ECB head says European job market rigged against younger workers

PanARMENIAN.Net - Europe’s economies are rigged to protect older workers at the cost of new employees, the president of the European Central Bank said, according to the Guardian.

Mario Draghi also said “tragic” high levels of youth unemployment had the potential to threaten social harmony in Europe and that rock-bottom inflation was damaging the prospects of Generation Y by redistributing their wealth to older people.

Draghi told the Guardian there should be a “more open, flexible, innovative and business-friendly society” that did not disadvantage new workers because companies were afraid of taking on new staff. He gave the exclusive interview as part of a Guardian series investigating the economic plight of young adults around the world.

Setting out his views before the ECB’s dramatic decision on Thursday, March 10, to lower interest rates to zero percent in an attempt to pump life back into the Eurozone and return inflation back to a target rate of 2%, Draghi said:

“In many countries the labor market is set up to protect older ‘insiders’ – people with permanent, high-paid contracts and shielded by strong labor laws,” Draghi said. “The side-effect is that young people are stuck with lower-paid, temporary contracts and get fired first in crisis times. That also means that employers are reluctant to invest in young people, so the incomes of this generation stay lower over their lifetime.”

Europe’s most powerful banker, 68, who has been at the ECB’s helm for four years, also said it was a priority for Europe to tackle chronic youth unemployment and reform a job market that locked out young workers.

“Youth unemployment is a tragedy and prevents people from playing a full and meaningful part in society. If every second young person is out of work – as is still the case in some countries in Europe – it seriously harms the economy ... and it threatens social harmony,” the Guardian quoted Draghi as saying.

Draghi said the situation for young people was made worse by a lack of inflation, which according to the bank’s own research was increasing inequality and damaging their prospects.

Low inflation means that savings, likely to be held by older people, maintain their value, while debts, which are more likely to be held by younger people, do not erode.

“Nobody stays young forever. The crucial question is whether a person can participate fully in the economy over his or her lifetime – get a good education, find a job, buy a home for the family,” said Draghi.