Youth Unemployment: Waging an Effective Battle

Some 5.5 million youths under 25 are currently unemployed in the EU. While not a new problem, youth unemployment has become much more acute since the outbreak of the last economic crisis. Across the EU, youth unemployment jumped from 15.6 per cent in 2008 to 23.5 per cent in 2013. Yet this figure conceals highly divergent trends in individual member states. While youth unemployment fell during this period in Germany from 10.6 per cent to 7.9 per cent, in Italy it rose from 21.3 per cent to 40 per cent, and in Spain from 24.6 per cent to over 55 per cent. Of course, these figures are partially explained by Germany’s quick recovery after 2009, in contrast to the persistent negative impacts exerted by the financial and sovereign debt crisis on Spain and Italy. However, differences in national education systems and labour market institutions have also played a role. Clearly, Germany has benefitted from its "dual education system", which formally combines hands-on apprenticeships with classroom study. But other factors, such as dismissal protections and the relations between firms and unions, have also contributed to Germany's better performance in this area. Numerous studies have shown that experiencing unemployment has lasting negative impacts on the career development of youths. This is one of several reasons why action is imperative.

Responsibility for fighting youth unemployment primarily resides at the national level in Europe. Nevertheless, the EU is taking action, and has adopted a policy to tackle unemployment known as the Youth Guarantee. Under this programme, member states have been called upon to ensure that all youths who depart from school or become unemployed receive a job offer or opportunity to continue their education within four months. Member states with the highest youth unemployment rates are receiving the most support; a total of six billion euros has been earmarked for the programme. While it is welcome that the EU is addressing this important issue, there is a danger that the Youth Guarantee will be an expensive affair with little in the way of lasting impacts if the specific measures that are enacted in member states are poorly designed. To avoid this, due consideration must be given to past experience with labour market intervention.

On behalf of the Robert Bosch Foundation, economists at the Centre for European Economic Research recently authored a study that makes policy recommendations for battling youth unemployment in the EU. The study reflects on past experience and draws attention to country-specific factors while emphasizing five key points:

First, national education systems must better prepare youths for the labour market. The dual education system delivers promising results in this regard, and should be adopted and/or expanded in other countries. Second, it is more effective to invest money in job counselling and placement services, as well as to provide subsidies for hiring, rather than institute public employment programmes. In certain cases, the latter may even be counterproductive. Third, it is necessary to eliminate barriers to hiring, such as excessively high starting salaries and the division of the labour market into jobs with high layoff protection and short-term positions without any protection at all. Fourth, cross-border mobility should be promoted. It is a welcome development that increasing numbers of Spanish, Italian, and Greek youths have been coming to Germany to work or pursue their educations. Yet the numbers could be much higher. Fifth, it is important that firms, unions, government authorities, as well as youths adopt and monitor the implementation of their own plans for overcoming unemployment.

The commitment of the EU to solving this problem should not end with the banners and trumpets of the announced Youth Guarantee. We must monitor the national programmes that are enacted to fight youth unemployment. And if deficits in individual programmes are revealed, then we should make calls for reform to ensure that EU funding is spent wisely and effectively.