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Youth Unemployment

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Laura Schmitz

on 23 October 2013

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Transcript of Youth Unemployment

The British New Deal for Youth Employment (April 1998);
Employer subsidy for the hiring of unemployed youth aged 18-24;
Applies to youth who have been unemployed and receiving UI for six months;
Four-month “Gateway”
The subsidy is provided for up to six months of employment, at a rate of £60 per week;
The employer must provide at least one day of training per week;
(Smith 2006).

Temporary contracts
Low-income self-employment
In 2012 nearly 75 million youth were unemployed
Youth Unemployment
Global youth unemployment rates 1991-2012
Global Unemployment rate for
Global Unemployment rate for


unemployed worldwide in 2012
of Youth Unemployment

In 2011
of adults
and as many as


of young employees
were employed only
Economic Crisis
Deficiencies in national policy frameworks
Discouraged Youth
Growth of population
Poor quality or lack of education
Social and Economic Effects
of Youth Unemployment

Long-term consequences on personal lives
More likely to be unemployed again
Acquire less income over their lifetime
Influences the happiness, health and job-satisfaction
Effects on the society
Marginalization and social exclusion
May trigger violence and juvenile misconduct
Widening of income gap
the more temporary contracts
the higher income inequality
Intergenerational poverty
(ILO , 2012a)
(ILO ,2012a)
(ILO, 2012b)
(ILO, 2012b)
(Morsy, 2012)
(Morsy, 2012)
Unemployment = Failure in Labor Market
Activation measures can focus on demand-side (job opportunities) or supply-side ("employability")
Short term
: Policies to increase labor demand can increase employment and output by shifting the labor demand curve back
Medium term
: both demand-side and supply-side policies can increase employment and output

(IMF, 2002)
Demand-side measures
Employment subsidies
(e.g. contribution to salary, tax break)

lower firms’ costs of employment without affecting workers’ take-home pay, which enables firms to raise employment and output
The direct employment effect is determined by the wage elasticity of labor demand and the percentage by which the wage is subsidized.
1. Substitution effect: A B or D E
2. Scale effect: B C or E F
effective in creating employment for targeted groups
deadweight losses possible
employment may last only as long as the subsidy
rising profitability may lead to greater
investments in targeted industry,
additional scale effects
provides work experience, even if
employment does not last
employment gains among targeted
workers may come at the expense of
other workers
Further considerations:
Entrepreneurship promotion:
Offering good access to well-integrated services such as management training and business mentoring programmes; financial services and support in networking opportunities
Public and private sector should be involved
high employment potential
meets young people's aspirations
(flexibility, independence)
high failure rates
limited capacity to create sustainable
difficult task for young unemployed
lacking experience and networks
new jobs created, no substitution effects
Supply-side measures
Address the “employability” of young people

Weight of intervention is transition from school to work e.g. through implementing the German “dual-system” model combining school-based education with work-based training and apprenticeship

EU mobility programs (“Youth on the Move”)
So far...
Programmes and policies aimed at refining labour market dynamics often resulted in interventions that are too narrow
supply-side measures tend to outweigh demand-side measures
need of an over-arching, integrated strategy for growth and job creation
Job creation depends primarily on economic growth and a stable macroeconomic environment
United Kingdom
(IFPRI, 2010)
Van Reenen in Smith - concludes that the employment rates of eligible 18-24 year olds are around 5 to 11 percentage points higher at the end of the four-month Gateway period
(ILO, 2011)
Half of this programme effect is due to the subsidisation of employment (Smith, 2006).
(OECD, 2009)
(ILO, 2011)
South Africa
(OECD, 2009 / FES, 2012)
Employment Tax Incentive Bill (draft September 2013)
source: Economist.com, 2013
(OECD, 2009)
During the first period of 12 months that an employer employs a qualifying employee, the amount of the employment tax incentive in respect of that qualifying employee, if the monthly remuneration of the employee is -
Employment Tax Incentive Bill (draft September 2013);
(a) R2 000 or less, 50 per cent of the monthly remuneration of the employee;
(b) more than R2 000
but less than R4 001, is an amount of R1 000;
(c) more than R4 000 but less than R6 001, is an amount determined in accordance with a formula.
In 2012, youth unemployment rate reached almost

Burns, Justine et al. (2010), "Wage Subsidies to Combat Unemployment and Poverty: Assessing South Africa’s Options", International Food Policy Research Institute, Discussion Paper 00969, available online via html: http://www.ifpri.org/sites/default/files/publications/ifpridp00969.pdf.

