POLICIES ON YOUTH EMPLOYMENT IN THE EUROPEAN UNION IN THE CONTEXT OF THE ECONOMIC CRISIS

Mihaela ONOFREI^[1], Irina BILAN^[1], Angela ROMAN^[1]

e-mail: onofrei@uaic.ro

Abstract

The recent economic and financial crisis has massively hit the labour market of the Member States of the European Union, unemployment rates increasing at high peace in many of these countries. At the same time, it exacerbated preexisting inequalities in terms of access to the labour market of certain vulnerable social categories such as young people, immigrants, etc. Youth unemployment rates increased at a higher pace than overall unemployment rates, thus calling for specific labour market policies of both European and national authorities. Against this background, the paper firstly aims to evaluate the specific impact of the crisis on youth employment in the different EU countries, emphasizing particularities for different genders or education attainment levels. Secondly, it aims to analyse the short- and long-term effects of high youth unemployment rates and evaluate the public specific policies for youth employment implemented during the recent crisis in the European Union countries and possibility to improve them. As youth unemployment has negative consequences on future wages and employability, and thus on long-term growth and development, many European countries, especially the most developed ones, reacted to the effects of the crisis by implementing comprehensive measures to support youth employment.

Key words: youth, unemployment, economic crisis, public policies

The position of young people on the labour market has always been more disadvantaged compared with that of adult population. Lack or insufficiency of professional experience has proved to be a serious impediment in an attempt to find and retain a job adequate to qualification, which would offer development prospects in the long term.

MATHERIAL AND METHOD

In the context of the recent international economic and financial crisis, these difficulties have increased, aggravating the imbalance between employment demand (lower) and supply (higher), resulting in increasingly strict requirements imposed by employers upon selection of potential employees and reducing thus young people’s chances of success in the labour market. At the same time, young people employed at the beginning of the crisis were among the first who lost their jobs, the ones with temporary jobs being the most affected. Consequently, unemployment rate for this age category has grown alarmingly at world level, implying also the risk of a “lost generation” (Boeri T., 2011; International Labour Office, 2011; Chung H. J. et al, 2012; Bekker S. et al, 2013), including transmission of negative effects on long-term.

Against this background, the topic of this paper – aimed at assessing the position of young people (persons aged between 15 and 24) in the labour market and customized measures, at national or supra-national level, implemented across the European Union to increase employment level and reduce the risks to which this disadvantaged category is exposed in the labour market – has benefited from an increased attention in the past few years.

RESULTS AND DISCUSSION

Assessment of the impact of the recent crisis on youth employment rate in the member states of the European Union

The recent economic and financial crisis deeply affected the operation of the labour market in the Member States of the European Union, and unemployment rate has increased heavily in many of these countries. Data reflected in Figure 1 show a consistent increase in unemployment rate across the EU-28 by more than 3 % between 2007 and 2013. However, the manifestation of this phenomenon has affected the Member States unevenly. The unemployment rate has increased between 2007 and 2013, in a much higher proportion as compared to the EU average in countries such as Greece (19.1%), Spain (with 17.9%) or Cyprus (12%), states affected by the crisis of sovereign debts, involving extension of the economic recession. On the contrary, in countries such as Germany, Malta, Austria, Poland or Romania, the increase in the unemployment rate in the same time interval was much lower, of less than 1 % or even negative.

Year 2014 is marked by a reduction in unemployment rate by 0.7% across the Member States of the European Union (and even with more than 1.5 % in countries such as Bulgaria, Ireland, Spain, Hungary, Portugal, United Kingdom), a phenomenon caused in the context of a revival, though not very consistent, of national economies.

Manifestation of crisis has led to aggravation not only of the economic imbalances in the labour market, but also of inequalities (preexistent in the European Area) with regard to access to the labour market of certain more vulnerable social categories, such as young people, immigrants, people with disabilities, etc. Therefore, the need to adopt not only generic antiunemployment measures (which are usual in time of recession), but also customized policies more directly targeted toward social disadvantaged groups particularly affected by the crisis has become obvious.

