wages, rising living costs and uncertain career prospects. These conditions make economic independence and financial security increasingly difficult.
5. Artificial Intelligence and Employment: Artificial intelligence (AI) and technological advancement may intensify employment insecurity if machines replace workers without sufficient creation of new jobs.
6. Commercialisation of Education: Young people are encouraged to acquire skills and higher qualifications to improve employability. However, neoliberalism has turned education into a profit-oriented industry, increasing the financial burden on students.
7. Uncertain Returns on Education: Rising education costs do not guarantee remunerative employment. Young people may invest heavily in degrees but still face unemployment, underemployment or inadequate earnings.
8. Growing Resistance: Economic insecurity and the perception of an unfair economic system are encouraging young people to challenge existing institutions and policies through protests and collective resistance.

Way Forward

1. Strengthen Public Investment: Greater government investment can support aggregate demand, production and employment, particularly when private investment remains inadequate.
2. Reinforce Public Welfare: Adequate public expenditure and welfare support can reduce economic insecurity and help protect vulnerable sections of society.
3. Improve Workers’ Bargaining Power: Protecting workers’ bargaining power and fair wages can strengthen household consumption and improve the distribution of economic gains.
4. Make Education Affordable: Reducing the financial burden of education can prevent young people from facing excessive costs without assured employment opportunities.
5. Promote Employment-Generating Growth: Economic growth should be accompanied by productive investment and sufficient job creation to ensure that young people benefit from economic progress.

Conclusion

Youth anger reflects weaknesses in the neoliberal economic order, including weak labour demand, declining wage shares and rising education costs. Addressing these problems requires greater attention to employment, public welfare and workers’ bargaining power. Sustainable prosperity must support productive investment and workers’ economic security, rather than leave young people facing uncertain futures.

Question for practice:

Examine how neoliberal economic policies have contributed to rising youth unemployment and economic insecurity, and suggest measures to address these challenges.

Source: The Hindu