Causes of youth unemployment

The causes of youth unemployment and circumstantial factors can be divided, at least, into three categories: 1) economic conditions, 2) labour market regulation and 3) education.

1. Economic conditions

A downward movement in the economic cycle is obviously one of the causes of youth unemployment. The countries which were hit hardest by the recent recession now have the highest youth unemployment. Companies do not take the risk of hiring new employees or are even forced to fire employees. Fewer new companies are started and self-employed people are confronted with a shrinking market.

Some sectors are more dependent on the economic cycle than others. The economic decline caused high rates of unemployment in the construction, manufacturing and retail trade sectors. As a result, the regional differences within countries can become larger.²⁸⁰ Therefore, youngsters who have been educated or trained for the sectors that have been hit hard deserve special attention when fighting youth unemployment.

2. Labour market regulation

One of the more structural problems in Europe is the rigid labour market regulation.

Almost in all over the continent the insiders (core employees) are treated better than the outsiders (peripherical employees/usually engaged in atypical employment). Insiders have fixed contracts on good conditions, at the cost of outsiders: newcomers, self-employed and ―flexible‖ employees.

278 In the Netherlands, for example, the level of unemployment among non-Western immigrants in 2009 was around 2.5 times as high as among the native population.

279ELDR, (2010), Countering Youth Unemployment in Europe, Rotterdam: ELDR Conference 07.05.2010 http://www.d66.nl/d66nl/document/magazine_eldr_youth_unemployment/f=/vihzi51vhwj9.pdf (12.05.2011)

280 In Wallonia, for example, the south-eastern region of Belgium, the unemployment rate is higher than in Flanders in the northwest of the country. This is due to the fact that Wallonia’s economy relies for a large part on heavy and manufacturing industry. In Flanders, on the other hand, the services sector is the motor of the economy, a sector which has shown to be less vulnerable to the recent economic decline.

For the career starters, the labour market is difficult to enter. The transition from school to work is hard since youngsters lack work experience and may not immediately be productive. Employers have to invest in them and their exact value is yet to be proven, which means risk. As a result, youngsters are offered part-time jobs and or temporary contracts which make them easy targets in times of economic decline.²⁸¹ The strong protection of employees with a fixed contract, the insiders, is to the disadvantage of newcomers.²⁸²

3. Education

The proportion of young people in higher education is clearly linked to the rate of unemployment.²⁸³ In times of high unemployment, many people who would have preferred to work choose to study rather than be unemployed.²⁸⁴

The field of education is one of the focus points of youth unemployment. Good education might very well be the main condition of finding an entrance to the labour market. Therefore, schools need to deliver high quality education, in line with requirements on the labour market.

Young people without a degree are overrepresented in unemployment statistics all over the EU. At some levels, mainly the vocational training level, it appears difficult to keep youngsters at school and make them finish it with a degree. Sometimes students have insufficient knowledge of the language and cannot keep up with their schooling. A more general problem is the failure to keep youngsters motivated.

But to finish a school with a diploma is not the only condition. Education has to be good. Schools need to guarantee a certain level of education, which prepares students for entering the labour market. Here it is one of the problem. In Spain, Belgium and Bulgaria was observed a disjunction between what education offers and what the labour market demands. This goes hand in hand with a failing apprenticeship system. In Sweden this disjunction causes high unemployment rates since students do not succeed in making the transition from school to the labour market. In many other European countries the contact between school and potential employers is lacking. Vocational

281 In some cases, the nature of the contract is short-term by definition like seasonal work often performed by youngsters, for example in Spain.

282ELDR, (2010), Countering Youth Unemployment in Europe, Rotterdam: ELDR Conference 07.05.2010 http://www.d66.nl/d66nl/document/magazine_eldr_youth_unemployment/f=/vihzi51vhwj9.pdf (12.05.2011)

283 At the beginning of the 1990s, there is a drastic rise in the proportion of full-time students claiming that what they really want to do is work.

284 Claudia Gardberg Morner & Mattias Ossowicki & Kristoffer Lundberg: Social Security at Odds with the Labour Market for Young Workers in a Post-Industrial Era? The Case of Sweden,

http://www.issa.int/Resources/Conference-Reports/Social-security-at-odds-with-the-labour-market-for-young-workers-in-a-post-industrial-era/%28language%29/eng-GB (03.05. 2011)

training is being pointed at mainly, but there is also low academic achievement, in terms of cooperation between universities and employers. ²⁸⁵

Flexibility is also one of the other key words in the field of education just as it is in the discussion about labour market reform. To adapt to changing circumstances and employers’ demands is crucial in preparing students as good as possible for their entry into the labour market. A good preparation means the level of education as well as the sort of qualification that can be acquired.

