Youth Unemployment | More severe in countries in which vocational preparation takes place in full-time schools

“Young graduates and early school leavers entering the labour market are a population at risk. They are exposed to above-average turnover rates between different jobs and face an increased risk of unemployment. “ write Marc Piopiunik and Paul Ryan in Improving the transition between education/training and the labour market: What can we learn from various national approaches?  for the European Expert Network on Economics of Education (EENEE) (Adapted choosen excerpts by JMM to follow)

The aftermath of the financial crisis – and currently the ongoing Euro debt crisis – have again shown that youth unemployment is. Between 2008 and 2010, young people (aged 15 to 24) in the European Union (EU 27) experienced an enormous increase in unemployment, from about 5% to 21.1%, compared to an increase of only around 2 percentage points among adults (aged 25 to 74), from 6.0% to 8.3%. These figures demonstrate the importance of policy measures to help youths master the transition from school to work.

Improving early labour market entry is particularly important for young people as many studies have suggested that long unemployment spells at labour force entry have long-run negative effects on employment probabilities and wages in subsequent working life.

For this reason, large amounts of money are spent each year to fight youth unemployment and to alleviate school-to-work transitions. One widely used measure to achieve these goals is active labour market programmes (ALMPs). Many ALMPs specifically target youth, in order to improve their integration into the labour market.

Between 2002 and 2010, youth unemployment in the OECD countries rose by 4 percentage points, from 12.7% to 16.7%, while the unemployment rates of prime-age workers (25-54 of age) increased by only 1.5 percentage points, to 7.5%.

Moreover, the youth-adult unemployment ratio has worsened more in some countries than in others. The ratio of the two rates indicates that some countries face especially severe problems in integrating school leavers into  the labour market (e.g. Italy (3.67), Sweden (4.13), and the UK (3.13)), while other countries have much lower youth specific unemployment problems (e.g. Germany (1.47) and Switzerland (1.80)).

Countries with large apprenticeship systems mostly have lower youth unemployment, both absolutely and relative to adults, than do those that rely on full-time schooling at upper secondary level, whether general or vocational .

The contrast is particularly sharp between Germany, Switzerland and Austria, in the former category, and Italy, Sweden, France, and Finland, in the latter two groups. Moreover, low youth unemployment in the Netherlands and Norway, within the ‘fulltime dominance’ categories may be linked in part to the presence of moderately large apprenticeship systems in each case. Countries in which vocational preparation takes place mainly in full-time schools – where students are therefore connected at most marginally to the labour market while in education  – have therefore more severe youth unemployment problems.

The share of unemployed is also significantly higher among early school leavers than among those with a higher school degree. Among males, the probability of being unemployed is 2.6 times higher for early school leavers than for individuals with a higher educational degree. Among early school leavers, the unemployment risk is substantially higher for males than for females (47% vs. 21%), while females are more likely to be economically inactive (58% vs. 31%).

Some youths are neither employed nor in education or training (NEET). Table 4 shows the NEET rates of young people aged 15 to 24 for the EU-27 countries. The NEET rates are especially high in Southern Europe (Spain 18.0%, Italy 19.1% and Greece 14.9%) as well as in Ireland (18.9%) and Bulgaria (21.8%). Given the social costs mentioned above, in several European countries the share of jobless and inactive youths is alarmingly large.

Three broad categories of policy interventions can be distinguished:

1. active labour market programmes (ALMP) targeted at unemployed youth;
2. the extension of high-quality fulltime vocational schooling;
3. and measures to improve the functioning of apprenticeship systems.

The authors suggest a clustering of European economies in terms of the leading institutionally oriented classification schema in contemporary social science. The primary distinction is between countries with large, highquality apprenticeship training systems, which possess all of the institutional foundations needed to support supra-market co-operation, and countries with largely school-based vocational education, either linked to a liberal or a co-ordinated form of market economy.

Youth active labour market programmes (ALMP) by Type of Intervention

The authors present evaluation results for :

1. Public Employment Services
2. Classroom-based Training
3. Job Creation and Workplace-based Training in the Public Sector
4. Workplace-based Training in the Private Sector
5. Self-Employment Support and a
6. Combination of ALMPs

Taken as a whole, the short-term (12 month) effects of ALMP programmes are indeed higher in the ‘Anglo’ than in the ‘Nordic’ countries,  and in turn higher in the ‘Nordic’ than in Austria, Germany and Switzerland.  Moreover, the reverse ordering of countries applies to long-term (36+ month) effects.

The pattern could mean that national institutions affect the time pattern of programme benefits, with liberal market economies doing better than co-ordinated ones in the short term but worse in the long term – a pattern consistent with the wider characterisation of greater short-termism in Liberal Market Economies (LME) financial markets.

All European countries face serious youth joblessness and use ALMPs in response to it. Because their young people acquire a better skills base and a stronger attachment to the labour market, mass apprenticeship countries have lower rates of youth unemployment and youth inactivity. Those countries’ policy choices in the ALMP area therefore incline more towards training, longer-duration participation and a longer-term time profile of benefits. They also devote particular attention to improving youth access to apprenticeship in the first place, an option that lacks a counterpart in other national institutional contexts. Although these policies have been widely criticised in Germany as second best, they do embody the national commitment to high-quality work-based learning.

And the evidence, albeit limited, that is available on the success of these policies points to substantial learning-related benefits. It is also possible that ALMP programmes are more effective in those countries, but neither theory nor evidence to date points clearly toward that.

In terms of national differences in the choice among and the effectiveness of ALMP programmes themselves, existing evaluation studies of youth ALMPs suggest certain patterns, with intervention modes and outcomes differing by national institutional type. Liberal market economies tend to rely heavily on private sector incentives, through wage subsidies and on-the-job training, which aim at providing workplace-based training. These measures were found to have been quite effective in raising participants’ future employment prospects. Co-ordinated market economies with mostly school-based VET, notably Sweden and France, have used a broader variety of ALMPs.

Overall, evaluation results are more mixed for them than for LMEs: programmes had positive, insignificant and in some cases even negative effects on participants’ employment probabilities.

In the mass apprenticeship countries, there is much less evidence on ALMPs targeted at youth, but a range of interventions has been used there too, with broadly positive effects.

Finally, evaluation studies for Mediterranean and smaller East European countries are too scarce to permit statements about programme effectiveness in these countries.

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