Employment Sector

Employment Working Paper No. 70 2010

The impact of the economic and

financial crisis on youth employment:
Measures for labour market recovery in the
European Union, Canada and the United
States

Niall O’Higgins

Youth
Employment
Programme
Copyright © International Labour Organization 2010
First published 2010

Publications of the International Labour Office enjoy copyright under Protocol 2 of the Universal Copyright Convention. Nevertheless, short
excerpts from them may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or
translation, application should be made to ILO Publications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22,
Switzerland, or by email: pubdroit@ilo.org. The International Labour Office welcomes such applications.
Libraries, institutions and other users registered with reproduction rights organizations may make copies in accordance with the licences
issued to them for this purpose. Visit http://www.ifrro.org to find the reproduction rights organization in your country.

ILO Cataloguing in Publication Data

O'Higgins, Niall

The impact of the economic and financial crisis on youth employment:

Measures for labour market recovery in the European Union, Canada and the United States
/ Niall O'Higgins; International Labour Office, Youth Employment Programme. - Geneva: ILO, 2010
ca. 80 p. (Employment working paper)
9789221243793
ISBN 978-92-2-124378-6(print); 978-92-2-124379-3 (web pdf)
ISSN 1999-2939 (print); ISSN 1999-2947 (web pdf)

International Labour Office; ILO Youth Employment Programme

youth employment / employment policy / economic recovery / Canada / EU countries / USA

13.01.3

ILO Cataloguing in Publication Data

The designations employed in ILO publications, which are in conformity with United Nations practice, and the presentation of material
therein do not imply the expression of any opinion whatsoever on the part of the International Labour Office concerning the legal status of
any country, area or territory or of its authorities, or concerning the delimitation of its frontiers.
The responsibility for opinions expressed in signed articles, studies and other contributions rests solely with their authors, and publication
does not constitute an endorsement by the International Labour Office of the opinions expressed in them.
Reference to names of firms and commercial products and processes does not imply their endorsement by the International Labour Office,
and any failure to mention a particular firm, commercial product or process is not a sign of disapproval.
ILO publications and electronic products can be obtained through major booksellers or ILO local offices in many countries, or direct from
ILO Publications, International Labour Office, CH-1211 Geneva 22, Switzerland. Catalogues or lists of new publications are available free
of charge from the above address, or by email: pubvente@ilo.org
Visit our website: http://www.ilo.org/publns

Printed in Switzerland

ii
Preface
The primary goal of the ILO is to contribute, with member States, to achieve full and
productive employment and decent work for all, including women and young people, a goal
embedded in the ILO Declaration 2008 on Social Justice for a Fair Globalization, which
has now been widely adopted by the international community.1

In order to support member States and the social partners to reach the goal, the ILO
pursues a Decent Work Agenda which comprises four interrelated areas: Respect for
fundamental worker‘s rights and international labour standards, employment promotion,
social protection and social dialogue. Explanations of this integrated approach and related
challenges are contained in a number of key documents: in those explaining and elaborating
the concept of decent work, in the Employment Policy Convention, 1964 (No. 122), and in
the Global Employment Agenda.2
The Global Employment Agenda was developed by the ILO through tripartite
consensus of its Governing Body‘s Employment and Social Policy Committee. Since its
adoption in 2003 it has been further articulated and made more operational and today it
constitutes the basic framework through which the ILO pursues the objective of placing
employment at the centre of economic and social policies.3
The Employment Sector is fully engaged in the implementation of the Global
Employment Agenda, and is doing so through a large range of technical support and
capacity building activities, advisory services and policy research. As part of its research
and publications programme, the Employment Sector promotes knowledge-generation
around key policy issues and topics conforming to the core elements of the Global
Employment Agenda and the Decent Work Agenda. The Sector‘s publications consist of
books, monographs, working papers, employment reports and policy briefs.4

The Employment Working Papers series is designed to disseminate the main findings
of research initiatives undertaken by the various departments and programmes of the
Sector. The working papers are intended to encourage exchange of ideas and to stimulate
debate. The views expressed are the responsibility of the author(s) and do not necessarily
represent those of the ILO.

José Manuel Salazar-Xirinachs

Executive Director,
Employment Sector

1
See http://www.ilo.org/public/english/bureau/dgo/download/dg_announce_en.pdf
2
See the successive Reports of the Director-General to the International Labour Conference: Decent
work (1999); Reducing the decent work deficit: A global challenge (2001); Working out of poverty
(2003).
3
See http://www.ilo.org/gea. And in particular: Implementing the Global Employment Agenda:
Employment strategies in support of decent work, “Vision” document, ILO, 2006.
4
See http://www.ilo.org/employment.

iii
Foreword
Youth is a crucial time of life when young people start fulfilling their aspirations, assume their
economic independence and find their place in society. A difficult entry into the world of work has
serious repercussions for young people, including a higher risk of poverty and a loss to society of
valuable skills. While some young people eventually get a decent job, significant numbers remain
trapped in temporary and low-paid jobs, often in the informal economy.

The global jobs crisis has hit young people hard. Youth are generally the first to lose their jobs
in times of economic crises and the last to gain employment when the economy rebounds. Of the
world‘s estimated 211 million unemployed people in 2009, nearly 40 per cent – or about 81 million –
were between 15 and 24 years of age. The number of unemployed youth increased by 6.7 million in
2009 alone. European Union‘s countries (EU), Canada and the United States experienced the largest
annual increase of the rate of unemployment of young people (4.6 percentage points between 2008 and
2009). In many countries, this grim unemployment picture is darkened further by the large number of
youth engaged in poor quality and low paid jobs with intermittent and insecure work arrangements,
including in the informal economy.

Youth unemployment and under-employment result in missed opportunities in terms of

economic growth and development. Increasing pressure on the labour market can create social
discontent if insufficient jobs are available for young women and men. However, young people‘s
professional and personal development can be enhanced through effective school-to-work transition
measures. This support is especially needed to mitigate the negative impact of the jobs crisis on youth
employment outcomes.

In 2009, ILO member States signed a Global Jobs Pact, which pledges them to take active
measures to prevent the impact of the crisis on the young labour force. The dramatic impact of the crisis
on youth employment outcomes requires a continued support to labour market measures that have
proven effective, especially in times of greater pressure for fiscal consolidation. Withdrawing these
active employment measures too early could have dire consequences for the current generation of
youth.

This working paper was prepared by Niall O‘Higgins, Professor of Economics at the University
of Salerno (Italy) and former youth employment specialist of the ILO. It forms part of the regional
analyses the ILO has been conducting to improve the knowledge of the youth employment measures
taken by countries to promote the recovery of the youth labour markets.

This paper is organized around four chapters. The first chapter introduces the salient aspects of
the global crisis and its impact on youth employment. The second chapter analyses the effect of the
crisis on the main youth labour market indicators, while the third one reviews the policies and
programmes adopted by countries to mitigate the effects of the crisis on young people. The concluding
chapter distils lessons learn from the recent and past crises and highlights a number of implications that
may be considered by policy-makers while designing interventions to support young workers during
economic recovery. The paper is complemented with an inventory of youth employment measures
taken by countries during the recent crisis (Annex I).

Gianni Rosas José Manuel Salazar-Xirinachs

Coordinator, Executive Director,
ILO‘s Programme on Youth Employment Employment Sector

v
vi
Contents

Page

Preface ...................................................................................................................................................... iii

Foreword ................................................................................................................................................... v

Contents................................................................................................................................................... vii

Acknowledgements .................................................................................................................................. ix

Acronyms .................................................................................................................................................. x

1. Introduction ..................................................................................................................................... 1

2. Recent trends in youth employment and unemployment ................................................................ 3

2.1 Overall trends ............................................................................................................................ 3
2.2 Youth unemployment and adult unemployment rates............................................................... 8
2.3 Long-term unemployment ....................................................................................................... 11
2.4 Education, labour demand and the crisis................................................................................. 15
2.5 Temporary employment .......................................................................................................... 18
2.7 Which indicators – unemployment and joblessness ................................................................ 22

3. Policies to mitigate the effects of the crisis on young people ....................................................... 24

3.1 What do we know? .................................................................................................................. 25
3.1.1 Macroeconomic policies ............................................................................................ 25
3.1.2 Education policy ........................................................................................................ 26
3.1.3 Passive labour market policies .................................................................................. 27
3.1.4 Active labour market policies .................................................................................... 29
3.1.5 Labour market regulations ........................................................................................ 31
3.2 What is being done? An early assessment of the policy response to the crisis ....................... 33
3.2.1 Macroeconomic intervention ..................................................................................... 33
3.2.2 Education policy ........................................................................................................ 34
3.2.3 Labour market interventions ...................................................................................... 35
3.2.4 Labour market regulations ........................................................................................ 37
3.3 What can be done? Some issues of concern ............................................................................ 37

4. Conclusions and policy implications ................................................................................................... 38

Bibliographic references.......................................................................................................................... 42

Annex I:Youth employment measures adopted to mitigate the consequences of the economic and
financial crisis ......................................................................................................................................... 46

Annex II: The jobless rate ....................................................................................................................... 59

Employment Working Papers ................................................................................................................. 61

vii
viii
Acknowledgements
This paper arose out of, and was driven by, discussions with Gianni Rosas,
Coordinator of the Youth Employment Programme of the ILO. Thanks are due to Mariela
Buonomo Zabaleta (Youth Employment Specialist, Youth Employment Programme),
Mariangels Fortuny-Corredo (Employment Specialist, Country Employment Policy Unit)
and Alena Nesporova (Deputy Regional Director, Regional Office for Europe and Central
Asia) for their generous and useful comments on previous drafts. The appreciation extends
to Ms. Verónica Rigottaz, for her competent editorial work. Opinions expressed in this
paper, as well as any error or omission, are the sole responsibility of the author and do not
necessarily reflect the views of the International Labour Office.

