Some features of youth unemployment and labour in Europe

In Europe, particularly high YURs have been recorded in different areas: some Mediterranean countries (Spain, Italy, Greece), certain new EU member states (Hungary and Slovakia), but also some Northern countries (where YUR are not very high, but higher than TUR). After the recent crisis, the increase in the YUR has generally been larger than the rise in TUR, confirming the above mentioned greater sensitivity to the cycle; furthermore, the average duration of unemployment is also increasing.

A worsening situation concerns many other labour market indicators specific to young people. One of this is the NEET indicator, whose importance has been recognized also by international institutions.¹¹ Then, it has become a key statistical indicator, now collected also by Eurostat. A recent investigation on the characteristics of NEET in Europe, the institutional and structural determinants, the distribution across EU countries, the consequences (economic and social costs), and suggested policies, has been proposed by the “European Foundation for the Improvement of Living and Working Conditions” (Eurofound, 2012).

Source: Eurostat database

Bruno et al. (2014c) found that NEET rates are persistent and that persistence increases during crisis periods.

After this introduction concerning previous empirical studies, let us look now at some recent data concerning youth unemployment and other labour market indicators for the European countries (all data are elaborations from Eurostat). We now consider both youth unemployment rates and the ratios between such rates (YUR) and total unemployment rates (TUR); the age classes refer to 15-24 years and 15-74 years respectively (see Table 10.1). We compare the initial year for which comparable data for most countries are available (2002) with the final year (2014); below we shall give some hints about the post-crisis period (2008-2014). We can see that in the Eu as a whole both TuR and YuR in the final year is higher than the corresponding initial figures; however, the increase in YUR - from 18.1 per cent to 22.2 per cent - is comparatively greater.

While for TUR particularly high values are found, in 2014, in Greece, Spain, Croatia, Cyprus, Portugal, Slovakia, in the case of YUR top values are recorded in Spain (53.2 per cent), Greece (52.4 per cent), Croatia (45.5 per cent), Italy (42.7 per cent), Cyprus (36 per cent), Portugal (34.8 per cent). The only country exhibiting a YUR well below 10 per cent is Germany (7.7 per cent). While, in general, female and male unemployment rates in 2014 are almost identical (10.3 per cent and 10.1 per cent in the EU), in the case of young people the performance of males is now little worse (22.8 per cent) compared to the one of females (21.4 per cent); on the contrary, in 2002 there was a gap in the opposite direction. Considering the individual countries, female YUR are higher than the male ones in all countries with high YUR in general (above mentioned), but Spain.

Considering the long-run dynamics of the TUR (i.e. every single year), the best year in the 2002-2014 period was 2008, when TUR was equal to 7 per cent in the EU as a whole; the worst one was 2013, being TUR equal to 10.8% (data not shown in the table). In the case of YUR, we can detect a similar cyclical behaviour: a minimum of 15.6 per cent in 2007-2008 and a maximum of 23.6 per cent in 2013.¹²

The relative disadvantage of young people compared to the total population slightly increased in the period 2002-2014, as shown by the ratios between YUR and TUR (see Table 10.2): the ratio was equal to 2 in the initial year and 2.2 in the final one. A dire position for young people can be detected, in 2014, in countries such as Luxembourg (ratio 3.8, but the YUR is close to average), Romania (3.5), Italy (3.4), but also Sweden (2.9), the UK (2.8), Belgium and Poland (2.7 in both countries).

Thus a first conclusion is that the relative position of young people is bad in two types of countries: (i) where generally adverse economic conditions, especially after the recent crises, are reflected in high unemployment rates, TUR and even more YUR (countries like Greece, Spain, etc.); (ii) in countries that, despite the generally better economic conditions, are characterized by structural or institutional features that are not particularly favourable to young people (countries like the UK, Sweden, Belgium, Luxembourg, Poland, etc.).

