Quantitative and qualitative analysis of labour market integration of young people

In recent years there has been a resurge of interest in young people's employment problems, the focus of labour economists and sociologists during the Seventies and Eighties, also covering countries with apparently good employment situations (such as Sweden, Germany and United Kingdom). This interest is timely and Europe-wide, prompted by escalating youth unemployment, difficulties in the transition from school to the labour market and the precariousness of short-term employment alternating with unemployment. Even countries with a high level of adult employment and some of the best labour-market performances have encountered problems in recent years. The unfavourable position of young people in the labour market is evident across Europe. Figure 1 (Annex 1)2 shows the youth-to-adult unemployment ratio (15-29 versus 30-59) in the 27 member countries, where Lithuania shows the lowest, followed by Germany, and Italy the highest ratio, followed by Sweden and UK, countries with a youth-to-adult unemployment ratio of over 3. The same figure indicates an increase of this ratio between 2000 and 2005, the most striking example being Sweden, whose youth-to-adult unemployment ratio rose from 1.6 in 2000 to over 3 in 2005. Also in UK, Cyprus and Austria we find a strong deterioration of this ratio. The only, slight improvements can be found in Finland, Greece, Italy, Lithuania, Luxembourg, Netherlands and Poland. Evidently, that the integration of young people in the labour market is becoming increasingly difficult, subject to long entry periods in which unemployment alternates with atypical contracts (see Figure 2, Annex 1). The more or less stable level of the youth to total employment ratio from 2000 to 2005 (except for Luxembourg, rising from 4 in 2000 to almost 6 in 2005, Romania dropping from 4 in 2000 to under 3 in 2005 and Cyprus with the lowest value in 2005, around 1.5, slightly less than in 2000, see Figure 4, Annex 1) shows that temporary employment is becoming widespread among the young. The share of under 12-month contracts ranges from 28-29% in Greece and the Netherlands to 55% in Spain, 59% in Sweden and 66% in Finland (see Table 16, Annex 1). The accession of the EU 12 has had repercussions on the mean age of women at childbirth (on average the new member countries have an age two years below the mean, see Table 32, Annex 1) and on other elements such as the level of human capital, performances on the labour market, and the age of entry in the labour market. However, these gaps seem to be narrowing, revealing an alarming general picture. This chapter will explore the reasons for this insufficient labour-market integration through the statistical-econometric analysis of quantitative data, based on EUROSTAT source and qualitative data. The first section illustrates the indicators of youth labour-market integration in the 27 member states, discussing the reasons for insufficient labour- market integration. The second section estimates how indicators of human capital affect the labour-market integration of young people. The third section analyses how labour-market institutions and differences in employment protection legislation are responsible for differences in the size of youth employment. The forth section describes the contribution young people make to the labour force and economic growth and provide recommendations to improve the labour market integration of young people.