Is the Youth Guarantee enough to get unemployed Europeans out of poverty?

Leaders in Europe and around the world are hoping the worst of the economic and financial crisis is over and that 2014 will be a year of recovery.

However, when it comes to youth unemployment in the European Union (EU), there appears to be no light at the end of the tunnel, save for a few exceptions. Youth unemployment has been on a continuous rise since the beginning of the crisis five years ago and, according to Eurostat (the European Commission’s Directorate providing statistical information), it has now reached an average of 23.5%.

More specifically, there has been an increase of the “NEETs,” young people who are not in employment, education or training. According to Eurofound — tasked with improving living and working conditions — as many as 14 million young Europeans fall into this category.

Long-Term Effects

The problem has been particularly acute in the European “Southern belt” — Greece, Portugal, Spain, Italy and Croatia — where roughly one in two young people are without a job. Many of the new Eastern European members, including Romania and Bulgaria, also face difficult youth unemployment problems.

In truth, the information produced by Eurostat does not provide a complete picture. First, it only takes into account people aged between 15-24, leaving out many youngsters that entered the job market during the economic crisis.

Moreover, many young Europeans are underemployed, holding jobs they feel overqualified for or working under precarious contracts such as internships, which are often unpaid or grossly underpaid.

Apart from the alarming size of the phenomenon, it is clear that youth unemployment will have a long-term effect on a big segment of the EU population. In this regard, many speak of “a lost generation” that will bear the scars of the crisis long after it ends. In addition to the immediate economic consequences, they will suffer in numerous other ways.

For example, according to the World Economic Forum’s “Outlook on the Global Agenda 2014,” a generation that starts its career in complete hopelessness will be more vulnerable to populist politics and will lack the fundamental skills one develops early on in a career.

This generation will also have a higher chance of suffering from unemployment and poverty later on, which could lead to higher rates of crime.

Furthermore, countries with the highest rates of youth unemployment suffer from a “brain drain,” in which educated youngsters leave the country to try and find work abroad. Not only are these countries losing a motivated workforce, but all the money invested in its education has also been wasted.

The Youth Guarantee

Within the context of its social policies and the promotion of the movement of workers and their full employment, the EU has supported youth employment since long before the outbreak of the crisis. The main instrument of this support is the European Social Fund (ESF) – a structural fund investing around 10% of the EU budget in creating more and better jobs within the European Union.

According to the European Commission, from 2007 to 2012, 20 million young people under 25 benefitted from the ESF through training or mentoring. Many member states use ESF to modernize education and strengthen vocational training.

As a new targeted policy, the European Council endorsed the principle of the Youth Guarantee in June 2013, which was hailed by the Commissioner for Employment, Social Affairs and Inclusion as “the most ambitious reform yet” to tackle youth unemployment.

Under this scheme, member states are to offer all young people up to the age of 25 a good quality employment opportunity, continued education, an apprenticeship or a traineeship within four months of leaving their formal education or becoming unemployed. The Youth Guarantee is based on the model of earlier national plans that were successfully implemented in Scandinavian countries, Germany, Austria, the Netherlands and Poland.

As it has been noted, youth guarantee schemes create entitlements to certain measures for all parts of a population within a certain age group. The principal supportive measures of the initiative would consist of building up partnership-based approaches, early intervention and activation, and supportive measures for labor market integration.

Partnership-Based Approaches

This part of the program focuses on the actors that are to be involved in helping young job seekers. In order to work, the Youth Guarantee needs the full cooperation of national and regional authorities, as well as public employment services and participants from businesses and the third sector.

There will also need to be a public authority in charge of coordinating partnerships across all levels and sectors. Building partnerships will not be an easy task, as the situation within EU member states is characterized by a wide range of actors involved with combating youth employment. This includes an increasing presence of grassroots campaigns, such as the Geração à Rasca in Portugal, No nos vamos, nos echan in Spain, and the Giovani Italiani Bruxelles — a watchdog of European and Italian policies to combat youth unemployment.

