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Why we need a new deal for young people in Europe

Posted on November 18, 2013 by Tom Healy

Tom Healy, Director NERI
Tom Healy, Director NERI

While there may be grounds for celebration in the departure of An Troika, unemployment, under-employment and precarious employment is the lot of too many young people across Europe. Ireland (Republic), at 27%, is in the acute ward just behind Greece, Spain, Croatia and Portugal which, in each case, have rates of young unemployment in excess of 40% (see indicator 2.2 in the NERI Quarterly Economic Facts).

Traditional notions of youth are being re-defined to include adults who are reaching 30 and still living at home or elsewhere without ‘a proper job or prospects’ – in some cases doing course after course to enhance their CVs if they can avail of training.

The future of the European project – economically, socially and political  - is poised on how this great problem will be tackled and reduced in the coming five years.  As politicians and commentators speculate on how the markets will speculate and how accounting rules on public debt and deficits will be implemented there is a fundamental problem with the way European macro-economy is functioning or not functioning.  Supply-siders of a particular ideological persuasion may argue for measures to make it easier to hire and fire, reduce wages especially on entry to the labour market and provide greater work incentive by further lowering the value of social transfers to those out of work. But, the problem remains, essentially, one of demand for labour precipitated by a systemic crisis in consumption and investment and exacerbated by a lack of proper functioning banking since the onset of the current economic crisis. In the case of Ireland (Republic) the ratio of unemployed to job vacancies is 32 to 1 (indicator 2.6).

Supply-siders have a point, however: without proper skills and work experience young people stand a very poor chance of competing in a slack labour market especially as technology and, in the case of Spain and Ireland, the bottom fell out of construction many years ago. However, caution is needed in the provision and evaluation of various types of internship and other schemes targetted at the unemployed to ensure that:

  • they do not constitute forms of cheap labour (and job displacement) for jobs that might have otherwise been done at a decent living wage.
  • they provide quality work experience and training.
  • they lead on to full-time jobs that pay a living wage.

Much attention has been given to the idea of a ‘Youth Guarantee’ involving guaranteed training or employment for young people out of work beyond a certain period of time.  Initiatives at EU level, and more recently announced in the case of the Republic of Ireland, are welcome even if they represent an extremely modest and limited scale response to a huge problem. The diagnosis of the underlying problem needs to be approached with great care and with regards to the complex and evolving mismatch of skills and labour demand in the economy. Claims that young entrants to the state of joblessness upon leaving school or losing a job are prone to laziness and lack of incentive to go out and find jobs ‘that are there if they only are prepared to work in them or train for them’ need to be treated with a good dose of caution.  The research evidence if under-whelming in the case of young single persons who are unemployed for the first time. If incentives are a major problem then why is that all unemployment including youth was very significantly lower in the years prior to 2008? My colleague Dr Rory O’Farrell has summarised some of the key issues and problems with the recent decision to cut (again) the allowance for young entrants to the Liver Register of unemployed in a recent NERI InBrief Research paper ‘Do the Young Unemployed Need the Incentive of Reduced Social Welfare’.

The decision to further reduce job seekers allowances for new entrants to the Live Register announced in Budget 2014 was particularly unhelpful to the plight of young people out of work for the following reasons:

  • Other options for increasing revenue or stimulating the economy were available but not chosen.
  • The impact on domestic demand (yes young people do spend) along with that of the hundreds of other cuts is negative and will increase unemployment – other things equal.
  • Given that it is not possible to live independently or decently on €100 per week this decision will inflict real hardship and poverty on families as well as individuals who have already been means-tested for job seekers allowances.
  • Given that alternatives in the form of education, training or employment are not available in sufficient quality or quantity to absorb young people who are unemployed it is inevitable that many will fall between cracks and in a few cases end up on the street – literally.
  • Finally, the idea of living on €100 a week because there are no jobs or no training available in at least some cases may be taken as a signal that ‘there is always the boat to Holyhead’ as when your granddad went to England in the 50s. However, this time it is different because: demand for the low-skilled is dramatically different abroad compared to the past and there is a recession or very difficult labour market abroad.

The chances are that, without large-scale and effective investment skills coupled with a growth and investment stimulus both in Europe and in Ireland (and not just in Europe so that it can pull Ireland along – eventually), we will be left with a core of long-term unemployed heavily concentrated by age, possibly by sex and certainly by locality.

Not a great idea for fixing the public finances long-term.

Back to the drawing board. We need a strategy to give young people hope and jobs.

Posted in: Jobs

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