Youth In and Out of the Labour Market: The Impact of the Economic and Financial Crisis on Youth Employment in the European Union and North America Niall

Youth In and Out of the Labour Market:The Impact of the Economic and Financial Crisis on Youth

Employment in the European Union and North America

Niall O’Higgins

CELPE, LABESS & DiSES,

Università di Salerno

& IZA, Bonn

Today

• Overview of the situation of Youth in (and out) of the labour market – in the EU & North America– Recent developments– Policy responses– Some Comments on Policy issues

• A couple of general points– Youth (15-24) vs. Adults (25-64)– simply a convention– Distinction between countercyclical measures and

structural longer term measures

Introduction: The Recession

• Global Recession has hit young people hard– But, something of a misunderstanding:

Not that more young people than adults are affected by the recession,

But that young people are more affected than adults by the recession

• Majority of young people are in education• Real problem is the potential long-term consequences of an early

interuption in working lives– Life-time employment & earnings– Crime– Unhappiness– Social exclusion: Freeters in Japan emerged after recessuion in the 1990s

Employment rates fell unevenly during the recession…

Can

ada

Irel

and

Uni

ted

Kin

gdom

USA

Aus

tria

Bel

gium

Fran

ce

Ger

man

y

Cyp

rus

Gre

ece

Ital

y

Mal

ta

Port

ugal

Spai

n

Den

mar

k

Finl

and

Net

herl

ands

Swed

en

Bul

gari

a

Cze

ch R

epub

lic

Hun

gary

Pola

nd

Rom

ania

Slov

akia

Slov

enia

Est

onia

Lat

via

Lith

uani

a

Anglo Continent Mediterranean Scandinavia Central Europe Baltics

-50

-40

-30

-20

-10

0

10

20% point change in employment rates 2007Q3 – 2009Q3

F15-24F25-49F50-64M15-24M25-49M50-64

Per

cen

tage

Poi

nt

Ch

ange

, 200

7Q3

- 20

09Q

3

Percentage change in employment by age and sex, Italy 2007Q3 – 2009Q3

F15-24 F25-49 F50-64 M15-24 M25-49 M50-64

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

European Union Italy

Per

cent

age

chan

ge 2

007Q

3 -

2009

Q3

And Unemployment rose…..C

anad

a

Irel

and

Un

ited

Kin

gdom

US

A

Au

stri

a

Bel

giu

m

Fra

nce

Ger

man

y

Cyp

rus

Gre

ece

Ital

y

Por

tuga

l

Sp

ain

Den

mar

k

Fin

lan

d

Net

her

lan

ds

Sw

eden

Bu

lgar

ia

Cze

ch R

epu

blic

Hu

nga

ry

Pol

and

Rom

ania

Slo

vak

ia

Slo

ven

ia

Lat

via

Lit

hu

ania


-5

0

5

10

15

20

25

30

35

% point change in unemployment rates 2007Q3 – 2009Q3

F15-24F25-49F50-64M15-24M25-49M50-64

Per

ced

nta

ge P

oin

t C

han

ge in

Un

emp

loym

ent

rate

s 20

07Q

3 -

2009

Q3

Youth unemployment rates were already high compared to adults prior to the recession…

Irel

and

Un

ited

Kin

gdom

US

A

Au

stri

a

Bel

giu

m

Fra

nce

Ger

man

y

Cyp

rus

Gre

ece

Ital

y

Por

tuga

l

Sp

ain

Den

mar

k

Fin

lan

d

Net

her

lan

ds

Sw

eden

Bu

lgar

ia

Cze

ch R

epu

blic

Hu

nga

ry

Pol

and

Rom

ania

Slo

vak

ia

Slo

ven

ia

Lat

via

Lit

hu

ania


1

2

3

4

5

Ratio of youth to adult unemployment rates, 2007Q3

Females 2007Q03Males 2007Q03

And, not infrequently, thry worsened during the recession

Irel

and

Uni

ted

Kin

gdom

USA

Aus

tria

Bel

gium

Fra

nce

Ger

man

yC

ypru

sG

reec

eIt

aly

Por

tuga

lSp

ain

Den

mar

kF

inla

ndN

ethe

rlan

dsSw

eden

Bul

gari

aC

zech

Rep

ubli

cH

unga

ryP

olan

dR

oman

iaSl

ovak

iaSl

oven

iaL

atvi

aL

ithu

ania

Anglo Continent Mediterranean

Scan-dinavia

Central Europe Baltics

-1.4

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

0.6

0.8

1.0

Change in the ratio of youth to prime age adult unemployment rates, 2007Q3 – 2009Q3