ix
Acronyms

ALMP Active Labour Market Policy

CBI Confederation of British Industry
CEE Central and Eastern Europe
EPL Employment Protection Legislation
ESF European Social Fund
ETC Employment and Training Corporation (Malta)
EU European Union
GDP Gross Domestic Product
ILO International Labour Organization
IMF International Monetary Fund
JSA Job Search Assistance/Job Seeker Allowance
LFS Labour Force Survey
LMP Labour Market Policy
OECD Organisation for Economic Co-operation and Development
OPHRD Operational Programme Human Resources Development
PES Public Employment Services

x
1. Introduction
It now appears that the worst of the recession in the European Union, Canada and the
United States may be over – in terms of falling Gross Domestic Product (GDP). Recent
estimates of the International Monetary Fund (IMF) suggest that global economic growth is
expected to be around 4 per cent in 2010 – although advanced economies are likely to lag
behind at around 2 per cent overall and just a little over 1 per cent in Europe (IMF, 2010).5
Yet, there are no signs that employment is picking up or unemployment falling as GDP
begins to show signs of gradual recovery. Indeed the ILO (2009a) highlights that evidence
from previous crises suggests that even once economic growth resumes, it takes on average
four to five years before employment returns to its pre-crisis levels. Moreover, the impact on
the specific individuals caught in the crisis may be even more long-lasting. Particularly for
the young, unemployment early on in one‘s working life is likely to have repercussions
which will be felt throughout their adult life (O‘Higgins, 2001). Action is necessary therefore
to seek to combat the detrimental long-term effects of the current crisis on those who are
likely to be most affected by it. One of these groups, if not the main group, in this category is
that of young people. This paper looks at the effects of the economic and financial crisis on
the labour market experiences of young people in the European Union, Canada and the
United States and discusses the policy responses which have thus far been introduced in an
attempt to mitigate these deleterious effects.

Young people tend to be harder hit than adults by recessions. The problem is not just
that young people‘s unemployment rates raise more than adult rates during a recession. This
is true, but for several reasons this is not the key issue. The main point is that young people
who are caught by the crisis are more vulnerable to its effects than are adults and that these
effects are likely to be more long-lasting. This is not just because young people will have
more time to suffer the consequences of their current unemployment, but also because they
are at a formative stage in their lives; they are more educated and trained than are older
people, but also their patterns of behavior are likely to be more affected by their experiences
at an early stage in their working careers. Several studies have argued that young people are
more affected by the crisis because their unemployment rates have risen by more percentage
points than adults. This rather misses the point. In the European Union, Canada and the
United States, relatively few young people participate in the labour market; the majority is in
full-time education. Thus, a substantial percentage point rise in unemployment may actually
affect only a relatively small group of people. It is not so much that more young people are
affected, but that young people are more affected, by the crisis. It has long been recognized
that the loss of work experience early on in life, with its implied loss of human capital (both
that already acquired, and that which would be acquired were the person in work), is likely
to translate into a lower earnings over the entire life-cycle (Ellwood, 1982).6 In part, at least,
this is due to the fact that unemployment in early working life tends to lead to repeated
unemployment spells later on (Arumpalam, 2001).

5
The European Commission has been slightly less optimistic about the prospects for recovery in
Europe; however, the most recent Spring Forecasts (European Commission, 2010) predict growth of
1per cent in both the euro-zone and the European Union as a whole for 2010.
6
More recently, Greg and Tominey (2005) have found a wage ‗scar‘ from youth unemployment of up
to 13-21 per cent at age 41. Similarly, Kletzer and Fairly (1999) and Mroz and Savage (2006) find
evidence of long term wage reductions for young people experiencing unemployment early in their
‗working‘ lives.

1
 Unemployment and joblessness – particularly when prolonged – are associated with
long-term negative effects on the employment and wage prospects of young people going
through such spells.7 Youth unemployment and joblessness tend to be associated with higher
crime rates. Fougere et al. (2009) have established that increased youth unemployment
causes an increase in burglaries, thefts and drug offences. Unemployment is also associated
with unhappiness – both for those experiencing it as well as those who are employed but fear
unemployment in a time of high job insecurity (Bell and Blanchflower, 2010). It has also
long been recognized that unemployment is associated with a series of negative health
consequences, both physical and psychological which tend to grow disproportionately with
the duration of unemployment.8

Verick (2009) has analysed in more detail the effects on unemployment, and in
particular youth unemployment, of five major financial crises in Spain (1977), Norway
(1987), Finland (1991), Sweden (1991) and Japan (1992). The main findings are that youth
unemployment tends to peak more quickly, or at the same time, as the prime-age adult rate,
but the increased rates of youth unemployment tend to me more durable in time even once
the economy starts to recover. Moreover, Hoshi and Kashyap (2008) amongst others point
out that the effects of the Japanese recession were particularly long lasting in part because
the slow recognition of the extent of the ―bad-loan‖ problem. Indeed, the Japanese recession
was not particularly severe, but it was relatively long-lasting and, as a consequence,
contributed to the emergence of a ―lost generation‖ of Japanese youth with the emergence of
disaffected groups of young people commonly such as ―Freeters‖ characterized amongst
other things by their lack of attachment to the mainstream labour market.

Although the youth unemployment rate provides crucial information on the labour
market situation of young people, it is also important to look at what is happening to other
indicators to gain some understanding of what are the likely consequences – and so, the
appropriate youth employment policy responses – of the crisis. In particular, youth
joblessness in addition to youth unemployment is an issue of concern in that it is associated
with long-term labour market withdrawal and social exclusion. The inclusion of the jobless
rate as a standard indicator would be of relevance to better understand the labour market
problems faced by young people during the recession. As yet, however, it is not included in
the range of otherwise reliable and timely indicators reported in the European Union, Canada
and the United States.

The quality of employment is also important. The growing incidence of less stable
forms of employment – and of temporary employment contracts in particular - is an issue of
concern, particularly in the European Union and Canada.9 Although temporary jobs may

7
See, for example, Bell and Blanchflower (2009) and Ryan (2001) for discussions of this literature
which goes back more than a quarter of a century to the seminal paper by Ellwood (1982). In what
follows I make a distinction between unemployment and joblessness. The latter concept identifies all
those who are neither in employment, education or training – referred to as NEET by the OECD.
Thus, joblessness is a broader concept which all the unemployed but also those who are not actively
searching for work, and, as is argued below, the youth jobless rate (the number of jobless as a
proportion of the youth population) has a number of properties which make it a useful complementary
indicator to the youth unemployment rate. The issue is discussed further in the text and, in more
detail, in Annex II.
8
See Bell and Blanchflower (2010) and, in particular, the references cited therein.
9
In the United States, employment protection is extremely weak and consequently the distinction
between temporary and permanent employment is of much less significance.

2
 facilitate the entry of young people into work of some form, there is a danger that these
unstable arrangements may persist rather than leading to permanent employment.

The nature of the youth labour market varies much across the countries considered here,
as have the effects of the current recession on it. In thinking about policy responses, it is also
important to recognize these cross- (and indeed within-) country differences. Above all,
existing national labour market institutions differ quite widely and this has implications for
both the shorter and longer-term impacts of the recession on young people.

2. Recent trends in youth employment and

unemployment

2.1 Overall trends

The immediate effect of the financial and economic crisis throughout the countries
considered here has been a substantial fall in labour demand due to the unusually large and
widespread shock to aggregate demand. Figure 1 below, reports the absolute change in
employment rates by age and sex between the third quarter of 2007 and the third quarter of
2009 – broadly corresponding to the beginning and end of the recession in GDP terms.10 The
countries which were most severely affected by the crisis in GDP terms – the three Baltic
countries and Ireland - are also those which were most severely affected in employment
terms. However, figure 1 shows that also Spain, and particularly Spanish young people
suffered severely in terms of the fall in employment. For the most part, the effects of the
crisis were felt principally by males and in particular by young men as noted by the
European Commission (2009). As the Commission notes, this is largely a result of the
sectors that were most severely hit – manufacturing and construction – which are dominated
by male workers. However, there is a substantial degree of variation across countries. In
Estonia, for example, the employment rates of women fell nearly as much as for men and the
employment of young women fell by slightly more than young men. In most countries, the
employment rates of the young fell more than older age groups – indeed, not infrequently,
the employment rates of older workers – particularly female workers - actually increased.
Looking at the country groupings – taking a fairly conventional subdivision also employed
by Verick (2009) amongst others11 – and leaving aside the Baltics, there is much within
group variation, but overall, it appears that both ―Anglo‖ and ―Mediterranean‖ countries
fared relatively badly, with Continental European countries being least affected – in
employment terms – by the crisis.

10
The timing of the crisis of course varied across countries with some – in particular Central and
Eastern European (CEE) countries – tended to be hit later by the economic rather than by the financial
crisis. It is also not clear that the crisis ended for all in the third quarter of 2009. As yet, the recovery
is fragile particularly in Europe with again the newer Member States and Mediterranean countries
being slower to recover. The use of the third quarter of 2009 is principally a convenient fixed point.
Moreover, as noted above, the negative employment effects of the crisis are likely to persist from
some considerable time to come.
11
These broadly correspond to different models of labour market institutions. As with the timing of
the recession, the use of these groups is a convenient, and, it is to be hoped, uncontroversial,
simplification.

3
 Figure 2 illustrates what happened to unemployment rates by sex in Europe as a whole.
As noted above, the effects of the crisis were felt more by men, however, the figure
illustrates that this only brought male unemployment rates in line with female unemployment
rates.

Looking in more detail at what happened to unemployment rates by age and sex across
individual countries (figure 3), one may observe that there was substantial variation in the
impact of the recession. In all the countries considered in this paper – with the notable
exception of Germany where unemployment rates actually fell for both young men and
young women – young female unemployment rates increased less than those of young men.
Once again, leaving aside the Baltic countries, Ireland and Spain, the Anglo countries seem
to have fared worst, and the Continental European countries best in terms of rising
unemployment, although the variation across groups is fairly modest and actually there is
more in- (than across-) group variation in the change in youth unemployment rates.
Particularly in the Central Europe grouping, the Czech Republic and Hungary fared
relatively badly whilst in other countries – Poland in particular, youth unemployment rates
actually fell.