Data in Table 1 show that, at the level of the Member States of the European Union, young population was more strongly affected by unemployment at the beginning of the crisis. In the EU-28, unemployment rate among the population aged under 25 exceeded, in 2007, with more than twice, the unemployment rate among adult population aged between 25 and 74 (15.9% as compared to 6.1%). This problem occurred in particular in countries such as Greece, Croatia, Italy, Poland, Portugal or Slovakia, where unemployment rate among young people was higher than the threshold of 20 %.

At the same time, the negative effects of the crisis on the employment rate have had a more powerful impact on young population, given that for the period 2007-2013 the unemployment rate increased, as an average for the 28 Member States of the European Union, by 7.8% for the age group under 25 years, compared with less than half, 3.4%, in the case of the population aged over 25. This difference of dynamics has been confirmed not only as an average at European Union level, but also in the case of a majority of Member States, with the exception of Luxembourg (where the unemployment rate for the population aged under 25 was, at the outset of the crisis, almost 5 times greater than that among adult population), Malta, Austria or Germany. Countries such as Greece, Spain, Italy, Croatia, Cyprus, or Ireland, where the unemployment rate among young people has increased by more than 30%, were particularly affected.

Although in the last year of our analysis unemployment rate for the age group under 25 years decreased in many European states, in conjunction with a recovery (yet shy) of the national economies, the situation is far from being similar to the one before the crisis. At the end of 2014, the unemployment rate among young people was beyond 50 % in countries such as Greece or Spain and was close to this value in Croatia and Italy. In the same year, approximately one of five young people was unemployed at the level of the European Union, and one of four young people in Romania. Thus, young people currently represent a social group with high (even the largest) risk of social exclusion in Europe (Eurofound, 2015).

Men and women aged under 25 have been equally affected by the crisis, as unemployment rate increased in comparable proportions. In 2014, there are not very consistent differences between unemployment rate for each of the two genders in all the Member States of the European Union (Table 2), although such differences exist in the special cases of some countries (in Greece, unemployment is more pronounced in the case of young women, while in countries such as Estonia, Ireland, Luxembourg or the United Kingdom, the situation is quite the opposite).

The level of education, however, is very relevant; data summarized in table 2 show an inverse relationship between education and unemployment rate, in the sense that there is a much higher rate of unemployment among young people without studies or graduates of primary or secondary education, compared to young graduates of high school, post-secondary or higher education (although there are exceptions to this rule in countries such as Greece, Cyprus or Romania, in the latter case the ratios being even reversed). For all the Member States of the European Union, unemployment rate among young people without studies or graduates of primary or secondary education reaches almost double the value of unemployment rate among young graduates of tertiary education (30.3% compared to 16.5%). This proves that the measures aimed at supporting education (covering, in particular, adaptation of the education system to the requirements of the labour market) must be an integral part of the policies of sustainable reduction of youth unemployment.

Therefore, young people are confronted with a high probability to become unemployed once they are active on the labour market, compared with adult population. Other risks occurred on the labour market, more strongly in the case of young people, such as the risk to find a precarious job, below qualification level, risk of temporary or parttime employment, risk of poverty etc., are added to unemployment risk.

Causes and effects of youth unemployment 

Economic recession results, naturally, in an increase in the rate of unemployment, determined by reducing the volume of production of goods and services and GDP (cyclic unemployment). Although adult population is also affected by unemployment, as a general rule, unemployment rate among young people reacts more strongly to deterioration of the economic situation, in other words, elasticity of the unemployment rate among young people in relation to business cycle is higher. This fact is confirmed, for the period prior to the crisis (1996-2007), by a study conducted by Scarpetta S. et al (2010) for the group of OECD Member States, which shows that a deviation of 1 % of the growth rate of actual GDP compared to potential GDP has led to an alteration by almost 1.4% of unemployment rate among young people and by only 0.65% of unemployment rate among adult population. The effects were even more powerful in some States of Continental Europe and Eastern Europe, among which France, Great Britain, Spain, Portugal, Slovakia, Poland etc.

Higher sensitivity of unemployment rate among young people to unfavourable evolution of economic activity can be explained by several factors, the most important of which is that young employees occupy in greater proportion fixed-term jobs or jobs in fields of activity more sensitive to recession, such as that of constructions (Scarpetta S. et al, 2010).  At the same time, during recession, companies predominantly dismiss employees with less experience (most of the young people belong to this category), or refuse to hire new employees, which restricts employment chances of young graduates.

