Reasons behind youth unemployment in Europe

by Aleksi Vihunen and Ville Matilainen (group 3)

During the 21st century youth unemployment has been rising ominously across much of the developed world. 20 % of the under 25-year-olds in the European Union labor force is unemployed, with the figures particularly horrid in the southern Europe. Unemployment rates among young workers is around 30 % in Portugal and nearly 50 % in Spain. In comparison, Switzerland, Netherlands and Germany have youth unemployment rates below 10 %.

What are the reasons behind this phenomenon? Some say that the labor-market is the one to blame. While older workers enjoy the benefits of permanent contracts, the young are typically hired temporarily and are therefore easier to sack. Such ”dual” labor markets are products of reform. After the 70’s and early 80’s economic troubles European leaders recognised the need to inject more flexibility into the labor market but powerful trade unions rebelled against workers’ rights. The answer was to create a less-protected class of employees.

One of the biggest reasons is cyclical unemployment. This is unemployment caused by recession. Often young workers are hit the hardest by an economic downturn, when firms don’t hire new workers.

Other reason is the lack of qualifications. Young people without any skills or training are much more likely to be unemployed. To some extent the service sector has offered more unskilled jobs such as bar work, supermarket checkout and waiters, but it isn’t enough to solve the real problem.

Frictional unemployment is also one reason. Many school graduates may simply take some time off to find the right job. There are also social and cultural factors that need to be taken into consideration. Youth unemployment is often highest amongst deprived areas where there is pessimism over job prospects. Youth unemployment is often higher among people who have history of broken families, drug use or criminal record.

Needless to say, youth unemployment has a tremendous impact on the European economy. Increased benefit payments and the lost income-tax revenues are only the tip of the iceberg. Ambitious young people facing grim work prospects at home often seek opportunities elsewhere. In Portugal, Ireland and Italy a constant brain-drain is a depressing symptom of a stagnant economy. Another cost is crime. Young men are already more likely to break the law than most. Having more free time, more motive and less to lose hardly discourages them. If the crime leads to prison, future employment prospects fall off a cliff.

South is struggling and North is flourishing, right? It might come as a surprise that

Spain’s and Germanys employment models looks basically the same. Government supported, fixed-term contracts are one reason why Germany is actually doing as good as it is nowadays where the same basic model is the reason Spain is doing so very badly.

Germanys total unemployment rate is also now lower than in decades. Where Spain is struggling with almost half of its youngsters without a job (and nearly quarter of a its total) has Germany managed to drop its youth unemployment rate all the way down to 7.8 percent, being one of the lowest in Europe.

The difference lies in industrial and its flexibility. Being almost half of a century one of world’s highest developed countries, Germany’s infrastructure has flourished. It’s almost like a tradition that Germany is a good country to work – because everything really works. This can also be seen in rates of immigration.

Unfortunately Finland is not Germany.

We might have one of the highest education systems in the world, and we might have used to be the world’s top mobile-tech producer almost two decades but now all that is over. Even the few factories Nokia used to have are eventually shutting down. Finland is as we could put it a county of services. Our traditionally biggest employers, the ones in wood and metal industry, are running away from homeland, leaving our youngsters of the countryside without any other option, than moving to capitol area, hoping to find a job there. If they find – and that is a big if.

Another difference is our attitude. Finland has one of world’s best giving social support system. In other words, it’s not as bad being unemployed in Finland as it is to be one in Spain. And if the job isn’t “nice enough” it’s easy just to lay down and wait for a better possibility to come across.

This kind of development has led Finland’s employment politics in different road than in Germany or Spain.

Today we might as well call it a Britain way. It was only last week when Britain’s Labour party and its leader Edward Miliband suggested that Britain should actually force its youngster to work.

If agreed, they promised to fund at least 100.000 new jobs, focused mainly to youngsters who have been unemployed at least a year. If the young person declines they cut all social benefits leaving the young person without any support from its country.

Hard times, hard means. Won’t work in North.

Finland has basically navigated in same area than Britain almost two years now. The difference is that we had our parliament election in between and no politic would dare to even think saying out loud something as radical as Miliband. Still the chosen solution seems to be same.

At the moment government will continue to pump the necessary money to create new jobs under its own secured wings. Somebody might have already said that if the job is declined you will lose your allowance, but it will surely take over next falls community election before this kind of outburst is really made public.

Sources:

Eurostat, The Economist, Taloussanomat, BBC, Helsingin Sanomat, Economics Help,

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