4
 Figure 1: Percentage point change in employment rates by age and sex, 2007Q3 – 2009Q3
5

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database, except for Canada (form Statistics Canada: http://www.statcan.gc.ca) and
the United States (USA) (from BLS database: http://www.bls.gov/).
Notes: For Canada, data by gender is not available for youth; for the United States the figure reports the percentage change in employment (not the percentage point change in employment rate). In both cases, monthly
data is used covering the period October 2007 to October 2009
Figure 2: Seasonally adjusted aggregate unemployment rates in the European Union by sex, 2000-2009

Source: calculated from Eurostat seasonally adjusted quarterly LFS data.

6
 Figure 3: Percentage point change in unemployment rates by age and sex, 2007Q3 – 2009Q3
7

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database, except for Canada (from Statistics Canada: http://www.statcan.gc.ca) and the
United States (from BLS database: http://www.bls.gov/).
Notes: For Canada and the United States, monthly data is used covering the period October 2007 to October 2009.
2.2 Youth unemployment and adult unemployment rates

Youth unemployment rates are significantly higher than prime-age adult rates almost
everywhere for a number of reasons (O‘Higgins, 2001, OECD, 2009a). Consequently, it is not
very surprising that during the crisis, , the percentage point increase in unemployment rates was,
in absolute terms, higher for young people than for prime-age workers (Figure 3). The
exception was in Germany (where youth unemployment rates actually fell) and Austria with
their dual apprenticeship systems, young male unemployment rates increased less than prime
age workers.

There are big differences across countries in the extent to which young people as opposed
to adults were hit by the crisis. These differences do not appear to bear direct relation to the
depth of the recession. Figure 4 reports the ratios of youth unemployment rates to those of prime
age adults for males and females, over the two-year period (2007Q3-2009Q3). It can be
observed that neither the ratio, nor the change in the ratio, bears much relation to the overall
changes in youth employment and unemployment rates. For males, the countries which had the
highest youth-adult ratio before the crisis (Cyprus, Italy, Romania, Sweden and the United
Kingdom) all saw a fall in the ratio – implying that in these countries, the relative rise in
unemployment was less pronounced for young men than for male prime-age adults. This was
not the case for females. In Sweden and Romania, the ratio actually increased.

To emphasize this, Figure 5 reports the (absolute) change in the ratio of youth and prime-
age adult unemployment rates for males and females. This figure shows in which countries
young people were disproportionately affected by the crisis. As can be observed from the
preceding figures - and emphasized in Verick (2009) – the unemployment rates of young
people almost invariably increased more than those of adults in absolute (percentage point)
terms. Yet, often albeit not invariably in the past, the ratio of youth to adult unemployment rates
has moved in an opposite direction to the aggregate unemployment rate (Figure 6). This is
another way of saying that the elasticity of the youth unemployment rate to the adult
unemployment rate has tended to be less than one. A cursory examination of Figure 5, however,
is sufficient to identify this was not the case in the current recession. Very often, young people
were indeed disproportionately affected by the crisis, not just in terms of the percentage point
rise but also in the proportionate or percentage increase in unemployment rates.12 On the other
hand, this phenomenon appears to bear no relation to the percentage increase in itself. In this
regard, it may be observed that Lithuania may be singled out as a country which was heavily hit
by the crisis; and the burden was felt disproportionately by young men. Overall, the correlation
between the percentage change in youth unemployment rates and the youth-to-adult ratio of the
changes is practically zero for both young men and young women.

12
The usually reported figure of the percentage point increase refers to the absolute change = UR t –
URt-x (where UR stands for Unemployment Rate at time t and at time t-x, i.e. some time before that). The
percentage change in unemployment rate is given by 100*(URt – URt-x)/URt-x. That is, the change in
unemployment rate proportionate to the base or initial rate. The larger the base rate UR t-x, the smaller will
be the percentage change corresponding to a given absolute change in the unemployment rate. Since the
youth unemployment rate is higher than the adult rate, the percentage point change paints a more dramatic
albeit less accurate picture of the relative change in the situation of young people compared to adults than
does the use of the percentage change.

8
 Figure 4: Ratio of youth to prime age adult unemployment rates by age and sex, 2007Q3 – 2009Q3
9

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database, except for Canada (from Statistics Canada: http://www.statcan.gc.ca) and the
United States (from BLS database: http://www.bls.gov/).
Notes: The figure reports the youth unemployment rate/prime age adult unemployment rate by gender. For Canada and the United States, monthly data is used covering the period October 2007 to October 2009.
 Figure 5: Change in the ratio of youth to prime age adult unemployment rates by sex, 2007Q3 – 2009Q3
10

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database, except for Canada (from Statistics Canada: http://www.statcan.gc.ca) and the
United States (from BLS database: http://www.bls.gov/).
Notes: the figure reports change in the ratio of youth to prime age adult unemployment rates. A positive value indicates that young people were disproportionately affected by the recession in terms of the percentage increase in
unemployment rates. For Canada and the United States, monthly data is used covering the period October 2007 to October 2009.
Figure 6: Aggregate unemployment rates and ratio of youth to adult unemployment rates in the European Union
by sex, 2005-2009

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database

2.3 Long-term unemployment

The negative consequences of unemployment are largely associated with longer durations
of unemployment. Short spells of frictional unemployment are more or less an inevitable
consequence of job search. Being on average less settled in their occupational choices and more
mobile than adult workers, young people tend to experience unemployment spells more
frequently than adults. This is one reason why youth unemployment rates are much higher than
those of prime-age adults with the partial exception of countries operating a dual apprenticeship
system (O‘Higgins, 2001). Some have argued that high youth unemployment is not so serious
since unemployment spells tend to be of shorter duration for young people, yet, in actual fact,
this is not necessarily the case (O‘Higgins, 2003; Ryan, 2001).

In the context of the current recession, it is pertinent to look at what has happened to long-
term unemployment for different age groups across countries. Changes in the incidence of long-
term unemployment – the proportion of the unemployed who have been so for more than one
year – principally reflect two phenomena. The incidence of long-term unemployment will tend
to: a) increase if the recession affected outflows from, more than inflows to, unemployment –
that is if the fall in new hires was greater than the increase in redundancies; and/or b) fall with
the introduction of new Active Labour Market Policies (ALMPs) targeting the long-term
unemployed. Figure 7 reports the information on incidence of long-term unemployment in the
third quarter of 2009, and, to focus on changes in the incidence, Figure 8 shows the variations in
incidence of long-term unemployment over the period 2007Q3 – 2009Q3 for males and females
by age group.

11
 It can be observed that, almost everywhere, the incidence of long-term unemployment is
higher for the older age groups. In this regard, Estonia stands out as an exception: the incidence
of long-term unemployment is much higher for young males than for prime age males. Also, in
several other countries – in particular, in Italy, Latvia, Lithuania, the Netherlands and Spain–
there is little difference between the incidence of long-term unemployment for young and
prime-age males.

Looking at the changes in the incidence of long-term unemployment, the picture is rather
different to that emerging from an examination of overall unemployment changes. In particular,
it seems that young people and above-all, young women were the hardest hit in terms of
lengthening spells of unemployment. Put simply, the higher unemployment of adult men (and
also adult women to a lesser extent) arising from the recession has had much to do with
increased inflows into unemployment – more men have been made redundant. For young people
and above-all young women, the recession has largely manifested itself in terms of increased
difficulties in finding work. The major exception is Spain where the incidence of long-term
unemployment for all age groups, except for older males, increases. This is a particularly
worrying development given the overall dramatic increase in unemployment rates.

As noted above, these figures also reflect to some extent the introduction or expansion of
ALMPs adopted to mitigate the labour market effects of the crisis. The full impact of the
recession on long-term unemployment will not be felt for some time. However, one important
message from the information thus far available is that countries need to take action to prevent a
relatively temporary fall in labour demand producing a cohort of long-term unemployed young
people with few prospects of the future.

12
 Figure 7: Incidence of long-term unemployment in the European Union by age and sex, 2009Q3
13

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database

Note: The incidence of long-term unemployment is defined here as the proportion of the unemployed who have been so for at least one year. Data availability limits the countries included here. For the countries for which some data
was available, on the date of access (19/6/2010), data was unavailable from the EUROSTAT database for young (15-24) women in Austria, Denmark, Finland, Netherlands, Sweden, Bulgaria, Slovenia, Estonia and Lithuania; prime
age (25-49) females in Estonia; Older (50-64) females in Denmark and Estonia; young men in Austria and Denmark; and, older males in Denmark.
 Figure 8: Percentage point changes in the incidence of long-term unemployment in the European Union by age and sex, 2007Q3 – 2009Q3
14

Source: Author calculations Eurostat, European Labour Force Survey data, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database.
Note: See note to figure 7 above. Available data was insufficient to calculate the change in the incidence of long-term unemployment for young (15-24) women in Ireland, Austria, Finland, Netherlands, Sweden, Bulgaria, Slovenia,
Latvia and Lithuania; prime age (25-49) females in Latvia; Older (50-64) females in Ireland, Latvia and Lithuania; young men in Austria, Finland, Netherlands, Sweden, Latvia and Lithuania; and, older males in Latvia and Lithuania.
2.4 Education, labour demand and the crisis

Although with substantial cross-country variation, the employment rates of young people
tend to increase with level of education in almost all countries considered (see Figure 9). . The
Mediterranean countries are characterized by relatively low youth employment rates for all
levels of education and relatively small differences in employment rates by level of education.
For instance, amongst Italian young males, the employment rates of those with tertiary
education are actually lower than those with a completed secondary diploma.13 In most
countries, however, employment rates of those who have not completed secondary education
across a wide range of countries are very low. This is particularly noticeable in the countries of
Central Europe and of the Baltics, but is by no means limited to these areas.

