1. Institut Arbeit und Qualifikation Gerhard Bosch Youth unemployment and the European employment policy "Decent work and global trends in employment" 5th Astana Economic Forum 22- 24 May, 2012 Prof. Dr. Gerhard Bosch Institut Arbeit und Qualifikation Forsthausweg 2, LE, 47057 Duisburg Tel.: +49 203 / 379 1827; Fax: +49 203 / 379 1809, Email: gerhard.bosch@uni-due.de ; http://www.iaq.uni-due.de/

2. Institut Arbeit und Qualifikation Structure of presentation 1.Youth unemployment in the EU – a lost generation? 2.The structural problem: Transition from, education to work 3.The cyclical problem: Need for Growth package for Europe

3. Institut Arbeit und Qualifikation 1. 1 Growing unemployment of young people in the European Union Unemployment rate of under 25years increased from 15.8% in 2008 - to 20,1% in 2009 and 21,4% in 2011 Only in DE and AT decline of unemployment figures of young people since the financial crisis In some countries unemployment rates far above 30% - no short- term hope of decrease Lost generation – high scar effects

4. Institut Arbeit und Qualifikation 1.2 Youth unemployment rate/ratio by country 2011 (in %) Source: Eurostat

5. Institut Arbeit und Qualifikation 1.3 Scar effects of a bad start Myriad studies on long term scar effects of a bad start. Two examples: 1. Graduating from college in a bad economy has large, negative and persistent effects on wages. Lifetime earnings are substantially lower than they would have been if the graduate had entered the labour market in good times (Lisa B. Kahn (2010) 2. Data from the UK 1958 birth cohort (National Child Development Study) - Youth unemployment raises unemployment, lowers wages, worsens health and lowers job satisfaction twenty five years later. No such effects could be found for spells of unemployment when the respondents were in their thirties ( Bell/Blanchflower 2009)

6. Institut Arbeit und Qualifikation 1.4 Scar effects of a bad start Also many studies on political impact of a bad start – Main results: - Decreasing trust in own efforts and in public institutions Reasons for high scar effects of young unemployed: Young people as outsiders extremely vulnerable in recessions – first measure recruitment ban Personality still developing in adulthood Employment systems are often not „forgiving“: Access to good jobs and careers increasingly only with „clean CV‘s“ - without the stigma of a bad start

7. Institut Arbeit und Qualifikation 1. 5 Youth unemployment in the EU Reasons for high youth unemployment and high growth rates of youth unemployment in the crisis: 1.Structural: Difficult transition from education to work – chronically high youth unemployment rates 2.Cyclical: Young people outsiders – recruitment ban first reaction of companies in recession In deep recessions not sufficient to tackle only structural problems – growth package necessary

8. Institut Arbeit und Qualifikation 2.1 Transition from education to work - Vocational training important pathway - Different VET Systems in Europe Type of VET systemCountries Apprenticeship-basedAustria, Germany, Denmark Continental school-basedNetherlands, France Market-ledUK, Ireland, General Education Greece, Spain, Poland, Hungary Egalitarian School-basedFinland, Sweden

9. Institut Arbeit und Qualifikation 2.2 Research on transition from education to work Myriad studies: Fast and stable transition in countries with apprenticeship systems – apprentices are insiders Relatively fast, but often not sustainable transitions in market-led systems Most difficult transitions in countries with mainly GE and high levels of Employment protection legislation Difficult transitions from school-based VET – school leavers are outsiders

10. Institut Arbeit und Qualifikation Source: Müller/Gangl, Transitions from Education to Work in Europe, Oxford 2003 2.3 Transition from Education to Work: Unemployment rates and labour force experience (in years): ISCED 3 leavers (1990‘s)

11. Institut Arbeit und Qualifikation 2.4 Reasons for fast and stable transitions from apprenticeship systems – How to make apprentices „insiders“? High reputation of VET among employers and young people: Not second choice for poor school performers Occupational labour markets: Links of certificates with work organization, pay and careers Participation of social partners – „Their“ occupations In Germany in 2009 „social pact“ - recruitment of 566 000 new apprentices – 50 000 less than 2008, but in recession with a decline of GDP of - 4,7%

12. Institut Arbeit und Qualifikation 2.5 Academic drift: increasing mismatch Percentage of highly skilled jobs (ISCO 1-3) in most developed countries between 15 and 25% Share of graduates from tertiary education exceeding the share of highly skilled jobs in many countries Overproduction of graduates: Increasing mismatch because of expansion of tertiary education (Example: 40% of young Spanish tertiary graduates working at lower skill level 2007) Shortages at craft level

13. Institut Arbeit und Qualifikation 2.6 Share of population in skilled jobs and share of population with tertiary education (2006) share of the 25-to-64-year-old working population in skilled jobs (ISCO 1-3 Managers, Professional, Technicians and Associate Professionals) and share of the 25-to-64-year-old population with tertiary education (2006) source: OECD, Education at a glance 2008

14. Institut Arbeit und Qualifikation 2.7 G20 Labour and Employment Ministers Conclusions, Paris September, 26/27 2011 „ We agree that training systems based on dual learning or apprenticeships, are particularly effective. We are committed to promoting apprenticeship, vocational training and work-based learning systems, and we encourage the creation of public-private partnerships for this purpose“

15. Institut Arbeit und Qualifikation 3.1 Need for a growth package in the EU Upgrading VET - Long term structural project Not fast remedy to help present generation Prognosis of OECD 2012 - GDP Germany +1,2% Portugal- 3,2% Greece - 5,3% Italy - 1,7% Spain - 1,6% Growing unemployment especially of young people in EU with few exceptions (Germany, Austria)

16. Institut Arbeit und Qualifikation 3.2 Need for a growth package in the EU Some migration helpful, but not a solution Simulations of the medium-term trend in the euro area show that simultaneous austerity policies, primarily targeting the supply side will deepen the euro area’s economic divide between the southern European member states and Germany. A way out of the crisis only, if expansionary policies return to the economic policy agenda in Europe.

17. Institut Arbeit und Qualifikation 3.3 Need for a growth package in the EU Different models discussed: - Eurobonds to reduce burden of high interest rates in Southern Europe - Project Bonds that would co-finance industrial projects with the European Investment Bank - Mobilisation of unused money in structural funds to finance projects (80 Billion) Not yet discussed how programs can be targeted to young people: Possibilities – lower interest rates if young people are recruited/ or additional wage subsidies for young people - Also needed: Increase of domestic demand in surplus countries to stimulate imports (Higher wage increases accepted in Germany but not public investments because of fiscal pact)

18. Institut Arbeit und Qualifikation Conclusions Young people unproportionally hit by the recession in the EU No fast recovery in many countries expected – problem aggravating Threat to the social, economic and political stability of nations Need to tackle: structural problem: Improving transition from education to work cyclical problem: Need of growth package especially targeted at young people Also outside of Europe problems with high youth unemployment: Improving VET crucial

19. Institut Arbeit und Qualifikation 2.4 Month needed to find a first job after leaving school, United States and Europe, late 1990s- early 2000s

20. Institut Arbeit und Qualifikation 2.9 Education and occupational mismatches for young individuals 2007