In addition to unemployment, another important labour market indicator is the employment rate, from many points of view more thorough than the unemployment rate. Even the EU institutions have included the employment rate in the policy agenda, initially in the Lisbon Strategy of 2000 and more recently in the “Europe 2020” plan approved in 2010: a 75 per cent of employment is the target for people (males and female) of 20-64 years. Despite huge variations across the EU countries, the employment rates were generally increasing and converging up to the beginning of the crisis (2007-2008). Since then there has been a widespread reduction and a new divergence. The differentiation within the EU is even greater for young employment rates (Table 10.3). In 2014 the total rate for the

Table 10.2 Ratios between youth unemplyment rate (15-24) and total unemployment rate (15-74)

15-24 years age cohort was 32.4 per cent. Much higher values are found in Northern and Central Europe countries: the Netherlands¹³ (58.8 per cent), Denmark (53.7 per cent), Austria (52.1 per cent), the uK (48.1 per cent); on the contrary, the lowest figures are recorded in Greece (13.3 per cent), Italy (15.6 per cent), Spain (16.7 per cent), Croatia (18.3 per cent).

Notice that the average Eu employment rate is 4 percentage points (p.p.) below the figure of the initial year (2002) and almost 5 p.p. below the maximum value (recorded in 2007 before the crisis). The reduction has been larger in countries where the employment rate is now very low: for example minus 23 p.p. in Spain (2014 vs. 2007), 10 p.p. in Greece, 9 p.p. in Italy; but also minus 23 p.p. in Ireland, 12 p.p. in Denmark, 10 p.p. in the Netherlands. At the opposite, not surprising, there is one country where the youth employment rate has increased: Germany (from 45.4 per cent to 46.1 per cent).

While before the crisis the employment rate of young males was about 6 p.p. higher than the one of young females, for the EU as a whole, in 2014 the difference was less than 4 p.p. The lowest female rates are found, once more, in the mentioned countries: Greece, Italy, Spain, Croatia. However, the “gender gap” (in term of employment of young people) is even greater in Austria, the Czeck Republic, Bulgaria, Romania, Slovakia, Latvia, Lithuania. Denmark is the only country where the employment rate of young females is even greater than the one of young males.

With reference to NEET rates (Table 10.4), for the 15-24 cohort the average rate did not exhibit significant variations from 2004 to 2014 in the Eu¹⁴: 12.9 per cent in the initial year vs. 12.4 per cent in the final year; the complete time-series dynamics (not shown in the table), however, exhibits a dip of 10.9 per cent in 2007-2008 and a peak of 13.1 per cent in 2012. The female rates are little higher than the male rates. If we now consider the age class 25-29 years, the NEET rate is significantly higher: in fact, it is less likely that young people in this group are in education or training, so youngsters not working are more likely in the NEET group; moreover, for this age class there was in the EU a small increase over time, from 19.6 per cent in 2004 to 20.3 per cent in 2014 (close to the top value of 21 per cent in 2013). For this age class the female rate is much higher (in 2004 double than the male rate), although decreasing over time.

By considering the same table, let us focus on the cross-country variations. While the best performance is shown by countries such as the Netherlands, Denmark, Luxembourg, Germany, high values in the age class 15-24 years are recorded in 2014 (all sexes) in Bulgaria (20.2 per cent), Italy (22.1 per cent), Croatia (19.3 per cent), Greece (19.1 per cent), followed by Spain, Cyprus, Romania; in all these countries (but Bulgaria and Romania) the NEET rates have been increasing over time; the ranking are generally the same for both males and females. In the age class 25-29 years, the NEET rates reach top figures incredibly high as

39.5 per cent in Greece, 33.8 per cent in Italy, 29.6 per cent in Bulgaria, 27.1 per cent in Slovakia, 26.7 per cent in Spain, 26.2 per cent in Croatia, with the female rates even higher (for example 44.1 per cent in Greece and 39 per cent in Italy). These figures testify the waste of human resources that has become a big social problem, especially after the recent crises, for the reasons we shall explain in the next section.