As regards the change in employment rates, reflecting changes in the demand for those
young workers with differing levels of education, it appears that it is those with higher levels of
education who were usually the most adversely affected by the fall in labour demand
accompanying the financial crisis albeit with the ubiquitous significant cross-country variation
(see Figure 10). Anglo and Scandinavian countries, particularly Sweden where the change in
employment rates actually falls with level of education, represent partial exceptions. However,
it is worth bearing in mind that the number of Scandinavian youth with less than secondary
education is very small.

Thus, two major points emerge. First, labour force participation rates and also employment
rates are very low amongst youth with lower levels of education, particularly those who have
not completed secondary education.14 This raises the issue of labour market, and consequently
social, exclusion. The extraordinarily low employment rates of those with very low levels of
education is explained by labour market withdrawal and joblessness as well as by higher
unemployment rates amongst those with low levels of education. Independently of the crisis,
this should be an issue of concern to policy-makers. Second, somewhat in contrast to the first
point, the crisis seems to have hit more young people with higher – and in particular tertiary –
levels of education. However, some caution is in order. In many countries, a return to education
may be easier for those with higher education, and consequently the big drop in employment
rates does not necessarily signal a major problem. The situation will depend on the national and
local economic conditions, but also on the national institutional framework which, despite a
process of harmonization in Europe, differs significantly across countries. Although, on the
whole, the crisis seems to have hit the more educated particularly hard, this is not true for all
countries, nor to the same extent. Thus, careful analysis of the national context is required to
seek specific policy action to counteract this aspect of the financial crisis.

13
This trend is related to the ―Mediterranean Labour Market Model‖ and has to do with the role of
family, as opposed to that of the State, as the guarantor of the income of family members other than the
principal (usually male) breadwinner. There are a number of implications that go beyond the scope of this
paper, which include the greater difficulty of young Mediterraneans in accessing full-time permanent
jobs. See, for example, O‘Higgins (2008) for further discussion of some of behavioural implications of
this in Italy, or OECD (2007) for an analysis of the situation in Spain.
14
Although a substantial proportion of 15-24 year olds who have not completed secondary education are
still participating in education, this would not account for the huge differences in employment rates that
are observable in many countries.

15
 Figure 9: Employment rates of young people in the European Union by level of education and sex, 2009Q3
16

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database.

Note: Countries for which data are available are included. Amongst the included countries, data are unavailable from the EURISTAT database for young male Fins with ISCED 5-6 level of education.
 Figure 10: Percentage point change in employment rates of young people in the European Union by level of education and sex, 2007Q3 - 2009Q3
17

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database

Note: Countries for which data are available are included. Amongst the included countries, data are unavailable from the EUROSTAT database for young male Fins with ISCED 5-6 level of education
2.5 Temporary employment

The extent of temporary employment varies widely across Europe, Canada and the United
States (see Figure 11).The general trend in recent years (in some cases decades) has been
towards ever-increasing use of temporary contracts, particularly for young people. In all
countries, the incidence of temporary employment tends to be much higher amongst young
people than amongst older workers – although this difference is rather less pronounced for
females.

The effects of a recession on temporary employment may comprise two opposing effects.
First, those in temporary employment are likely to be the first to be laid off when aggregate
demand falls because the costs to firms of doing so are lower than for permanent workers. On
the other hand, temporary contractual forms may also be those most attractive to employers who
wish to take on new workers in uncertain times. In as much as the latter effect exists, this may
be particularly advantageous to young job seekers in gaining a foothold in the labour market. If
the latter effect dominates, temporary employment may actually increase in absolute terms or at
least as a percentage of total employment.

In general, the findings on the usefulness of temporary employment in promoting long-

term employment are not very encouraging. Many studies find that temporary employment does
not prove to be a very effective stepping-stone to permanent employment.15 Moreover,
temporary employment contracts tend to discourage investment by firms in training
(Arulampalam et al., 2004; Booth et al., 2002). In the case of Sweden, the recession of the early
1990s was the major driving force behind the spread of temporary contracts. The suggested
implication being that the rapid expansion of temporary employment was a contributory factor
to the recovery in employment in Sweden following the recession (Holmlund and Storrie,
2002).

During the recession temporary employment fell almost everywhere (see Figure 12)
although, as a percentage of total employment this was not always the case (see Figure 13). In
countries such as Czech Republic, Denmark, Greece, Hungary and Slovakia that were
characterized by a moderate or low incidence of temporary employment prior to the crisis, the
incidence of temporary employment has actually increased. Similarly, in Italy and Slovenia,
where temporary contracts were already fairly widespread, the recession led to a further
increase. In all of these countries, the increase in temporary employment as a percentage of total
employment implies that temporary employment fell less than permanent employment amongst
young people. This is a little surprising and runs contrary to the overall trend which saw a
substantial drop in temporary employment during the recession (European Commission, 2009),
as well as the common notion which suggests that temporary employees are the first to be made
redundant in a recession. It suggests that to some extent young temporary replacements are

15 See, for example, the collection of papers in the symposium in the Economic Journal, vol. 112, no.
480, 2002. Of the four substantive papers in the collection, three find negative effects of temporary
employment (Blanchard and Landier, 2002; Booth et al., 2002 and Dolado et al., 2002) with only one
(Holmlund and Storrie, 2002) suggesting a (partially) positive role. Although, the general picture has not
changed subsequently, some more analyses have found a positive role for temporary employment as a
stepping-stone to permanent employment. For example, in their review of the literature, Zijl and Van
Leeuwan (2005), report positive ‗stepping-stone‘ effect for temporary jobs in Germany, the Netherlands
and Italy, but not for Spain. Zijl et al. (2010) analysing the situation in the Netherlands in more detail find
that although temporary jobs do shorten unemployment durations, they do not lead to an increase in the
likelihood of being in regular employment subsequently.

18
being found for permanent employees made redundant during the recession and is an issue
which would certainly be worth investigating in more detail at the country level.

It is too early to make any assessment on whether the use of temporary employment will
contribute to the recovery, although it is predictable that, as a consequence of the crisis, the
incidence of temporary employment will rise – as occurred in Sweden in the 1990s. It is,
however, evident that the incidence of temporary employment contributed to the severity of the
employment effects of the crisis in some countries. Spain, in particular, was characterized by a
particularly high pre-recession incidence of temporary employment and was the country where,
without a particularly substantial fall in GDP, male employment rates – and particularly male
youth employment rates – fell dramatically. More generally, for young women there is a
moderate negative correlation (-0.24) between the incidence of temporary employment in the
third quarter of 2007 and the change in employment rates between the third quarter of 2007 and
the third quarter of 2009. For young men the correlation albeit negative is very weak (-0.06).16
The impact of the recession on employment rates depends on a number of other factors – most
notably the severity of the recession itself. However, this evidence suggests that thus far
temporary employment contracts have not counteracted the negative employment effects of the
financial crisis.

Looking at the recent evidence it can be observed that, prior to the crisis, there was a great
diversity in the incidence of temporary employment amongst young people in Europe (Figure
13). To some extent there is an inverse relation between the strictness of employment protection
legislation (EPL) and the incidence of temporary employment amongst young people. For
example, in the United Kingdom, which is characterized by weak EPL, the incidence of
temporary employment is relatively low whereas in Mediterranean countries and in particular,
in Italy, Portugal and Spain where EPL is relatively strong, the incidence of temporary
employment is relatively high. A similar incidence can also be observed in France and
Germany, other countries with relatively strong EPL. The situation in these Mediterranean
countries is largely the consequence of policy choices made first in Spain in the 1980s and then
in Italy and Portugal in the 1990s to introduce greater flexibility in labour markets in order to
facilitate the entry of young people into employment.17 Prior to the crisis there was little
difference in the incidence of temporary employment for young men and young women with a
few exceptions – most notably Sweden, but also Poland and Slovenia – where the incidence of
temporary employment was higher for young women.

16
The simple correlation coefficients were calculated for the sample included in the figure 12.
17
And at the same time is linked to the aforementioned ―Mediterranean model‖ which has as its lynchpin,
strong employment protection for the primary household breadwinner.

19
Figure 11: Incidence of temporary employment contracts among youth in the European Union by sex, 2007Q3

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database

Note: The figure reports the change in temporary employment as a percentage of the pre-crisis incidence. Countries included for which data are available.
Amongst the countries included data on young females were not available for Romania and Latvia.

Figure 12: Percentage change in temporary employment of young people in the European Union by sex, 2007Q3
– 2009Q3

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database

Note: Countries included for which data are available. Amongst the countries included data on young females were not available for Romania and Latvia.

20
Figure 13: Incidence of temporary employment contracts among youth in the European Union by sex, 2007Q3

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database

Note: Countries included for which data are available. Amongst the countries included, data on young females were not available for Latvia.

In the light of the discussion of temporary employment, it may be observed that the
correlation between the change in unemployment rates (in percentage terms) and the strictness
of employment protection legislation as measured by the OECD indicator is moderately strong
but, contrary to the view often propounded – although less frequently supported by the data18 -
turns out to be negative and of a similar entity for young men (-0.20), young women (-0.20) and
adult men (-0.23), whilst being somewhat larger for adult women (-0.35).19 On the other hand,
the correlation between the youth-adult ratio of changes in unemployment rates and the EPL
index is moderately positive for both males (0.20) and females (0.23). That is, in countries with
stricter employment protection legislation, unemployment rates amongst both young people and
adults tended to increase less than in countries with weaker EPL. However, in countries with
stronger EPL, the relative position of young people worsened – on average, their unemployment

18
See, for example, Bell and Blanchflower (2010) and/or Freeman (2007) for further discussion of this
issue as well as the discussion below.
19
For the purposes of the correlations, a distinction between the young (under 25) and adults (over 25)
was used. Simple correlation coefficients were calculated for the countries for which the OECD strictness
of EPL indicator and data on the change in unemployment were available. Specifically, the countries
considered were Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, France, Germany,
Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain,
United Kingdom and the United States. The correlation is only statistically significant (p < 0.05, one-
tailed test) for adult women.

