Youth Unemployment in the EU - The European Youth Guarantee is Unlikely to Be Effective

The European Union has decided to spend billions of euros to combat youth unemployment, a problem that is particularly acute in many Southern European countries. In this interview, Prof. Dr. Holger Bonin, a labour economist at ZEW, raises doubts about the effectiveness of the initiative. He emphasizes the main responsibility to fight youth unemployment should be at the EU member state level.

Holger Bonin has been head of ZEW's Research Department "Labour Markets, Human Resources and Social Policy" since October 2007, and Professor of Labor Economics and Social Policy at the University of Kassel since October 2011. The focus of his work is applied empirical economics. In particular, he is interested in the economic impact of demographic change and migration, the impact of family-related policy, behavioural microsimulation of labour supply, and wage and employment rigidities. He is a member of the population economics section of the German Economic Association and an IZA Research Fellow.

The EU has adopted a European Youth Guarantee that promises to get young people into employment, further education or (re)training within 4 months of leaving school. What do you think of this initiative?

We need see how this guarantee will be put into practice, but I am sceptical. Many of the programme’s resources are simply being shifted around within the European Structural Fund (ESF). So thiscould be a case of "old wine in new skins". Many of the EU countries with high youth unemployment are implementing strong austerity measures. They struggle hard to even meet the co-financing requirements associated with ESF programmes. In any event, I think it is problematic that the Youth Guarantee focuses on an input-oriented target. This creates incentives to simply offer any kind of educational or employment opportunity, regardless of its suitability for the individuals in question. It would be much bolder to set output-oriented goals, such as improving the rate of successful transition from government-supported employment or training under the Youth Guarantee to regular employment. But this would in all likelihood quickly expose the limitations of the programme.

What limitations are you referring to?

We know from evaluation studies that public training or employment programmes for the unemployed often do not significantly improve individual employment chances. When it comes to young people, let me refer to the experience in Germany with the so-called "transitional system" , which does not exactly give cause for optimism. This system is a complex set of measures that works as a safety net for those who have difficulties entering the regular labour market following completion of secondary education at school. While no systematic evaluation of this system has been conducted, it is quite obvious that many youths start programme careers leading them from one public support measure to the next.

Still Germany is widely perceived to be a role model when it comes to youth employment. Is this a wrong perception?

In terms of bringing youths with weak cognitive or non-cognitive skills, who are not ready for vocational training, into regular employment, Germany is perhaps not a role model. But Germany's dual apprenticeship system, which combines tuition at the workplace with some general training in the classroom, remains a strong institution which keeps youth unemployment low. Unfortunately, such a system needs to evolve over a long time frame. It is not possible to copy it as quickly as many politicians perhaps wish it was. Yet the German model does tell us that structured vocational training in which apprentices gain hands-on experience in real companies is a recipe for success. We must not forget that youths in Mediterranean countries are not just suffering from poor labour demand. As school-centred systems fail to provide agents with the kind of knowledge required at the workplace, skills mismatch is also a problem.

If the Youth Guarantee is not the way forward, then how should the EU work to combat youth unemployment?

My first, provocative answer is – the EU should not act at all! We must not forget that responsibility for labour market policy resides with the individual member states. And there it belongs, according to the principle of subsidiarity. Secondly, structural reforms  facilitating youth employment should be a key element of the broad economic policy guidelines issued in connection with the EU Stability and Growth Pact or in connection with receiving bailout funds. E.g., there is a need to roll back the strong employment protection for regular workers in Italy and Spain. This norm has created a dual labour market where young labour market entrants are facing high hurdles. Finallyit would be worthwhile to strengthen European programmes such as Leonardo da Vinci that are designed to encourage work-related training abroad.