We have seen in the previous section that a major problem with YUR is that they tend to persist over time, so this type of unemployment - once turned into structural - cannot be tackled only with expansionary macroeconomic policies. Also from the social point of view, long-term unemployment is worrisome because unemployment benefits generally have, in most countries, a maximum duration. Many studies have shown that the risk of poverty is high when one of the parents is unemployed and such risk increases with the length of unemployment conditions.¹⁵

Source: Eurostat database.

Source: Eurostat database.

208 Enrico Marelli and Marcello Signorelli

Considering long-term unemployment (longer than 12 months) as percentage of labour force (LTU), we find very high values for young cohorts (15-24 and 25-29) and a significant increase during crisis years. In 2014, LTu was particularly high in Greece (31.5 per cent the total rate for 15-24 years and 28.2 per cent for 25-29 years), Italy (25.1 per cent and

13.8 per cent respectively), Croatia (22.6 per cent and 12.3 per cent), Spain (21.5 per cent and 13.4 per cent), Slovakia (17 per cent and 10.2 per cent), as compared to the average Eu figures (7.8 per cent and 6 per cent for the two cohorts). Very low LTu for young people are recorded in Denmark, Finland, Sweden, Germany, Austria.

The relative position of young people in the labour market depends not only on the probability to find a job and on the length of the unemployment condition, but also on the type of work and its remuneration. In fact, economists and sociologists have deeply debated about the “working poof’ (e.g., Bazen et al., 1998; Pena-Casas and Latta, 2004; Fraser et al., 2011). Furthermore, the policies for the labour market - even in the EU following the Lisbon Agenda of 2000 - have set the aim to create “more and better jobs”. A discussion about human capital, the skill content of jobs, the importance (and incidence) of work in innovative occupations and in the R&D sector would be interesting, but beyond the scope of this chapter.

Some data, however, can be presented and are important since have an immediate impact on the distribution of income between different working groups. As we have seen in the previous section, one strand in the literature maintains the young people exhibit a disproportionately larger incidence of “temporary” jobs, especially in countries that have adopted a flexibility approach oriented to remove restrictions to the entry into the labour market (rather than acting on dismissals, EPL, etc.). Many authors argue that youngsters, in this way, tend to hold “precarious” jobs, that often become a “trap”, leading also to higher risk of unemployment.

Table 10.5 refers to the incidence of temporary employment out of total employees. The key evidence is the following: (i) the incidence is very high for the youngest cohort (15-24 years), reaching over 43 per cent in the Eu as a whole: i.e. about half of young workers in Europe hold temporary jobs; (ii) the incidence decreases with the age of the workers: it is about 23 per cent for 25-29 workers (and even less for subsequent age classes, although not shown in the table); (iii) the incidence has increased over time (it was less than 36 per cent in 2002); (iv) there are no significant differences between male and female workers. The highest incidences of temporary employment are found in Slovenia (72.7 per cent in 2014 for the youngest cohort), Poland (71.2 per cent), Spain (69.1 per cent), Portugal (63 per cent); the lowest ones in Bulgaria, Romania, the three Baltic states and also in the U.K. The ranking is rather similar also for the subsequent cohort (25-29 years).

Concerning part-time employment, in the EU the incidence over total employment is significantly higher for young people (31.8 per cent in 2014) compared to all workers (20.3 per cent); moreover, it is increasing over time: in 2002, it was 21.4 per cent for young people, i.e. one-third smaller. As expected, the incidence is even greater for females: 40 per cent for young females 15-24 years old (up from 28 per cent of 2002), slightly greater than 38.5 per cent recorded by female workers of all ages (15-74 years). Considering the differences across countries, part-time employment is particularly important for young workers (all sexes) in the Netherlands (78.9 per cent in 2014), Denmark (66.9 per cent), Sweden (49.5 per cent), Ireland (45.2 per cent). Thus we can say that in Northern European countries, especially where the “flexicurity model” is prevailing, young people exhibit a better performance in the labour market - i.e. lower YUR and NEET rates; however, they are penalized by different working conditions, for instance shorter working hours and consequently lower incomes. This can be to some extent a voluntary choice, e.g. in order to reconcile working and education choices (or family duties in case of less young female workers, according to a traditional view), but in some other cases it might be another type of discrimination (it is staggering that in the Netherlands more than 87 per cent of young female workers are part-time workers). It is also remarkable that in all countries, also where the incidences of temporary and part-time employment were initially very low, there has been an increase over time.