21
 rates increased proportionately more than those of adults. Taken at face value,20 these simple
descriptive statistics suggest that stronger employment protection legislation tended to mitigate
rather than worsen the negative effects on unemployment of the financial crisis for both young
people and adults. At the same time, EPL did have a moderate impact on just how badly young
people fared compared to adults. Neither proposition is particularly surprising. In countries with
stronger EPL, firms will react more slowly to the crisis through the shedding of the workforce,
due to the greater costs involved. At the same time, young workers tend to be much less subject
to EPL, since on average they are less likely to have accumulated sufficient time on the job to
qualify. Of relevance here is the fact that the increased use of temporary contracts will tend to
accentuate this differential between younger and older workers, by further excluding young
workers from employment protection.

2.7 Which indicators – unemployment and joblessness

Although full discussion of indicators of the school-to-work transition goes well beyond
the scope of this paper, one major issue needs to be broached due to its relevance in times of
recession. The most commonly used indicator of youth (and indeed adult) labour market
problems is the youth unemployment rate. This measures the percentage of young people who
are without a job but are actively seeking work. Thus, a high youth unemployment rate is
undesirable in the sense that a substantial proportion of young people who are actively seeking
work do not find it.

Yet the unemployment rate indicator has some drawbacks:

(a) The youth unemployment rate does not necessarily give much idea of the extent of youth
labour markets problems as they affect young people. If young people participate in
education more or less until the age of 24, but most of those who do enter the labour market
are unemployed, the youth unemployment rate will be very high but it will reflect a
relatively small problem in terms of young people as a whole.

(b) The youth unemployment rate is based on a rather restricted definition of the labour market
as it does not include young people who would like to work but do not seek it because they
know or believe that no suitable work is available: the discouraged workers. In the context of
a recession, this issue becomes of major importance. Discouragement from the labour
market is not independent of economic – or personal – circumstances. People may stop
seeking work because they know or believe that no employment is available. Once thus
excluded, they disappear from the statistics but also become part – or risk becoming part of a
permanently excluded – and disaffected, or perhaps worse, apathetic – group.

(c) There are many young people who choose to do ‗other things‘ (e.g. have and/or look after
children, enjoy leisure or travel (or indeed migrate to other countries), or participate in
education). For most of them, this choice is unlikely to be independent of the quantity and
quality of the work available. Taken from a school-to-work transition perspective – by which
education and employment are, respectively, the desirable start and endpoints of the

20
Although, the correlations are relatively weak throughout, they are however, consistent and
consequently suggestive.

22
 transition in young people‘s lives – the issue of whether youth are actually seeking work
may not be very relevant.

(d) Most importantly, all young people who are not usefully occupied represent a missed
opportunity and a wasted potential.

The above-mentioned considerations have led some international agencies to look also at
the more general indicator of joblessness or, in OECD parlance, the not in employment or
education or training rate (NEET).21 This indicator defines the number of young people who are
not in education or employment as a percentage of the age-specific population.22 Annex II looks
in a little more detail at some of the advantages of this indicator. Unfortunately the jobless or
NEET rate has not yet entered the standard lexicon of commonly reported indicators, nor is it
calculable on the basis of the standard statistics available so it is not possible to consider the
effects of the recession on joblessness. Yet such an analysis would be informative since the
jobless rate:

(a) Includes all young people who are not in some sort of ―productive‖ or ―useful‖ activity.
Specifically it includes a potentially substantial group of people who are not actively seeking
work but would do so if conditions in the labour market improved. Arguably it is precisely
the discouraged young people who are most in need of intervention in terms of education,
training and/or active labour market policies in order to prevent them from becoming
entirely detached from the labour market;

(b) Gives a sense of the size of youth labour market problems in relation to the youth population
as a whole. The youth jobless rate is an indicator of the incidence of youth labour market
problems amongst young people as a whole.23

(c) In combination with youth unemployment rates, the NEET rate would also help in the
interpretation of the employment adjustment process and consequently in throwing further
light on cross-country differences in youth unemployment rates.

21
See, for example, World Bank (2006).
22
The OECD (2009b) has recently further refined the concepts underlying this indicator and suggested
two new albeit related categories – poorly integrated (young people who do not find stable jobs, but move
between temporary employment, unemployment and inactivity) and left behind youth (those young
people who face long-term joblessness).
23
Thus, for example, if almost all young people continue in education until they are 24, then even if the
youth unemployment rate is very high, the youth jobless rate will be low. One might argue consequently
that this is not strictly speaking an indicator of labour market problems amongst young people. The
debate is ongoing. I would argue that it is, at the very least, a useful additional indicator of youth labour
market problems – or possibly more accurately school-to-work transition problems – for the reasons
given above. Precisely this type of reasoning has lead the European Commission to include the youth
unemployment ratio (i.e. youth unemployment narrowly defined as a percentage of the youth population)
in addition to the youth unemployment rate amongst the standard indicators reported in its Employment
in Europe annual reports.

23
 The youth jobless rate is a particularly relevant indicator in times of recession because it is
precisely those people who drop out of the labour market who are most in danger of permanent
exclusion. For these people the long-term consequences of the recession are likely to be most
severe as they risk to be permanently excluded from the labour force as a consequence of the
relatively short-term fall in labour demand. A recent OECD report ( Scarpetta et al., 2010), has
argued that priority should be placed on ensuring that the current recession does not have the
effect of permanently augmenting the ―youth left behind‖ as well as ―poorly integrated youth‖.

The group of young people neither in employment nor in education or training represented
11 per cent of the youth population in the OECD in 2007. Among them, two in three were
already detached from the labour market, either because they had been unemployed for more
than a year or were inactive and did not seek a job. More specifically, for the countries in this
report, the NEET rate reached 10.2 per cent in 15 European Union member countries, 9.7 per
cent in Canada, and 11.2 per cent in the United States in 2008 (Scarpetta et al., 2010).

As mentioned earlier, in addition to the youth unemployment rate it is important to

consider also the rate of young discouraged workers. Together with unemployment, this
indicator provides a better picture of the situation of young people in the labour market,
especially in times of crisis. In France, for example, the number of young discouraged workers
increased by 30.7 per cent between the third quarter of 2007 and that of 2009. This compared
with the increase of 16.7 per cent for the overall rate of worker discouragement (ILO, 2010b). In
Spain, the number of young discouraged workers increased by over 18 per cent between the
third quarter 2007 and the same quarter of 2009 (ILO, 2010c).

3. Policies to mitigate the effects of the crisis on

young people
Policies to mitigate or counteract the effects of recession o employment can be broadly
divided into macroeconomic policies, educational policies and labour market policies and
programmes (LMPs) which in turn may be subdivided into active (policies and programmes
promoting employment and/or employability) and passive (income support). The distinction
among these types of policies is not always entirely clear-cut. Moreover, measures relating to
large-scale labour market policies may well have macroeconomic effects. More generally,
passive labour market policies are often a significant component of (mainly non-discretionary)
fiscal policy. The main emphasis in this paper is on labour market policies and programmes and,
above-all, active labour market policies and programmes (ALMPs) although all three are clearly
relevant to the labour market situation of young people.

As regards labour market policies, one may first divide these between passive and active
policies. Passive policies are those which provide income support and generally comprise
unemployment and some social security benefits for the unemployed, whilst active policies are
concerned with improving the employment or employability of young people. There is,
however, some overlap. Public works programmes are usually considered a part of active labour
market policy, however, they tend to do very little to enhance the employment or employability
of participants (Betcherman et al., 2004). This has led some authors to suggest that they should
more properly be considered as income support rather than employment promotion
mechanisms. Passive and active elements may also be combined and in general, the distinction
is becoming more blurred with more innovative approaches to the promotion of employment
through activation strategies.

Confining attention to strategies which aim to increase the likelihood of finding work and/
or the employability of participants, active labour market policies include interventions to
enhance human capital – usually through training and/or education; to promote employment – in

24
 particular, employment subsidies and support for business start-ups and/or expansion; and, to
enhance job search assistance.

Very often programmes involve more than one of these elements and indeed
―comprehensive‖ programmes involve elements of all three of the above. One well-known
example of this type of programmes is the ―New Deal for Young People‖, which was
introduced in the United Kingdom in the late 1990s and, with some changes, remains operative
to this day.

In addition to passive and active labour market interventions, policies affecting youth
labour market integration also include legislation affecting the ease and costs of hiring and
firing workers – in particular, minimum wage regulations and Employment Protection
Legislation. The strictness – and type – of EPL is likely to have significant effects on the depth
and duration of the employment effects of recessions as well as having important implications
for the specific effects of recessions on the youth labour market as was noted above.24

3.1 What do we know?

One major difference between the situation facing countries today and that facing countries
going through recessions even ten or fifteen years ago is the much greater availability of timely
information and analysis to support policy and programme choices.

3.1.1 Macroeconomic policies

The recent crisis of 2008-2009 represents the deepest downturn experienced throughout the
world since the Second World War. Several recent studies have highlighted issues from past
recessions which may inform our understanding of the current crisis. In particular, the IMF has
analysed past recessions noting that:

(a) recessions in advanced economies have become less severe (and expansions more lasting)
over the last two decades;
(b) those that have been associated with financial crises have been more severe and longer
lasting than those arising from other shocks;
(c) those which are synchronized across countries have also been deeper and longer lasting than
those confined to one region; and,
(d) recessions associated with both financial crises and global downturns have been particularly
severe and durable (IMF, 2009a, chapter 3).

Although not terribly surprising, the findings are not very encouraging since the recent
downturn was both global in extent and financial in origin. On the other hand, remedies are at
hand. At the macroeconomic level, Keynesian expansive fiscal policies are found to be
particularly effective in counteracting recessions associated with financial crises and, although
less effective, monetary policy may play a useful supporting role. 25 The IMF (2009a) finds that

24
See, for example O‘Higgins (2001) and/or O‘Higgins (2010) for a discussion of the impacts of these
policies.
25
Although the ability of countries to react through fiscal stimulus packages as well as their effectiveness
is limited for countries with high levels of public debt, as is the case in many Central European countries,
as well as in Italy and Greece.