FemalesMales

With some exceptions, long-term unemployment fell during the recession

Irel

and

Un

ited

Kin

gdom

Au

stri

a

Bel

giu

m

Fra

nce

Ger

man

y

Gre

ece

Ital

y

Por

tuga

l

Sp

ain

Fin

lan

d

Net

her

lan

ds

Sw

eden

Bu

lgar

ia

Cze

ch R

epu

blic

Hu

nga

ry

Pol

and

Rom

ania

Slo

vak

ia

Slo

ven

ia

Lat

via

Lit

hu

ania

Anglo Continent Mediterranean Scan-dinavia

Central Europe Baltics

-30

-25

-20

-15

-10

-5

0

5

10

F15-24F25-49F50-64M15-24M25-49M50-64

Per

cen

tage

poi

nt

chan

ge in

th

e in

cid

nce

of

lon

g-te

rm u

nem

plo

ymen

t 20

07Q

3-20

09Q

3

The recession often hit more educated young people harder

Irel

and

Un

ited

Kin

gdom

Au

stri

a

Bel

giu

m

Fra

nce

Ger

man

y

Cyp

rus

Gre

ece

Ital

y

Por

tuga

l

Sp

ain

Den

mar

k

Fin

lan

d

Net

her

lan

ds

Sw

eden

Bu

lgar

ia

Cze

ch R

epu

bli

c

Hu

nga

ry

Pol

and

Rom

ania

Slo

ven

ia

Lat

via

Lit

hu

ania


-40

-30

-20

-10

0

10

20

30

ISCED 0-2 Females ISCED 0-2 Males ISCED 3 - 4 FemalesISCED 3 - 4 Males ISCED 5-6 Females ISCED 5-6 Males

Per

cen

tage

poi

nt

chan

ge in

em

plo

ymen

t ra

tes

2007

Q3

- 20

09Q

3

With some notable exceptions temporary employment fell during the recession, but its incidence often didn’t

Irel

and

Un

ited

Kin

gdom

Au

stri

a

Bel

giu

m

Fra

nce

Ger

man

y

Cyp

rus

Gre

ece

Ital

y

Por

tuga

l

Sp

ain

Den

mar

k

Fin

lan

d

Net

her

lan

ds

Sw

eden

Bu

lgar

ia

Cze

ch R

epu

blic

Hu

nga

ry

Pol

and

Rom

ania

Slo

ven

ia

Lat

via

Lit

hu

ania


-16

-12

-8

-4

0

4

8

Percentage point change in the incidence of temporary employment of young people in the European Union, 2007Q3 – 2009Q3

Young FemalesYoung Males

Per

cen

nta

ge p

oin

t ch

ange

Incidence of temporary employment by age and sex,

Italy, 2007Q1 – 2010Q1

0

5

10

15

20

25

30

35

40

45

50

15-24 25-49 50-64 15-64 15-24 25-49 50-64 15-64

Males Females

Tem

pora

ry E

mpl

oym

ent

as a

% o

f to

tal

empl

oym

ent

of a

ge-g

roup

2007Q1

2010Q1

Programmes and policies for young people in the context of the crisis

Macro Policy:

Throughout the EU & NA, most countries adopted substantial expansionary fiscal policies.

An example is instructive

Example of Germany & Italy

2007

Q3

2007

Q4

2008

Q1

2008

Q2

2008

Q3

2008

Q4

2009

Q1

2009

Q2

2009

Q3

2009

Q480

85

90

95

100

105

Germany - Young People

Germany - All

Italy - Young People

Italy - All

Em

plo

ymen

t , 2

007Q

3=10

0

Education

• Some countries have extended support for young people remaining in education– Piecemeal

• Good time to take such action– Desirable in any event – part of the (old and) new EU 2020

strategy– Recession – opportunity costs of educational participation

are relatively low– Support for recovery– Help prevent increases in the hardcore of ‘excluded’ youth

• Costs of inaction – higher youth unemployment and joblessness with connected direct and indirect costs

Labour Market Policy

• Much variety in the response to the crisis– Expansion of passive income support common –

and short-time working or partial unemployment for employees • Sometimes combined with training measures – clearly a

fruitful avenue to pursue

–Many countries have introduced subsidised training for young people, however, it needs to be linked to private sector employment opportunities

Labour Market Policy

• Job Search Assistance & more efficient PES– Improving the efficiency of JSA is typically seen

as a very cost effective means of enhancing the employment prospects, particularly, of young people • But, in the context of a recession, the usefulness of such

measures is limited

Employment Protection Legislation

Often argued that too strong EPL limits opportunities for Young People – Mediteranean countries since the 1980s (Spain) and 1990s (Italy), moves towards flexibility at the margin

But


1. Correlation between the percentage change in unemployment rates and the strictness of employment protection legislation (EPL) is negative and moderately strong (-.20) for both young men and young women

2. Correlation between the youth-adult raio of changes in unemployment and OECD EPL index is positive (+.20) for males (+.20) and females (+.23)

Taken at face value, suggests that strong EPL mitigated the negative effects of the recession – for both young people and adults – but that stronger EPL tended to worsen the relative position of young people (compared to adults)– May be a partial explanation of the Italian experience


Moreover,• Not much evidence to support the idea that recessions

are shorter in countries with more flexible labour markets

• Much evidence to suggest that recessions are deeper in countries with more labour market flexibility

• Implication: now is not the right time to put an emphasis on flexibility (although there are a great dela of cross-country variation) – worrying trend – some countries reacted to the recession by

Key Issues

1. Question of the job prospects of YP entering the labour market during the recession – the ‘youth left behind’ – Above-all low educated young people who are more susceptible to

the scarring effects of unemployment and joblessness

2. Job Quality: Type of employment available to young people – dangers associated with the wide diffusion of temporary employment forms. Inter alia have a number of costs– Less training – Greater insecurity– Less satifìsfactory jobs

Concluding comments

• No one size fits all• Risk of exclusion is greater for the low

educated• Problem of dual labour markets & job quality

for young people• Combination of passive and active LMP• A more radical approach to educational

reform?

Documents

Youth In and Out of the Labour Market: The Impact of the Economic and Financial Crisis on Youth Employment in the European Union and North America Niall