Coenjaerts, Claudia et al. (2009), "Youth Unemployment" in: Promoting Pro-Poor Growth, OECD, available online via html: www.oecd.org/dataoecd/63/11/43514554.pdf.

Cottarelli, Carlo (2012), "Fiscal Policy and Employment in Advanced and Emerging Economies", IMF, available online via html: www.imf.org/external/np/pp/eng/2012/061512.pd.

Emplego.gob.es (2013), "Strategy for Entrepreneurship and Youth Unemployment 2013/16", available online via http://www.empleo.gob.es/es/estrategia-empleo-joven/descargas/EEEJ_Documento_INGLES.pdf

Eurostat (2013), "Unemployment statistics", available online via http://epp.eurostat.ec.europa.eu/statistics_explained/index.php/Unemployment_statistics

ILO (2009), "Policy Options to support young workers during economic recovery", Policy Brief ILO, available online via html: http://www.ilo.org/wcmsp5/groups/public/@ed_emp/documents/publication/wcms_151459.pdf.

ILO,(2012a), "Global Employment Trends for Youth 2012". May, 2012. Geneva: International Labour Organization.

ILO (2012b), "Temporary, Part-time Jobs: A Trap for Youth?” International Labour Organization.

Martín, Paz (2012), "The European Union tackling youth unemployment in times of crisis", FES policy paper, available online via html: library.fes.de/pdf-files/id/ipa/09516.pdf.

Morsy, H. (2012), "Scarred Generation", Finance & Development, March 2012, Vol. 49, No. 1

National Treasury (2013), "Dreft Employment Tax Incentive Bill", available online via http://www.treasury.gov.za/comm_media/press/2013/Draft%20Employment%20Tax%20Incentive%20Bill%20for%20comment.pdf

Scarpetta, S., A. Sonnet and T. Manfredi (2010), “Rising Youth Unemployment During The Crisis”, OECD Social, Employment and Migration Working Papers No. 106, available onlice via html: www.oecd.org/dataoecd/10/8/44986030.pdf.

Smith, C. (2006). “International experience with worker-side and employer-side wage and employment subsidies, and job search assistance programs: Implications for South Africa.” Employment Growth and Development Initiative. Pretoria, South Africa: Human Science Research Council. < www.hsrc.ac.za/en/research-data/ktree-doc/1318>

The Economist.com (2013), "Generation Jobless", April 27th, available online via http://www.economist.com/news/international/21576657-around-world-almost-300m-15-24-year-olds-are-not-working-what-has-caused

Released in March/2013;
15 early-impact measures (emergency measures);
85 medium to long-term measures;
The Strategy … is in line with the recommendations and initiatives adopted in this area by the European Union, especially the objectives of the Youth Guarantee recently proposed by the European Commission.
Incentives for Hiring
Reduction of employer’s Social Security contributions for common contingencies for a maximum period of
reduction for companies employing more than
people and
for the rest.
Initiative n. 12
Initiative n. 13
Elimination of social security contributions for permanent contracts for young people with micro-smes and self-employed persons
Initiative n. 14
First job contract for young people. Companies that turn temporary contracts into open-ended contracts are entitled to an annual discount in the employer’s Social Security contributions of
500 €
for three years, and
700 €
if women.
Initiative n. 15
Work experience contract. whenever the contract involves young people up to the age of
, the employer’s Social Security contributions for common contingencies will be reduced by up to
International Experience?
Wrapping things up...
Unemployment of youth 3x higher than that of an adult
Caused i.e. by poor education, deficiencies in national policy frameworks, economic crisis and population growth
This leads to long-term personal, social and economic consequences
To fight this situation, an integrated strategy for growth and job creation covering labor demand and supply and a mediation process, is needed
In order to control side-effects, youth employment policies tend to be complex, which leads to high administrative and compliance costs
The issue of youth unemployment
Activation measures
The issue of youth unemployment
International Experience
Effects on the economy
Full transcript