25
 during financial crises both expansionary fiscal and monetary policies tend to shorten the
duration of recessions.26

It might also be observed that the crisis in Spain which began in 1977 was characterized by
a lengthy slowdown rather than a precipitous fall – somewhat similar to Japan – yet during this
period unemployment rates, particularly youth unemployment rates, exploded. Unemployment
rates amongst prime age men rose from 3.5 per cent to 15.4 per cent, for young men they
increased from 8.5 per cent to 39.5 per cent and for young women from 10.6 per cent to 50.6 per
cent. Indeed, youth unemployment rates only started to fall significantly in the late 1980s with
the widespread introduction of temporary employment contracts. Moreover, as noted above, the
extensive use of this type of contract along with the maintenance of existing EPL regulations for
the prime-age workers may well have contributed to turning a relatively small fall in GDP into a
major collapse in employment.

Recently the ILO (2010a) has analysed the nature of employment multipliers of
expansionary fiscal policy and has found that:

(a) The employment multiplier is positively correlated with the extent of cyclical unemployment
– as indeed was suggested by Keynes some eighty years ago. The further implication is,
however, that it is important to act quickly so as to reduce the risk of long-term
unemployment and informality which will subsequently reduce the employment multiplier.
(b) The employment multiplier is low for highly indebted countries due to the higher interest
rates payable on such debt.27
(c) The appropriate use of above-all ALMPs can increase the employment multiplier by
promoting employment at the microeconomic level whilst sustaining income and
consequently demand at the macroeconomic level.

3.1.2 Education policy

It is now well established that higher levels of education amongst the population contribute
to the longer run growth performance of countries (Sianesi and Van Reenan, 2003). Although
some methodological issues remain to be resolved in the literature, the general findings are that
a one-year increase in average education raises the level of output per capita by between three
and six percent or over one percentage point faster economic growth. Whichever way one looks
at it, education promotes growth. Indeed, the encouragement of educational participation up to
the age of 18 is a key element of European Union policy. Yet, change in the educational sector
is by its nature rather slow and ponderous. It takes substantial time for educational reforms to
show results in the labour market. The relevance of this point in relation to the current recession
is that the reduction in employment opportunities for young people may well provide an
opportunity for governments to adopt measures which promote greater participation in
education in the longer run. This could resort to positive labour market effects provided that
education is relevant to labour demand.

Much ink has been spilled on the role of educational policy in supporting the effective
transition of young people to employment by providing them with the appropriate skills so that

26
Although, in their analysis of around 120 recessions, the IMF finds that impact of monetary policy is
not statistically significant (IMF, 2009a, p. 123, table 3.3).
27
Specifically, the effectiveness of fiscal measures tends to weaken when government debt exceeds 85-
90% of GDP (Reinhart and Rogoff, 2010).

26
 they can more easily find productive employment once they enter the labour market (O‘Higgins,
2001). An important element in such discussion concerns the issue of quality and relevance of
education.28 However, during a severe recession, the central reasons for encouraging young
people to remain in education are:

(a) The availability of new employment opportunities is severely curtailed. That is, the
opportunity cost for young people (and for society as a whole) of doing so is relatively low.
Indeed, to some extent this will occur without any governmental support.
(b) The contribution of better-educated youth to the process of recovery. Once employment
opportunities begin to re-appear, the better-educated cohort and employers will reap the
benefits of greater productivity.

Once in place, the greater participation in education, particularly if based on policy reform
will become more permanent. In this sense, the recession actually facilitates the introduction of
measures which could enhance countries‘ longer-term economic performance.

3.1.3 Passive labour market policies

By their nature, income support measures alone do not promote the employment of those
receiving them, and, in as much as they may raise reservation wages, may impede a return to
employment. However, in the context of a severe recession, passive income support is likely to
play a major role in the short–run. Unemployment and social security benefits constitute a major
automatic macroeconomic stabilizer. Thus, they do have an important role to play in
maintaining incomes in the short-run.

The experience of the transition-induced recessions in some of the countries of Central and
Eastern Europe (CEE) in the 1990s is quite informative. Transition to the market was of course
a rather specific shock, involving a collapse in demand for some sectors and a rapid expansion
in others, thus necessitating a rapid shift in industrial structure. The initial approach adopted
throughout the region was one of rapid expansion of passive labour market policy – income
support measures. These were followed by measures to maintain employment in failing
enterprises. It was only rather slowly that countries began to introduce active labour market
policy measures – such as training and wage subsidies to support the development of new
and/or expanding industrial sectors. Thus, the approach was essentially remedial.29 Over the
transition period, the countries of Central and Eastern Europe and in particular those which
subsequently joined the European Union became more pro-active in the adoption of activation
strategies. Specifically, in the second half of the 1990s there was an increasing trend to shift
labour market policy towards promoting employment in new and/or expanding sectors. The
Commonwealth of Independent States‘ countries, on the other hand, tended to be more
conservative and remedial in outlook and in particular, were more protective of existing low
productivity forms of employment. Recovery was much quicker in the former group and part of
the success is clearly to be attributed to the shift in policy focus.

At the same time, many countries significantly reduced unemployment benefit entitlement
both in terms of its level and its duration. Here, the findings in the literature are relatively clear.
In most studies, the duration of unemployment is positively linked to the level and duration of

28
See, for example, O‘Higgins (2010) and World Bank (2007) for more extensive discussions of these
issues.
29
Although Hungary and Poland introduced ALMPs in the early ‘90s, when the transition process began.

27
unemployment benefits in CEE as is the case also in studies of Western Europe.30 However, in
the current context, several observations on this are necessary. First, the disincentive effects are
generally small. Second, the finding regarding disincentive effects is not universal; Lubyova
and Van Ours (1999) find little evidence of disincentive effects in Slovakia and Earle and Pauna
(1998) clearly reject the idea of disincentive effects in Romania. Third, in several studies, whilst
the exit from unemployment is clearly increased, much of this exit is to inactivity rather than
employment.31 Fourth, unemployment benefits played a fundamental role in reducing poverty
during early transition (Vodopivec et al., 2003).

The crisis of 2008-2009 is rather different. However, some useful lessons may be taken
from the experience of the transition-induced recessions in the countries of CEE. One lesson is
that, in a region where open unemployment had not existed to any significant degree, were
suddenly faced with large numbers of jobless people. When the recovery came, some groups got
almost entirely left behind – the Roma being one obvious example.32 Throughout the region, the
immediate reaction of governments was to introduce widespread and relatively generous income
support for the unemployed and to protect existing employment through employment subsidies
to firms experiencing a fall in demand. The policies of wide-scale passive income support over a
long period, with little or no activation strategies led to the creation of substantial numbers of
long-term unemployed; a legacy which still remains in some of these countries. This is not to
say that income support was mistaken, just that such measures need to be accompanied by
others which will constructively support the long-term employment and employability of those
currently unemployed. The widespread use of subsidized employment in failing firms, rather
than putting policies in place to constructively support the shift in industrial structure, however,
proved to be a completely misplaced strategy. Much better to employ the unemployed on public
infrastructure projects than maintaining employment in uneconomic firms.

Only a limited number of the existing unemployment insurance systems provide coverage
to workers in non-standard employment or to those who have not reached a required minimum
period of contribution to the unemployment insurance. Many young workers are not eligible to
the unemployment benefit because they are engaged in temporary work or other forms of non-
standard employment (e.g. on-call, seasonal, interim, short-time and part-time jobs).. For
instance, in 2008 fourteen countries of the European Union had unemployment insurance
systems which required a contribution period of at least twelve months. This makes it more
difficult for young workers to have access to the benefit.33

During the crisis, more than half of OECD countries have introduced a number of
changes to extend the coverage of unemployment benefit to workers who were previously
excluded. For instance, the United States increased funding to expand unemployment benefits to
workers with short work history, including young workers (e.g. part-timers and temporary

30
See, in particular, Vodopivec et al. (2003) on CEE and Atkinson and Micklewright (1991) and more
recently Bassanini and Duval (2006) on OECD countries.
31
For example, Cazes and Scarpetta (1998) on Poland and Micklewright and Nagy (1998) on Hungary.
32
Although the context is very different, a parallel can be drawn on what happened in Japan during the
1990s with the emergence of substantial numbers of young people – the ―freeters‖– with little or no
labour market attachment.
33
Information extracted from the ―Social Security Programs throughout the World, 2008–2009‖,
available at: http://www.socialsecurity.gov/policy/docs/progdesc/index.html

28
 workers).34 Similar reforms were introduced in France and Italy to extend coverage of
unemployment insurance to young temporary workers who lost their job during the crisis.
Reforms to the unemployment insurance were also introduced in Finland, Latvia, Slovenia and
Sweden to reduce the period of employment required to become eligible to unemployment
benefit. All these reforms are likely to increase unemployment insurance coverage of young
workers.

3.1.4 Active labour market policies

There is now a fairly substantial body of literature, including several meta studies, on the
effectiveness of different types of active labour market interventions.35 Some of the relevant
findings are as follows:

(a) Business cycle. There is general agreement that training appears to be less useful in
times of recession. Training programmes performed better when they were instituted
during periods of economic expansion (Betcherman et al., 2004). This is quite a general
finding.36 During a recession, more emphasis should be put on employment subsidies
and other measures aimed at creating employment and providing income support. This
view has now been supported also by the analyses of the OECD (2009). Once
economies start to grow, training and other policies (such as appropriate educational
policy) may also play a more constructive role in supporting recovery.
(b) Targeting – In general, evaluations have found discouraging results as regards the
impact of active labour market policies on young people. Indeed, one of the central
findings of the most recent study by Card et al. (2009) confirms this result. However, the
analysis of Betcherman et al. (2007) finds that programmes which target disadvantaged
youth seem to be more effective. Moreover, a general result from several reviews –
going back to the relatively early analysis of Fay (1996) is that targeted programmes are
more effective.
(c) Time period considered – The most recent meta-analysis undertaken by Card et al.
(2009) looks specifically at the timing of evaluations, and finds that this is an important
characteristic in determining estimated effects. In particular, over the medium term (2-3
years after participation), labour market training is found to be particularly successful.
Longer duration programmes which appear to be less effective than short programmes
when looking at immediate impacts are found to have significant positive effects in the
medium-term.