Such causes, the action of which is perceived especially during periods of economic downturn, are completed by other factors determining higher unemployment rates among young people, such as:

• An educational system insufficiently adapted to requirements of the labour market, so that young graduates lack the necessary qualifications to meet employers’ demands;
• The lack of vocational experience or insufficient vocational experience of young people who, this way, are more likely to become unemployed;
• Employment of young people in black economy, resulting in their exclusion from official statistics on employment rates;
• Development of forms of temporary employment such as internship programmes, seasonal jobs and short-term employment contracts which, concluded mainly by young people, are the first to be terminated when economic agents downsize their business;
• Consistent level of social benefits granted to unemployed young people in some countries (under conditions of low income obtained by them in the hypothesis of employment), reducing interest of young people into a job;
• Social and cultural factors – young people originating from broken families or with a history of drug consumption or involved in criminal activities have fewer chances to find a job etc.

Literature shows and previous experiences in different Member States confirm that the negative effects of a high youth unemployment rate are much more harmful than those of generic unemployment, being felt both in the short and medium and long-term, at individual level, as well as at the level of the entire collectivity (at the scale of national economy).

Those directly affected are, first of all, unemployed young people themselves who, not being able to find a job suitable to their training or failing to keep it in the long term, see their professional evolution and career path jeopardized  The longer the period of inactivity, the lesser the relevant professional experience gathered by young people, and their chances to find a job in the future and to develop a career in the field of interest are diminished. Thus, persons facing periods of involuntary inactivity (unemployment) in youth years are more likely to also face unemployment in the future (Scarpetta S. e al, 2010). At the same time, unemployed young people will accept temporary jobs, jobs paid worse or jobs not covered by social insurance and this way they will have lower incomes and will be more severely affected by the risk of poverty.

Negative effects on revenue may be felt immediately, but also from the perspective of a longer time frame. The study conducted by Mroz T.A. and Savage T.H. (2006) shows that periods of inactivity/unemployment recorded with even up to ten years before continue to affect the income level of individuals, although the impact decreases in time. By assessing the effects of the economic recession on the prospects of developing a career and, by default, on the future revenues of university graduates, Oreopoulos P. et al (2006) considers that a 5% increase in unemployment rate among them induces an initial reduction of income by 10 %, and this loss of income is completely recovered not earlier than ten years. In addition, Bell D.N.F. and Blanchflower D.G. (2009) show that unemployment recorded up to the age of 23 years tends to have quasi-permanent negative effects, while such effects do not occur when unemployment appears at a later age.

From a broader social perspective, unemployment among young people may affect their self-esteem, lead to a loss of motivation and damage their health status. Social exclusion, stress and worries regarding employment can cause mental problems (depressions), increase consumption of products harmful to human health (drugs, alcohol) and crime among young people. Motivation to build a family may be reduced, causing the aggravation of unfavourable demographic trend. In short, general welfare and happiness (immediate but also on the long-term) of young unemployed persons will be negatively affected.

On the scale of the entire national economy, a high unemployment rate among young people may negatively affect the rate of GDP growth and labour productivity. This occurs because a long period of inactivity can lead to decreased specialisation of young people, therefore, to a reduction of their capacity to produce innovation and to contribute to economic growth. In other words, national human capital deteriorates.

At the same time, the State’s financial effort increases, as the public authorities must grant social benefits for protecting this social category.

At the same time, against the background of a less consistent economic growth, State revenues in the form of taxes and fees will decrease. A study by Eurofound (European Foundation for the Improvement of Living and Working Conditions) carried out for 21 member states of the European Union assessed the budgetary impact of unemployment among young people, by cumulating costs with social benefits granted and unpaid (taxes) contributions, as amounting to more than Euro 100 billion in 2009.

Public policies for reducing youth unemployment in the member states of the european union

Finding a job is a difficult task for any unemployed, especially when the economic conditions are unfavourable, and labour demand is far below the supply level. Difficulties become nevertheless insurmountable for young unemployed who lack work experience and for whom finding a job or keeping it on the long-term represents a real challenge. Thus, in times of crisis, specific policies oriented toward supporting youth and strengthen their position on the labour market have been adopted at both supra-national, EU and national level, complementary to generic policies to stimulate employment.

