Avoiding a lost generation
By Cecille S. Visto
First Published in Business World (9/16/2013)
IN THE PHILIPPINES, youth unemployment is becoming a major concern. Unemployment rose to 7.3% in July from 7% in the same month in 2012. Last week, the National Statistics Office (NSO) reported that although the local economy generated 620,000 new jobs, over three million of the more than 41-million-strong labor force remain jobless. Included in the three million unemployed are youth workers, or those who are at least 15 years old and looking for work.
However, this issue is not unique to the Philippines.
In a recent study by Ernst and Young’s Global Center for Entrepreneurship and Innovation, titled “Avoiding a lost generation,” it was noted that youth unemployment has reached critical levels in most G20 countries and is expected to rise in the next five years. The International Labor Organization reports that 75 million, or almost 13% of the world’s youth, are unemployed, and many more are underemployed based on their capabilities and training.
Joblessness among the young is seen to threaten global economic recovery and, according to the EY report, raises the specter of a “lost generation.”
The 2013 survey had 1,500 respondent-entrepreneurs aged 40 and under from across G20 countries. In the survey, young businessmen expressed optimism about their future and agreed that their roles are crucial in help curbing the youth unemployment crisis. However, they said that there are challenges that must be addressed before young entrepreneurs can truly succeed in the cutthroat economy of the 21st century.
The respondents cited five main action plans that will help youth entrepreneurs achieve their full potential.
UNFURL MORE FUNDING ALTERNATIVES
Ideas remain ideas unless they get off the ground. Funding is a critical element for a start-up small and medium-sized enterprise (SME). Not surprisingly, almost three of four, or 73% of the respondents, said that access to funding remains very or somewhat difficult in their countries.
The new generation of entrepreneurs is demanding non-traditional funding methods, given that traditional modes — such as private equity and venture capital — are limited, even for the best young businessmen with the brightest ideas.
They are calling for improved access to microfinance and crowdfunding to address the current funding gap.
BEYOND CAPITAL, DELIVER MENTORSHIP AND BROADER SUPPORT
Since young entrepreneurs likely have limited experience in running a business and fewer network opportunities, they will depend on mentorship and support from older peers so that they can gain a business foothold. A recent study by the French organization, Reseau Entreprendre Paris, showed that 88% of entrepreneurs with mentors survive in the business, while 50% of those without support will likely fail.
Respondents agreed that no amount of capital can spell success if this is not bolstered with advice and guidance. Capital without mentorship, the EY study noted, may result in capital lost.
Moreover, 66% of the surveyed entrepreneurs said that entrepreneurial skills must be specifically taught.
CHANGE THE CULTURE TO UNDERSTAND FAILURE
There should be a change in the mind-set toward entrepreneurship, and the community must learn to embrace the entrepreneurial culture. Respondents said that society must be more tolerant of failure and recognize entrepreneurs as providers of innovative products.
Schools and universities should likewise cultivate the entrepreneurial mind-set. Respondents highlighted the need for success stories and role models; 51% said that government support for education, funding, and promotion of entrepreneurs will have a significant aspect on perception. For the Philippines, it is encouraging that almost all institutes of higher education are already offering degree and graduate courses in entrepreneurship. More and more, entrepreneurship is becoming not just a viable course of study but also a desired “career” for graduates.
Now, some might say that concrete funding programs, rather than stories, would be more beneficial to would-be young entrepreneurs; yet we should always remember that encouragement and inspiration are the fuels of the human spirit. This is the reason programs such as Entrepreneur Of The Year Philippines, conducted yearly by the SGV Foundation, focuses on celebrating the trials and achievements of worthy Filipino entrepreneurs. In fact, in the past 10 years since the program began, it has presented the Young Entrepreneur Award to a number of entrepreneurs who have achieved remarkable success, and who can inspire other young people to follow the path of entrepreneurship.
Aside from improving the image of entrepreneurs, governments should also try to provide more support to start-up SMEs in the form of tax incentives for investment in small businesses. Forty-one percent of the respondents feel that governments should accelerate access to funding through tax breaks.
REDUCE RED TAPE AND EXCESSIVE TAXATION
Young entrepreneurs also believe that a simple, SME-friendly business environment will help them succeed. More than one of two respondents believe that a simplified system will boost their efforts. According to 33% of those surveyed, development of a single government agency to help start-ups with regulations will be most beneficial, while 14% support the creation of a single government entity to help in the tax filing requirements.
Innovative job generation is key in the 21st century. Given the uncertainty facing many large corporations, it is perhaps timely that the jobs of the future should neither come from government nor from big conglomerates, but from entrepreneurs. And who better to be in the vanguard of this movement than the young?
However, empowering the youth in an environment that is still largely patriarchal and conventional may be easier said than done. But, change must be institutionalized, and soon, if we are to mitigate the risk of having a generation lost to unproductivity.
As former United Nations Secretary-General Kofi Annan succinctly said: “Youth unemployment will create serious problems around the world unless we do something about it.”
Cecille S. Visto is a tax senior director of SGV & Co.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views and opinion expressed above are those of the author and do not necessarily represent the views of SGV & Co.