34
Scarpetta, Sonnet, and Manfredi, (2010), Box 5, page 24.
35
These include Betcherman et al. (2004), Betcherman et al. (2007), Card et al. (2009), Fay (1996),
Grubb and Ryan (1999), Heckman et al. (1999), Kluve (2006), Martin and Grubb (2001) and Quintini and
Martin (2006).
36
Although not by Kluve (2006), whose study concludes that programmes work better in times of
recession. The author‘s suggested explanation for this somewhat odd result is that in times of recession,
the pool of potential candidates for programmes - which, de facto or de iure, are for the unemployed -
will be of a higher average quality. Thus, the author‘s conclusion is that it is not that programmes are
more effective during recessions, but rather that the average quality of participants tends to rise during
such periods, leaving the basic conclusion outlined above unchallenged.

29
(d) Job search assistance – Again, going back to the early study of Fay (1996), measures to
improve job search assistance are found to be the most cost effective form of active
labour market intervention. Having said this, once again, job search assistance is likely
to be of greatest value when there are sufficient jobs available, so the problem is one of
matching workers to jobs. In times of recession, this type of intervention is likely to be
less effective.
(e) Comprehensive interventions – Comprehensive programmes involve some combination
of subsidized employment, training, self-employment support, guidance and counselling
and so on. They have a long history in OECD countries and above all in the United
States. In Europe and Latin America such programmes have achieved substantial
success. One of the most cost-effective programmes, the United Kingdom‘s New Deal
for Young People, is illustrated in Box 1.
(f) Training context – Amongst training programmes, those which involve on-the-job
training have universally found to be more effective.
(g) Public versus private – Similar to the above, programmes which involve some form of
placement in the private sector also appear to work better.
(h) Social partners involvement – The general consensus is that the involvement of the
social partners is likely to enhance the effectiveness of programmes. Employers‘ and
workers‘ organizations are involved in the design and implementation of ALMPs in
many countries. However, the extent to which formal involvement is actually translated
into a real input into the policy-making process varies enormously. Involving the social
partners in the formulation and implementation of ALMP is likely to increase the
effectiveness of such policies. There are several reasons why this may be so. The
involvement of employers and workers implies a commitment on their part to the
success of policies and programmes. The quality of programmes is also likely to be
higher if the social partners are involved. Numerous studies have demonstrated that
programmes which are more closely linked to private employers are likely to be more
effective. Employers may use programmes as a recruitment and/or screening device.
Also, the relevance of training is probably greater in the context of private employer
involvement. The skills acquired are likely to be closer to those required by the labour
market than those taught on programmes without such direct labour market links. The
involvement of workers‘ organizations can also help avoid some of the pitfalls of work
experience and training programmes. In promoting the training content and through
careful monitoring of implementation of programmes, workers‘ organizations can guard
against inadequate working conditions regarding programme participants, at the same
time helping to promote their long-term prospects of good quality employment. They
can also ensure that programme participants are not substituted for other categories of
workers.

30
 Box 1: The New Deal for Young People

In 1998, the British Government launched the New Deal for Young People, aimed at youngsters under the
age of 25.
The programme is composed of several measures, with different options offered to different groups of the
unemployed. The New Deal for Young People is compulsory for all those aged 18-24 who have been receiving the
jobseekers allowance (JSA) for more than six months. Initially, individuals enter a "Gateway" period, where they
are assigned a personal adviser who gives them extensive assistance with job search. If the participants are still
on JSA at the end of the Gateway period (formally a period of 4 months), they are offered one of the following four
options:
i) Entry into full-time education or training for up to 12 months for youth without basic qualifications (without
loss benefits);
ii) A job for six months with a voluntary sector employer (paid a wage or allowance at least equal to social
assistance plus £400 spread over six months);
iii) A job on the Environmental Task Force (paid a wage or allowance at least equal to social assistance plus
£400 spread over six months);
iv) A subsidy to a prospective employer for six months, with training for at least one day a week (£60 per
week plus an additional £750 training subsidy spread over six months).
If the option is refused, the claimant is liable to suffer a benefits sanction. Initially, sanctions take the form of
withdrawal of benefit for two weeks, and further refusal may result in repeated four-weekly withdrawals. Individuals
returning to unemployment within thirteen weeks after leaving an option go onto the follow-through programme of
job assistance, which is essentially the same as Gateway.
Impact evaluations of the New Deal show that the programmes have been effective and young unemployed
men are about 20 per cent more likely to gain jobs as a result of their participation in the programme. Part of this
effect is due to subsidized jobs, part a pure "Gateway" element (enhanced job search), at least one fifth of the total
effect. The job search assistance element of the New Deal element is more cost effective than the other ALMP
options as there is no subsidy involved.
The New Deal stands as the least costly comprehensive intervention for youth in OECD countries. The cost
per beneficiary served ranged from £454 to £790 (at constant 1999 prices). In addition, the cost per job created is
under £4,000 (at constant 1999 prices) given an average placement rate of 17,250 participants per year (Van
Reenen, 2003). The relative success of the programme is reflected also in the fact that is it is still operational
some 12 years after its inception, and indeed, for young people (18-24) participation is obligatory after 6 months
spent claiming job-seekers allowance.
However, the initial programme was less successful with some ethnic groups, women and jobseekers with
low qualifications. Also, sustainable employment outcomes proved difficult to achieve. In 2007, one in five young
people who found work through the programme held a job lasting less than 13 weeks. As a result, the most
difficult beneficiaries alternate short employment spells with benefit dependency
Following these results, in October 2009, the Flexible New Deal was launched with some additional services
being added particularly for disadvantaged young people. The main policy shift was the introduction of obligations
on the part of participants. That is, refusal to accept an offer of a placement leads to disqualification from or
reduction of benefits. Whilst this approach undoubtedly has the effect of reducing social security claimants, the
evidence suggests that it is of limited usefulness in getting young people into productive employment.

Sources: OECD (2009c), O’Higgins (2001, 2010), Puerto and Rother (2007) and Van Reenen (2003). See also:
http://www.direct.gov.uk and Knight (2010).

3.1.5 Labour market regulations

Labour market regulations concern, among other policies, those related with minimum
wages and employment protection legislation. Both types of regulations are likely to affect
young people more than other groups. Since young people are usually, by virtue of their age,
either new or recent labour market entrants, they are more likely to be affected by employment
protection legislation in as much as this impedes new hires. Similarly, they are likely to be
disproportionately represented amongst the low paid and so may well be more affected than
other groups by minimum wage legislation.

31
 As regards minimum wages, despite the apparent plausibility of the argument that high
levels of minimum wages tend to discourage the employment, particularly of young people, the
evidence is somewhat mixed. The most recent review evidence presented by Neumark and
Wascher (2007) finds estimates of the teenage employment elasticity with respect to the
minimum wage which range from below -1 to above 0. The authors conclude overall that the
existing evidence points towards negative employment effects of minimum wages for young
people. Of 102 studies considered, nearly two-thirds found negative albeit often not statistically
significant employment effects of minimum wages, whilst only eight found ‗convincing‘
positive effects. However, an emphasis on demonstrating that the effects are generally negative
rather than positive rather misses the central point which is that the effects of minimum wages
in the vast majority of cases are found to be small. In this sense, these results are in line with the
review of evidence presented in O‘Higgins (2001, chapter 6) which found small or zero (i.e. not
statistically significant) employment effects of minimum wages for young people.37
Furthermore, Neumark and Wascher (2007) find that the effects of minimum wages vary
considerably (from negative to positive) according to the presence of other labour market
institutions (e.g. employment protection legislation, active labour market policies) and, in
particular, the negative effects are most pronounced in unregulated labour markets.

As regards EPL, there seems to be a general idea that stricter EPL tends to lead to
shallower but longer recessions. This view has been propounded recently by both the OECD
(2009) and the IMF (2009b). Evidence already available on the 2008-2009 recession, presented
here and elsewhere, confirms that countries with stronger EPL indeed have thus far suffered
smaller employment losses than countries with weak EPL, such as Canada, the United Kingdom
and the United States. There are exceptions and, in particular, the example of Spain suggests
that the relation is not so clear cut, partly because of the way flexibility (through fixed term
contracts for new labour market entrants) and security (through the protection of established
workers) have been combined. Clearly, the issue is a little more complicated than simply being
a question of more or less EPL.

Perhaps more importantly, the evidence on the positive relation between the strength of
employment protection legislation and the duration of the employment consequences of
recessions is to say the least, not very convincing. For example, IMF (2009b, pp. 13-17)
presents a consideration of current and past recessions comparing:

(a) the Germany and United States as examples of countries with weak and strong EPL,
respectively; and,
(b) groups of countries identified as having weak and strong EPL.

The report argues that the evidence supports the idea of strong EPL countries being
characterized by longer recessions. However, the analysis of the dynamics of employment rates
over past recessions in both cases, the evidence is rather weak. In the case of the United States,
employment growth became positive nine quarters after the recession began, whereas in
Germany, it took all of ten quarters to do so (IMF, 2009b, p. 15). However, the employment
effects of the recession were much more severe in the United States than in Germany.
Comparing groups of countries, the return to positive employment growth occurred on average
after fourteen quarters in both low and ―not low‖ EPL countries.38 Moreover, the difference
between the severity of the employment loss in the two country groups was even more

37
Similar findings are reported also be Kolev and Saget (2005).
38
The IMF distinguishes between low EPL countries – Canada, the United Kingdom and the United
States – on the one hand and ―others‖ (with medium to high EPL) on the other - comprising the other
major OECD countries. See IMF (2009b, pp. 15-16) for details.