Ensuring a high level of employment among young people represent a priority of EU policies, a fact proven by the compatibility of this desideratum with some of the major goals undertaken in the framework of Europe 2020 Strategy, aimed at creating a smart, sustainable and inclusive growth. Achieving an employment rate among the population aged between 20 and 64 of at least 75% cannot be achieved without reducing, implicitly, unemployment rate among young people. At the same time, reduction of early school leaving rate in secondary education to 10%, by specific measures in support of education, should also ensure a reduction in unemployment among young population.

In line with these objectives, the Community institutions have been actively involved in identifying and implementing measures to help solving the problem of the high unemployment rate among young people in the Member states more strongly affected.

Upon a proposal of the European Commission dated April 2013, the Council adopted the Recommendation on the establishment of a “Youth Guarantee” initiative, which requires Member States to ensure that all young people aged up to 25 receive a quality offer in terms of employment, continuation of studies, apprenticeship or traineeship, within four months of the graduation of a formal education institution or becoming unemployed (Council of the European Union, 2013). This initiative sets the guidelines for establishment of youth guarantee systems, covering the need for strong partnerships between all stakeholders, intervention and early activation, adoption of measures in support of integration in the labour market, full use of EU funds, continuous evaluation and improvement of systems.

Member States had to prepare, until the spring of 2014 (or even up to the end of December 2013, for those with higher rates of youth unemployment), Youth Guarantee Implementation Plans, which set out how the Youth Guarantee will be implemented, the respective roles of public authorities and other organisations, how it will be financed (including the use of EU funds) and monitored, as well as a timetable (European Commission, 2014a). Decentralised implementation of the Youth Guarantee, by developing and implementing packages of specific measures at the level of each Member State, has many advantages, in particular that of adaptation to the exact needs and particularities of each country, but there is also a risk for the funds to be dispersed between projects of low value and with questionable efficiency (Berlingieri F. et al, 2014).

From a financial point of view, important resources were made available to the Member States from the funds and programmes of the European Union, in order to assists implementation of support measures to reduce youth unemployment. In particular, resources allocated from the European Social Fund (ESF) proved to be vital to combat the dramatic increase in youth unemployment among people aged under 25 years in occasion of the recent economic crisis, although supporting youth employment represented a preoccupation also during the period prior to the crisis. According to the European Commission, from 2007 and until 2012, 20 million young people aged under 25 years benefited from training programs or advice with financial support from the ESF (in some countries young people even represented 40 % or more of the total numbers of participants), and approximately 68 % of the ESF budget was directed towards projects in which young people could have been part of the target group (European Commission, 2014a). Support from the European Social Fund continues to play an important role in implementation of policies in support of youth employment and 2014-2020 multi-annual financial framework. In addition, the Member States of the European Union may also rely on “Jobs for Youth” initiative, including, complementary to support from the ESF (of at least Euro 3.2 billion), Euro 3.2 billion from a specific EU budget line dedicated to youth employment (European Commission, 2014b).

Moreover, in the context of adverse effects of the international economic and financial crisis, Member States have allocated important financial resources, also from national budgets, to provide social protection for the unemployed, including young ones.

Overall, public expenditures on financial measures and support intended for the labour market between 2008 and 2013 recorded, as shown in Table 3, annual average values that exceeded 2% of GDP in countries such as Belgium, Denmark, Ireland, France, the Netherlands or Finland. On the contrary, intervention was less consistent (reflected in specific values of public expenditure to below 1% of GDP per year) in countries of the Central and Eastern Europe such as Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Poland, Slovenia, Romania, the latter recording the minimum amount of public funds allocated to active and passive measures to protect the unemployed, i.e. 0.31% of GDP per year. This fact is explained by the fact that some of these countries were less affected by the crisis, requiring less consistent public intervention, as well as by the lower amount of public financial resources available in these countries, correlated with a lower level of economic development, which requires a more careful prioritization of public spending.

