YOUTH UNEMPLOYMENT IN MEDITERRANEAN COUNTRIES

Introduction

In all Mediterranean countries youth unemployment has reached alarming record levels. This paper analyses the current situation in France, Greece, Italy, Portugal, and Spain. In all countries school dropout rates are high, returns to education are low and the transition from education to work is problematic and difficult. This is due to a poor working vocational training system, the dualization of the labor market and minimum wages that are set too high. The Great Recession deteriorated the situation of young people, but youth unemployment is mostly structural. To overcome this crisis the overall performance of the labor market has to be improved.

Youth unemployment rate

It is now a well-known fact that in all Mediterranean countries (comprising France, Greece, Italy, Portugal and Spain) the current youth unemployment rates are at an alarmingly high level. Even before the economic crisis of 2008, each of those countries already had higher unemployment rates than the EU average. During and after the crisis youth unemployment increased sharply, especially in Greece and Spain. At the end of 2012, youth unemployment was above 50 percent in both countries, 55.0 percent in Spain and even 58.1 percent in Greece. The rate in Italy and Portugal was almost 40 percent, but in France it was only lightly higher than the EU average. 

In 2013, the youth unemployment rates continued to rise by 0.1 percentage points in the EU, as well as in Spain (+1.7 percentage points) and Italy (+2.9 percentage points). In Greece, youth unemployment remained quasi stable at 58.0 percent (-0.1). In France, the unemployment rate decreased in 2013 to 25.2 percent in the third quarter. The most significant decrease was observed in Portugal. First, the youth unemployment rate climbed from 38.8 percent (2012Q4) to 40.3 percent in the first quarter in 2013, but then significantly fell to 36.5 percent (-2.3 percentage points).

According to Eurostat, the share of pupils in upper secondary education enrolled in the vocational stream in the EU was 55.7 percent for males and 44.7 percent for females. In all Mediterranean countries the shares are lower than the EU average (Greece: 38.5 percent male, 24.3 percent female, Spain: 48.7 percent male, 41.8 percent female, France: 49.7 percent male, 39.3 percent female, Portugal: 46.5 percent male, 38.4 percent female) except for Italy (70.1 percent male, 49.2 percent female). 

Compared to the unemployment rate of the over 25-year-olds, the unemployment rate of young people aged 15 to 24 is more than twice as high, both in the EU as a whole and in the Mediterranean Countries. This has been a long standing phenomenon, however. Those statistics actually make the youth unemployment problem look worse than it really is, as those numbers must be interpreted more carefully because of two reasons (Barslund and Gros, 2013). First, the group of 15-24-year-olds consists of two subgroups, the “teenagers” (15-19-year-olds) and the “tweens” (20-24-year-olds). Most of the “teenagers” are still in education or training or, if not, are likely to be very low skilled. Therefore, even in normal times, they would have difficulties finding a job. The “tweens” normally have completed their secondary education or university studies early and are seeking a full-time job. Second, only a small fraction of young people are in the labor force: on average, only about 10 percent. A youth unemployment rate of 60 percent does not mean that 60 percent of the whole cohort is unemployed. It means that 60 percent of young people in the labor force are unemployed. 

The youth unemployment rate is potentially misleading, and it is therefore preferable to look rather at the youth unemployment ratio. This is the percentage of the unemployed in the reference population. The youth unemployment ratio of young people aged 15 to 24 is only slightly higher than the unemployment rate of those older than 25, and somewhat less alarming. In Italy and France, the youth unemployment ratio has a similar level as the EU 28, around 7 to 10 percent. In contrast, Spain’s level increased extremely during and after the economic crisis, from a similar level as the EU28 in 2006 to above 20.0 percent in 2012, which is twice as high. In Greece and Portugal, the percentage of young people without a job and looking for one did not increase until 2009. After 2009, the ratio of both countries consistently went up, reaching 14.3 percent in Portugal and 16.1 percent in Greece in 2012. 

An alternative indicator is the NEET rate. This includes all young people aged 15 to 24 who are not in education, employment, or training -- the critical mass of the young population. The NEET rate of “teenagers” is usually much lower than the NEET rates of “tweens” and the whole age group because most of them are still in education or training. The NEET average of the EU is lower than the youth unemployment rate. Especially in Italy, Spain, and Greece, the size of the NEET rate is much higher than in the EU. In Spain, the amount grew tremendously during and after the recession, from 12.2 percent in 2007 to 18.3 percent in 2009, and has stayed at a high level of about 19 percent. The NEET rate in Italy before the recession was already at a higher level of about 17 percent. It continued to grow during and after the crisis to a value of 21.1 percent in 2012. In Greece the value started to increase in 2009 and reached a similar level as in Italy in 2012 (20.3 percent).

Outlook and Policy Conclusion

In Mediterranean countries, youth unemployment is mostly structural and has deteriorated during the Great Recession. Therefore, well organized strategies to fight youth unemployment should improve the overall performance of the labor market. The goal is to reduce the high unemployment level, the volatility of employment and the risk of the exclusion of specific groups from the labor market. Reforms have to be introduced which try to reconcile the security, efficiency, and fiscal aspects of labor market policies. 

To be effective, reforms need to understand what policies and institutions do in different contexts. In order to improve the employment prospect of future entrants, it is important to set the right incentives to cut high dropout rates, smooth the transition from education to work, and also increase the possibility of securing a permanent job. At the same time, returns to (vocational) education have to be as high such that investing in all varieties of education is worth it. Further, the match between supply and the demand of skills has to be improved. A better interaction between the education system and the world of work would be a landmark in this development. There are various ways: Germany has a dual model; in Japan schools and universities place qualified students directly in firms; and there is also the Anglo-Saxon job placement model, where both young people and individual firms play important roles (Pastore, 2012). 

The gap between high employment protection and the high firing cost of permanent contracts with hardly any protection and security for fixed-term contracts has to be narrowed. The limits on the widespread use of fixed-term contracts must be stricter. A single type of employment contract would be a possible way forward, in particular if combined with job-related training. There would no longer be any distinction between fixed term and permanent contracts. Each employment contract could be seen as unlimited, and the longer it persists, the more claims could be granted (Eichhorst et al. 2013). Also more flexible wages are needed. In some countries, minimums wages are set to high to employ inexperienced and especially low skilled young workers.

Still, structural reforms of this kind will need some time to show effects and improve the situation for young people in the labor market in a sustainable way. Of course, they will also interact with the overall macroeconomic environment and labor demand. But the losers of the Great Recession and the labor market cannot be left alone. The state has a responsibility and must give financial and active support to activate young people in the current situation.

AIRA JANONYTĖ

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[artigo de opinião produzido no âmbito da unidade curricular “Economia Portuguesa e Europeia” do 3º ano do curso de Economia (1º ciclo) da EEG/UMinho]