Discussion and summary remarks

This study has attempted to provide a theoretical framework within which to think of the youth unemployment problem. The main conclusion is that youth unemployment depends on the hardship young people find in filling the youth experience gap. In a mainstream approach to the issue, it is typical to think that a flexible labour market is the best solution to the youth experience gap. Through sizeable moves across different labour market statuses, young people achieve the human capital they need to become adult and productive, making it convenient for employers to hire them. Therefore, within this framework, labour market flexibility and low entry wages are the best solution to the youth experience gap.

Two main argument cast doubts on the mainstream approach. First, comes the Heckman and Borjas (1980) and Heckman and Singer (1984) argument that there is no duration dependence from unemployment when controlling for omitted skill heterogeneity. The policy consequence is that training programmes may be in principle more efficient in reducing youth unemployment than increasing labour market flexibility. Becker’s work provides a second important argument: it suggests, in fact, that fixed-term contract may generate sufficient incentive to invest only in the formation of generic, but not of job specific work experience. There is therefore a failure in the market for job tenure, which should be addressed by providing some incentives to invest in human capital accumulation or job specific training programmes.

These arguments explain why labour market flexibility is only one of the policy instruments adopted in any country to help young people to fill the youth experience gap. They also let us understand why increasing entry flexibility in traditionally rigid Eu countries has reduced youth unemployment only marginally, while generating much work precariousness. An important stream of the literature has attempted to elaborate on flexicurity as an alternative to flexibility alone. Flexicurity necessitates providing employment stability, if not job stability. In turn, this calls for social security rights for temporary workers and passive income support during frequent unemployment spells, also to discourage the abuse of fixed term contracts. It also calls for more developed training and recruitment systems.

Other not less important policy tool than labour market flexibility to fight youth unemployment is the educational system itself. At certain conditions, the latter may in fact be the most effective tool to raise the employability of young people.

It is certainly difficult to find recipes that accord to the institutional framework of any country and it is clear that in each group of countries there are bad and good performers. However, comparison of the outcomes of different European models in addressing the problem of school-to-work transition suggests that youth unemployment is lower:

• 1 with flexible, dual educational systems, which are also more inclusive;
• 2 where labour market flexibility is coupled with high education attainment;
• 3 where ALMP are fine tuned to the needs of the weakest groups: targeting and evaluation are necessary;
• 4 if households do not bear all the cost of youth unemployment.

The Lisbon strategy, as defined by the Special EU Council of March 2000, further re-launched at the EU Council of 2010, suggests the importance for young people of investing in human capital accumulation for the future of Europe as “the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion”. Under the pressure of the economic crisis, the 2013 EU council held in Brussels launched the Youth Guarantee, a scheme that ensures that all young people under 25 - whether registered with employment services or not - get a good- quality, concrete offer within 4 months of them leaving formal education or becoming unemployed. The good-quality offer should be for a job, apprenticeship, traineeship, or continued education and be adapted to each individual need and situation.

The analysis carried out in this chapter suggests that the Lisbon strategy and the Youth Guarantee are good guides for EU governments to fight youth unemployment. Nonetheless, it also suggests that they are difficult to implement due to important institutional and historical differences across EU members, and also very costly to implement especially for countries where youth unemployment is very high and the institutions regulating the labour market are very weak, such as the Southern Mediterranean and transition countries.