A final comment refers to the earnings received by young workers compared to mature workers. In some countries, wages and compensations are much lower for young workers, although there are possibilities to increase over time, also thanks to the “seniority”; in some countries, the chances of career progression are high, thus productive and skilled young workers can quickly achieve good positions also from the point of view of compensations.

The available information (Eurostat data) is lacking for the generality of workers, employed in all firms. Thus it is proper to focus on the firms with at least 10 employees, for which data are more complete. Table 10.6 shows that the hourly earnings for young workers (less than 30 years) was in 2010, in the Eu as a whole, around 10 euros, compared to 14 euros for all workers, hence about one-third less. It is also interesting that the wage discrimination of women is sizeable for all ages (12.6 euros vs. 15.4 for males), while it is very small in case of young workers.

The previously mentioned “gap” between the wages of young workers and all employees - about one third less - is more or less confirmed in all EU countries, both Continental, Northern or Southern; it seems a bit smaller in Eastern countries, including the Baltic and Balkan states, where of course the absolute level of hourly wages is much lower compared to the EU average or the other countries.

The 2008-2009 financial crisis, the following Great Recession, the subsequent Eurozone sovereign debt crisis and the ensuing austerity measures have caused a deep impact on the European labour markets. The most exposed segments of the labour market have been young people, old workers, vulnerable employment in general. The economic crises abruptly ended the gradual decline in global youth unemployment rates recorded before 2007 (ILO, 2012, 2014).

In many European countries, the situation is particularly serious. This is related to the greater sensitivity of youth unemployment to cyclical conditions (see p.197). According to many empirical studies, there are two characteristics of the Great Recession that have been particularly detrimental to young people: the financial origin of the crisis and the protracted recessions or stagnation, especially in the Eurozone. As a matter of fact, in the EU we had a double-dip and even triple-dip recession in the 2007-2014 period; a key reason is that the austerity measures imposed by EU institutions to overcome the Eurozone debt crisis have been too deep and widespread, with harmful effects on employment and disproportionate consequences for youth unemployment. The situation is even more worrying since, although a feeble recovery has commenced in many European countries, the risk is that it will be a “jobless” recovery (see ILO, 2014).

The employment and unemployment impact of the crisis has been, however, differentiated across countries. Germany’s case is outstanding, since unemployment has decreased even in crisis years. In Europe, there have been two main types of adjustments: (i) in the most ‘flexible’ countries (such as Ireland, the Baltic states, Spain, that have followed an adjustment similar to the US), employment was cut rapidly and deeply, helping to maintain labour productivity, but at the cost of high and sudden increases in unemployment; (ii) in some other countries (not only Germany but also Japan, the Netherlands, Denmark, and Italy), labour hoarding practices, working hour adjustments and specific policy measures

Source: Eurostat database

Source: Eurostat database.

caused a small immediate reaction; however, these strategies and policies have been much less effective (but for Germany) and the persistence of the impact is much higher.

The impact of the crisis on youth unemployment has been impressive. YUR were in 2014 higher by half compared to 2007 values in the EU-28 (22.2 per cent versus 15.6 per cent). Some countries exhibit exceptionally high values in 2014, including Greece (52.4 per cent), Spain (55.2 per cent), Croatia (45.5 per cent), and Italy (42.7 per cent). Also, the NEET rate has increased in the EU: from 10.9 per cent in 2007 to 12.3 per cent in 2014; exceptionally high values can be found in Italy, where the NEET is above 22 per cent, Bulgaria (20 per cent), Greece and Croatia (about 19 per cent), Spain, Cyprus and Romania (17 per cent).