A qualification is the starting point. It improves one’s competiveness on the labour market and increases the chances to find a suitable job. The gap between those with a start qualification and those without tends to grow in times of economic decline.

Evidently, the level of qualification is important too.

One of the major problems in every EU country is the school dropouts, youngsters who have left school before acquiring any qualification. They have little chance of finding a job. How to resolve this problem? In the first place, everything possible should be done to prevent students from dropping out. Early measures are required, for example extensive monitoring and tutoring. Truancy is an early sign of dropping out and deserves attention from the school. This is a mutual responsibility of the parents and the school. It is important that school is a nice place to go to, students should feel at ease.

Bullying should be prevented, old school buildings are to be renovated and every elementary school should have a porter. This might look self-evident, but nonetheless things often go wrong here. Problems have to be resolved in a personal and effective way so that the student does not lose his/her motivation to finish school. When this happens, preventive measures may come too late. MR is of the opinion that school dropouts should be compelled, or at the least strongly incentivized, to return to some kind of education or training.

It could be useful to think of trade schools or on-the-job training schemes in the framework of employment services partnerships with the private sector. The knowledge in private companies and entrepreneurs should be better used. It could be the best solution if the best trades people and technicians, whether still in active employment or close to retirement, to become trainers of young people in both regulated and unregulated education. These trainers are the human capital of vocational training. They are highly qualified in different fields and have working experience in the private sector. When they retire, the labour market and the companies lose experience acquired over many years, along with a great deal of technological specialisation.²⁸⁶

285 ELDR, (2010), Countering Youth Unemployment in Europe, Rotterdam: ELDR Conference 07.05.2010 http://www.d66.nl/d66nl/document/magazine_eldr_youth_unemployment/f=/vihzi51vhwj9.pdf (12.05.2011)

286 In the Netherlands, employees with part-time unemployment benefits could use the time that they are paid unemployment benefits but do not work to train young unemployed and let them benefit from their skills and knowledge. Due to a lack of apprenticeships this expertise would otherwise not be transferred to a next generation.

The level of education also plays an important role. In addition, for many years vocational training had a low social prestige in many EU member states (e.g. Spain, Hungary) and was therefore not considered as a real option for youngsters to choose as a school.

There was an idea in Netherlands to introduce a tax advantaged personal skills savings called Future Account to increase investment in education and entrepreneurship. The Future Account can be seen as an individual adjustment insurance. The idea is that the individual is best capable of determining what kind of schooling/training he/she should invest his/her money in. The employee is free to choose the form of saving. In addition, an employer can pay part of the course costs, which is tax advantageous/tax deductible.

Whereas graduates cannot find a job, companies do not manage to find people with specialized training, for example skilled electricians. A related problem is acknowledged – e.g. in Bulgaria, in Hungary, etc. – where there is no bridge between education and the labour market.

This problem of an educational output that does not correspond to the needs of the labour market is being observed in many EU countries. The problem of shortages and surpluses on the labour market can only be resolved by an educational system that is capable of adapting to changing conditions on the labour market. This requires more learning opportunities and readiness amongst the labour force to participate in further education (labeled as lifelong learning). Nowadays, young people must be prepared to enter the labour market but at the same time they must be prepared to continue their education during their entire life. Investing in qualifications increases the competition-readiness, which in turn increases the chances on the labour market.

Many experts stress the importance of apprenticeships. Apprenticeships provide the youngster with valuable experience and knowledge and increase his chances on the labour market. Because of the economic conditions there are currently not enough apprenticeship possibilities. Companies do not have the resources or do not want to invest in training-apprenticeships.

Governments have set up a wide range of schemes to provide for additional apprenticeships and stimulate companies to create more of them. In most cases, companies are offered financial compensation for taking in apprentices as a temporary measure. Private sector experience might also help to build an entrepreneurial culture among the young population. Entrepreneurial spirit is a vital element of their education and private sector experience prepares young people to start a business of their own.

Governments should stimulate young people to become entrepreneurs and set up their own businesses.

However, young entrepreneurs often lack the information necessary to make a successful start. For example, how can they obtain credit and how do they raise the initial capital? Here the government could more pro-actively make information available. It would be necessary to offer grants and tax reductions for young entrepreneurs and support initiating incentives and financial aid to found micro-companies. ²⁸⁷