Early Intervention and Activation

The Youth Guarantee will support activities aimed at engaging and registering job seekers early on. This will include support for public employment services that should interact on a more regular basis with the schools.

There is also an emphasis on creating focal points that will ensure coordination between all groups concerned and the public authority responsible for managing the initiative. Providing people outside the system with information is also essential, and increasing the use of Internet and social media will be promoted.

Supportive Measures for Labor Market Integration

Perhaps most important to the success of the Youth Guarantee will be the steps taken to encourage a proper integration of youngsters into the labor market. One of the biggest issues, in many of the countries with the highest levels of youth unemployment, has been the apparent mismatch between the skills and competencies provided in education and those required by the labor market.

To give an example, the Italian high school system still places an emphasis on the study of Latin, whilst it ranks second to last in the EF English Proficiency Index amongst EU countries (with France ranking the lowest).

Apart from the provision of language training, which appears essential to enhance job mobility in the EU, the Youth Guarantee will support the acquisition of practical capabilities such as ICT and digital skills, which have been identified as one of the key sectors of growth in the labor market.

Moreover, many European countries have an insider-outsider labor market in which older people have permanent, often almost “untouchable” positions.

In Italy, for example, employers claim an important article of the workers’ statute, which dates from 1970, makes it very hard to fire workers and has promoted economic stagnation. Since the associated costs of hiring are so high, many companies have preferred to hire more experienced professionals, or sometimes to postpone the hiring process rather than spending time and capital on young talent as a long-term investment.

In order to help reverse these trends, the Youth Guarantee promotes wage and recruitment subsidies to encourage young people with an apprenticeship or job placement.

Some Critical Considerations

Part of the issue has been that European austerity measures are geared to promote healthy growth in the long-term, but have prevented spending by governments in the short-term.

Many European leaders find themselves having to both implement these difficult reforms and ensure their electorate remains content in order to avoid political instability. Often, there are tradeoffs that need to be made, and so far the young generation, which is frequently numerically smaller, has been chiefly on the losing end.

For example, Spain’s austerity budget in 2013 included new spending cuts, yet an increase in pensions using €3 billion of reserve funds.

The Youth Guarantee will provide a mechanism in which member states can take measures to tackle youth unemployment and receive money through the ESF; however, the extent to which they take advantage of this will ultimately be left to them.

Considering the crisis started over five years ago, it is important for member states to move as fast and efficiently as possible — also since there are age restrictions involved.

To increase available EU financial support for youth unemployment, the EU has also created a dedicated Youth Employment Initiative (YEI), which will provide €6 billion for regions experiencing youth unemployment rates above 25%.

The YEI will exclusively target NEETs aged up to 25 years but, where the member states consider it relevant, also those aged up to 30. In this case, however, member states will have to allocate additional ESF resources.

Many European countries have educational and societal systems in which students finish their tertiary studies after the age of 25. Part of the danger of trying to implement plans that worked in northern European countries in southern states such as Greece, Italy and Spain is that local considerations are not taken into account.

In Italy, for example, the average student finishes high school at age 19 and will usually graduate from higher education (first and second level) after the age of 25. For this reason, it would seem like a good idea to expand the application of the Youth Guarantee scheme to all people under the age of 30 automatically.

Furthermore, considering the EU recently approved a budget (multiannual financial framework) of €908 billion for the period 2014-2020, it appears the amount being allocated for the Youth Guarantee and other young employment initiatives is too small, consisting of €3 billion from a new line dedicated to youth employment matched by “at least” €3 billion from the ESF national allocations.

Although the European economy is no longer in the privileged geopolitical position it was after World War II, it still benefits from a highly educated population, high-quality outputs and the world’s largest trading block. In order to compete in an increasingly interconnected world, it will be necessary for the EU to coordinate its actions, stand together and implement best practices.

Nowhere does this seem more relevant than regarding its youth. Although the Youth Guarantee is a welcomed step in the right direction, it will be mostly up to EU member states to give the initiative the necessary impetus.

With the European Parliament election and the reshuffling of the EC expected for 2014, it seems like no better moment for EU representatives to step up their efforts to tackle youth unemployment as well.

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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