Youth unemployment and the disadvantages of the young in the labour market

Enrico Marelli and Marcello Signorelli


Economic inequality is one of the key issues concerning economic performance and development. The “distribution” aspects were considered crucial by classical economists, who focused not only on the causes of the wealth of nations, but also on how wealth (and income) is distributed. Later, Keynes argued that unemployment and bad income distribution are the major failures of market economies, that require appropriate public policies.

Concerning the “classical” distribution between the factors of production - capital and labour - it is known that after World War II workers have been able to gain, in most Western countries, an increasing share of income as well as a mounting power, also in the industrial relations; this was also the effect of “Keynesian” policies and the extension of the “Welfare state”. Since the 1980s, however, the labour share began to decrease, as a consequence of many factors: the declining role of the State (due to the diffusion of neoliberal approaches and the stricter constraints on public budgets), the globalization and internationalization of production, the “biased” technical change (that harmed unskilled labour), etc.

Labour markets have become increasingly “flexible”, but this was not enough to reduce the unemployment rate, that has been particularly responsive to the economic cycle and to severe economic crises (e.g. the global crisis started in 2007-2008); in some cases (especially in Europe) it has also been persistent over time. Within the labour market, young workers have been especially injured, for many reasons (some of them will be discussed in the next section). The consequence of recent trends is that the unemployment risk is persistently higher among the young cohorts; also when the youth are able to find a job, in many cases this is a temporary, low-quality, poorly remunerated and - in general - “precarious” job.

The difficulties of young people in the labour market (lower wages, precarious jobs, higher and more persistent unemployment) have deep consequences on the income and job opportunity distributions across generations. Even the expected future gains are contained, because of the insecure jobs, the slighter career opportunities, the low (expected) amount of old-age pensions. This causes greater difficulties also in the credit market, e.g. the chance to receive loans for buying houses or other durables. So, a new type of inequality refers to the relative position of different generations on the labour market.

All this worse condition for young people also bears psychological (e.g., Headey, 2002)1, medical (e.g., Taylor and Morrell, 2002) and social effects.2 Unemployed young people progressively postpone marriage or the decision to leave the parents’ home; this has negative effects on birth rates too. Despite generally high education levels, social mobility is impaired by the difficulty of finding stable jobs; this also matches low geographical mobility.

198 Enrico Marelli and Marcello Signorelli

Labour mobility of educated people has recently increased at the international level (e.g., young graduates of Southern Europe moving Northward), but this corresponds to a waste of resources for the sending country.

Thus, the rising “intergenerational inequality” should be wisely considered by policymakers, in view of its economic, social and even political costs. Young people are a “minority” in modern societies3 and as such are (in a certain sense) discriminated; but it is an ample minority and the long-run impact of the mentioned trends may be troublesome. Youngsters are a new category of “disadvantaged” workers, like women4, immigrants and people with disabilities (see Malo and Sciulli, 2014).

This chapter continues in the next section with a review of the key literature on the causes of high(er) youth unemployment rates. The third section presents and discusses various labour market indicators concerning young people, in a comparison across the EU countries. The final section concludes offering some policy implications.

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