Youth employment and labour market segmentation

1. Youth employment and labour market segmentation Ljubljana, 19th June 2012 Baudouin Regout Adviser, Bureau of European Policy Advisers Reporting to President Barroso

2. 4 The EU-15 has grown its GDP per capita (marginally) faster than the U.S. since 2000 50 2009 PPP USD, thousands 45 40 35 30 25 20 0 2008 1970 1975 1980 1985 1990 1995 2000 2005 Averagegrowth Percent 2.1 2.2 2.2 1.2 1.9 2.6 2.1 1.3 SOURCE: McKinsey Global Institute

3. 2 EU-15 United States …Thanks to a faster job creation Additional jobs, 1995–2008 Million 5.3 12.1 2.1 1.4 0.3 3.3 Total job growth Unemploy-ment reduction Increased participation rates Shifts in age structure Related to population growth SOURCE: McKinsey Global Institute

4. 7 Percent Reforms in specific countries shows ‘lump of labour’ is a fallacy Participation rate 1-unemployment rate 1995 2007 • Reforms of employment protection and unemployed activation • Hartz reforms improving employment services, activating the unemployed and deregulating the labour market. • Treu and Biagi reforms flexibilizing labour market • Senior participation support through financial and behaviour incentives for workers and employers • Youth specific measures against unemployment SOURCE: McKinsey Global Institute

5. Since, the crisis pushed unemployment back over 10%... • Unemployment rates in Europe and other countries EU US Euro area Japan % Unemployment has increased since the crisis, by more than 8 million compared to early 2008 to reach about 24.8 million today. Past progress has been lost. Source: European Commission

6. … with a disproportionate effect on young people, who had more temporary contracts Youth unemployment rates in Europe and other countries (under 25 year-olds) EU US Japan % Source: European Commission

7. Youth unemployment is very high in some countries Youth unemployment rates (March 2012) % of labour force < 10 10 - 20 20 - 30 30 - 50 > 50 Source: European Commission

8. Risk of a lost generation? Share of young people not in employment, education or training (NEET) as a % of the age groups 20-24 and 25-34 2007 2010 % Source: European Commission

9. Where to go from here? Short term: Measures to fight the economic crisis, restore confidence, lending, and boosting growth Measures to ensure flexibility and protect employment in a different way (e.g., temporary unemployment schemes) Long term: Structural reforms work. That means a.o. ensuring flexibility with a (reinforced when necessary) social net, education, active labour policies, etc.

10. Segmentation: are temporary contracts stepping stones or dead ends? • Austria • Mainly voluntary • Stepping stones • Low wage penalty • Spain and Poland • Mainly involuntary • Low probability to move to a better job • High wage penalty Source: Eurostat EU LFS 2010, RWI study based on SILC, DG EMPL calculations on SES 2006

11. Labour mismatches and employment traps an opportunity not to miss! Evolution of unemployment rateand labour shortages Unemployment rate Labour shortages Unemployment rate (%) Labour shortage indicator (%) 2011Q3 2008Q1 2009Q3 2010Q1 2010Q3 2011Q1 2009Q1 2008Q3 Note: while unemployment was reaching very high levels, labour shortages started to increase again as of end 2009 (“Q” = quarter)

12. Youth unemployment 2004–08 average, <25 age Change vs. 1998–1994 Percentage points Some European countries have made large cuts in youth unemployment +4.2 percentage points SOURCE: McKinsey Global Institute

13. The Youth Unemployment Taskforce Experience Decrease youth unemployment – the Dutch experience Measures (examples) Overview and objectives • Launched in 2003 to tackle youth unemployment • Aiming at offering each young person a training position or a job before six months in unemployment are reached • Targeting the halving of young people leaving school without a starting qualifications • Implemented with high cooperation between local actors (city councilors acting like ambassadors, companies, employers organizations, vocational school) • Youth development and experience raising positions (JOP): youth having received unemployment or social assistance benefits for more than six months can participate in an internship of three months during which trainees keep their benefit and get a wage of EUR 450 per month from the employer • Work Fist Trajectories: projects in which those asking for social assistance are put to work directly, i.e. as soon as possible after submitting an application, in low paid subsidized jobs (as incentive to look for regular job). The non compliance can deprive of part of the benefits • Tax reduction for providing contracts to apprenticeships • O&O: employers can make use of their sectoral training Fund (funded from contributions from member companies’ wage Bills) to provide on-the-job training • Invite to social partners to introduce pay for low-skilled young people at the level of the statutory minimum youth wage • Creation of regional reporting and coordination centers (RMCs) for early school leave Labor market outcomes: youth (<25) unemployment rate evolution -34% 8,2 8,0 6,6 5,9 5,3 -4% 16,4 16,0 15,7 15,3 14,7 2004 5 06 07 2008 SOURCE: McKinsey Global Institute

14. The EU opens up opportunities for young people STUDY: ERASMUS • 3 million students so far • > 200 000 a year • > 90% satisfaction TRAIN: LEONARDO • 710 000 people so far • > 80 000 placements a year • 86% find it beneficial WORK: EURES • 1.3 million vacancies • 25 700 employers registered • 100 000 jobs/offers a year Presentation of J.M. Barroso to the informal European Council, 30 January 2012 13

15. A “Youth on the move” Pact (1) EACH MEMBER STATE TO: Develop youth jobs plans by mid-April as part of National Reform Programmes Guarantee job, educationor training for each young person within 4 months of leaving school Agree with social partners to increase number of apprenticeships and traineeships Re-direct EU Structural Funds to give priority to youth unemployment Use existing EU support schemes to facilitate youth mobility (with EU and/or top-up national funding) Presentation of J.M. Barroso to the informal European Council, 30 January 2012 14

16. A “Youth on the move” Pact (2) WHERE YOUTH UNEMPLOYMENTIS SIGNIFICANTLY ABOVE EU AVERAGE: Action teams with Commission, Member States & social partners to develop youth jobs plans Use of unallocated EU Structural Funds to fund training and work experience Presentation of J.M. Barroso to the informal European Council, 30 January 2012