Data summarised in Table 3 also show that the largest share of public funds allocated to social protection measures for the unemployed belongs to passive measures (granting of unemployment benefits, assistance in case of unemployment, early retirement etc.) aiming at providing financial support to people who have lost their jobs. Public expenditure on passive measures to protect the unemployed accounted for over 70% of total public expenditure on financial support and measures for the labour market in countries such as Belgium, Germany, Estonia, Italy, Portugal, Romania, Slovenia or Slovakia. Countries such as Denmark, Sweden, but also Hungary and Poland have paid an increased importance to active measures (direct creation of jobs, granting of subsidies/credits to stimulate employment, support for employment and rehabilitation) which, although more expensive, usually have a better effect, directly aimed at increasing employment.

Although measures taken to protect the unemployed were consistent in some European countries, in certain cases they concerned only to a small extent young unemployed, although their position in the labour market is a disadvantaged one. As data summarised in Table 4 show, in Bulgaria, Denmark, Luxembourg and Slovenia, between 2008 and 2013, on average, less than 10% of the beneficiaries of the financial measures and support for the labour market were young people aged under 25. On the contrary, protection granted to young unemployed was more important in countries such as France, Ireland or Austria, where about 20% of all beneficiaries of protective measures were unemployed people aged under 25 and having this status. It is worth noting that these are not the countries where the unemployment rate among young people has the most alarming values, but, on the contrary, in these countries youth unemployment rate is the same as the average level of the European Union or even at a lower level (like Austria), possibly due to positive effects produced following implementation of more consistent measures aimed at protecting young unemployed.

Although often extensive, measures taken in recent years at EU level to support youth employment are sometimes criticized (Chung H. J. et al, 2012; Bekker S. et al, 2013). Arguments arise mainly from their orientation to offer jobs without taking into account the real problems young people are facing or their difficulty to find a first job, access to jobs requiring lower qualifications or with reduced promotion prospects.

CONCLUSIONS

Given the recent financial and economical crisis, many Member States of the European Union have experienced significant increases in unemployment rates, both among adults and, especially, young people aged up to 25. Lacking experience or the skills necessary and occupying temporary jobs or jobs in fields hit harder by the crisis, young people were strongly affected by unemployment, and currently, under the circumstances of a revival of national economies, youth unemployment rate exceeds 50% in countries such as Greece or Spain.

Unemployment at a young age can affect a person’s ability to find a job suitable for their training in the future and develop a career and thus may reduce future revenue. At the macroeconomic level, human capital is eroded, which affects GDP growth prospects and increases the States’ financial effort.

Given the negative consequences of youth unemployment, providing a high level of employment for this age group was established as a priority dimension of EU policies. Member States were required to develop and implement a Youth Guarantee scheme, ensuring that all young people aged up to 25 years receive a quality offer in terms of employment, continuation of studies, apprenticeship or traineeship, within four months of the graduation of a formal education institution or becoming unemployed. At the same time, important financial resources have been made available to them from the European Social Fund and under “Jobs for Youth” initiative.

Overall, unemployed protection measures adopted by the Member States of the European Union for the period 2008-2013 were consistent, and even exceeded 2% of GDP. However, in some cases (Bulgaria, Denmark, Slovenia) they targeted only slightly young people, who did not account for more than 10% of all beneficiaries of financial measures and support for the labour market. At the same time, emphasis was usually put on passive measures, aimed at providing financial support to people who have lost their jobs, but does not drive directly increase of employment.

In Romania, measures adopted for social protection of the unemployed were less consistent compared to other Member States of the European Union, and they are reflected in the lowest level of public expenditure for this purpose in 2008-2013. Expenditure was mainly aimed at passive measures, although their efficiency is known to be lower compared to active measures.

REFERENCES

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Bell, D.N.F., Blanchflower, D.G., 2009 – What Should Be Done about Rising Unemployment in the UK?. IZA Discussion Paper, No. 4040, Bonn.

Berlingieri, F., Bonin, H., Sprietsma, M., 2014 – Youth unemployment in Europe. Appraisal and Policy Options. Stuttgart: Robert Bosch Stiftung GmbH.

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*** – Council of the European Union, 2013 – Council Recommendation of 22 April 2013 on establishing a Youth Guarantee (2013/C 120/01), Official Journal of the European Union, available on-line at: http://eur-lex.europa.eu/legal-content /EN/TXT/PDF/?uri=CELEX:32013H0426(01)&fro m=EN.

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[1] „Alexandru Ioan Cuza” University of Iaşi