32
 pronounced than for the Germany-United States comparison. What is very evident is the
significantly greater volatility in employment growth in low EPL countries. Thus, whilst it is
undoubtedly true that the rate at which employment growth recovers is greater in low EPL
countries following a recession, since the drop in employment is so much more severe in such
countries, this does not necessarily (nor it would appear from the evidence presented in the
above-mentioned study) imply that employment returns to pre-crisis levels more quickly.

The idea of quicker employment adjustment being desirable may be appealing in theory.
However, there are a number of reasons why this may not be so desirable in practice. As pointed
out by Keynes nearly eighty years ago, the maintenance of income by reducing recession-
induced job losses (as well as through unemployment benefits) will tend to attenuate the
negative multiplier effects of the initial macroeconomic shock. In practice, the issue is an
empirical one and not simple to resolve since many of the factors affecting outcomes are
endogenous. It is evident however, that the simple descriptive evidence is not supportive of the
idea that the solution to a essentially temporary albeit global negative shock to labour demand
arising from the recession lies in greater labour market flexibility. This is of course somewhat
different to the issue of a permanent shift in the structure of labour demand witnessed in the
countries of Central and Eastern Europe following the transition to the market.

3.2 What is being done? An early assessment of the policy

response to the crisis

All countries considered in this paper have adopted interventions at both macroeconomic
and microeconomic levels in order to counteract the recession and to mitigate its negative labour
market consequences, but the type of action adopted varies across countries.39 It is useful to take
a look at the current policy responses adopted in the European Union, Canada and the United
States and, although it is far too early to effectively evaluate the impact of the differing
approaches to the crisis, to undertake a preliminary assessment.

3.2.1 Macroeconomic intervention

Canada, the United States and most countries of the European Union countries have
adopted substantial expansionary fiscal policies.40 There is general agreement – and indeed, the
evidence reported above supports this – that expansionary fiscal policy is a necessary central
element of the response. The early evidence suggests that countries which swiftly adopted
aggressive stimulus packages, such as Germany, managed to cushion the effects of the crisis
(ILO, 2010) whereas countries such as Italy which took little substantive action, and above-all,
made no attempt to adopt a expansionary fiscal stance, fared much worse. Looking at the
movements in the employment of young people, and all those of working age since the third
quarter of 2007 (See Figure 14 below), it may be observed that in Germany the aggregate
employment has already surpassed its pre-crisis level and youth employment has almost
returned to that level. Moreover, both aggregate and youth employment are on an upward
trajectory. In contrast, in Italy, the aggregate and youth employment continues on a downward
trend so that by the end of 2009, youth employment was almost 20 per cent below its pre-crisis
level. Of course, it would be improvident to attribute the difference in employment performance
entirely to the difference in fiscal stance adopted by the two countries. Yet the figure is
indicative and it is not unreasonable to suggest that differing fiscal policies played a significant

39
Annex I includes a more extensive inventory of the specific labour market policy measures adopted as a
response to the crisis.

40
For Italy see Boeri (2009) and O‘Higgins (forthcoming).

33
 role in determining the contrasting outcomes. This is line with the findings of ILO (2010a)
which indicate that a swift and aggressive stimulus package was a key element of the response
in the six countries (including Germany and Canada) identified there as having been relatively
successful in containing the effects of the crisis.

Figure 14: Youth and aggregate employment in Italy and Germany, 2007-2009

Source: Eurostat, European Labour Force Survey, http://epp.eurostat.ec.europa.eu/portal/page/portal/employment_unemployment_lfs/data/database

Note: 2007Q3 = 100

3.2.2 Education policy

Some countries have extended support for education: for example, Canada has introduced
extensions in funding of graduate scholarships and internship places and the United Kingdom
has introduced support for 16 and 17 year olds remaining in education. Thus far, however,
action has been piecemeal and some commentators (for example, Bell and Blanchflower, 2010;
OECD, 2009a; OECD, 2009b) have argued that a period of reduced labour demand may well
provide an opportunity for more systemic reform in the education system –for example, by
increasing the school leaving age.

There are a number of reasons why now is a good time to take such action. In the European
Union, at least, there is broad agreement that raising the school leaving age is desirable and
indeed, the European Employment Strategy includes, as one of its key elements, the provision
of education and training opportunities for all young people aged up to 18. Since countries are
now going through a period of reduced labour demand, the opportunity costs of increasing the
duration of educational participation across the board are relatively low, both for young people
themselves and society as a whole. A lack of adequate employment opportunities for new labour
market entrants – particularly those with low levels of education – means that staying on in
education will involve relatively little sacrifice for the individuals involved. Similarly, the costs
of supporting additional places in education should be set against the costs of inaction – more
youth unemployment and joblessness with its associated direct (e.g. increased income support
measures) and indirect (for example, increased crime and poorer health) social costs.

34
 There are arguments to be made for support for greater educational participation at all
levels. However, the nature of the interventions may differ for youth with lower and higher
levels of education. For young people with low levels of education, problems associated with
labour market entry are chronic in nature. Although these have been worsened by the crisis, the
problem is of a permanent nature and should be confronted independently of the crisis. In this
sense, the economic and financial crisis of 2008-2009 provides an opportunity to do so, but once
introduced, such measures such as the raising of the school leaving age, perhaps associated with
financial support for students from low-income families, need to be made permanent.

On the other hand, the crisis has also created serious problems of labour market entry also
for youth with higher levels of education. For the latter, it is to be hoped at least, the problem is
more temporary in nature and arises directly from the crisis itself. Interventions to support, for
example, participation in further education and/or training beyond secondary level should only
be temporary in this case. Again, the relatively low opportunity costs of supporting young
people in education make it appropriate to intervene now.

In both cases, the potential longer term costs of inaction are high. The risk is of
significantly enlarging the group of the long-term unemployed and/or jobless and disaffected
youth, and of creating a ―lost generation‖ of young people who entered the labour market at just
the wrong time. Increasing educational participation is an important, albeit by no means the
only, element in a strategy aimed at avoiding this risk.

3.2.3 Labour market interventions

As regards labour market policies, the approaches have been more varied as indicated by
the specific interventions reported in Annex I. With respect to passive policies, several countries
have increased support for the unemployed in one way or another. In some cases, this is
explicitly temporary. For example, Poland introduced ―refundable‖ support for unemployed
workers to pay their mortgages for a period up to 12 months. Italy on the other hand has
extended the coverage of unemployment benefits to include workers, mostly young workers, on
temporary or fixed-term contracts and those on apprenticeships. The extension is discretionary
in as much as it requires action by regions to activate it, which are also expected to pay 30 per
cent of the costs.

Combining income support with training: A fruitful

avenue to pursue

One of the more common approaches amongst governments in the European Union has
been the introduction or extension of support for short-time working. This is a policy which lies
on the borderline between passive and active labour market policy and generally comprises one
or both of two elements: work-sharing – so that subsidies are conditional on additional workers
being taken on; and/or training undertaken during the ―unemployed‖ time. For example, France
and Germany have extended their short-time (or work-sharing) schemes, extending the duration
and level of subsidy for the employee or the employer. By March 2009, 1.26 million workers
were covered by this scheme, up from only 155,000 a year earlier (Cazes et al., 2009).
Similarly, Latvia and Luxembourg have introduced programmes which combine short-time
working with support for training. Canada has also extended its Work-Sharing Programme to 52
weeks from a previous level of 38 weeks (Messenger, 2009). The basic idea underlying such
measures – is that income support is provided for those working less than usual, but at the same
time firms and individuals are encouraged to take advantage of low product demand to
undertake productivity enhancing training to the long-run benefit of all. Thus, these measures
combine short-term income support and employment maintenance aspects with longer term
productivity enhancements. As with support for the greater educational participation, this type
of intervention is likely to be relatively cost effective during a recession. It avoids some of the
costs and negative consequences of redundancies but at the same time allows the upgrading of

35
workers skills at a time when the opportunity cost – the lost productive capacity – to firms is
relatively low (Bassanini et al., 2005).

Most countries have also introduced new and/or extended subsidized employment and
training programmes for young people. As noted above, the usefulness of training programmes
in particular, has been questioned. However, these programmes do provide income support in
the short-term and, if carefully designed, may support the recovery process. A key issue relates
to the length of the recovery process. The same logic which was applied to increased
educational participation applies to labour market training. Such programmes have several
functions whose usefulness will vary with the economic cycle. Typically, training and
employment programmes provide participants with income support, skills training and, if
involve private firms, access to potential longer term employment. For employers, such
programmes will subsidize the employment and training of their workforce. In the short-term,
during the crisis, the income support and low opportunity cost aspects are of key importance. In
the longer-term, the training element becomes of more significance and may play a useful role
in enhancing the productivity of individuals and the competitiveness of firms. It is important,
however, to avoid some of the mistakes of policies adopted in the past to deal with acute labour
market entry difficulties of young people. Thus, for example, in the United Kingdom in the
1980s, widespread rioting and alienation amongst disaffected young people – who, in the
context of rapidly rising unemployment, found it impossible to get a job – led to the priority of
getting young people ―off the street‖. One of the negative effects of the consequent Youth
Training Scheme, which provided subsidized employment and training for unemployed young
people, was that it included inadequate mechanisms of the monitoring of training provision and
more generally the operation at the firm level of the programme. As a result, the programme did
little to enhance the employment prospects of participants (O‘Higgins, 1994) and indeed tended
to lower the post-programme earnings of trainees. 41

In any event, the approach adopted in several countries which seek to combine income
support with measures to enhance the productivity, and therefore the longer-run employability,
of young people seems to be a particularly fruitful avenue to pursue. It is far too early to make
any kind of reasonable evaluation of these measures – all the more so, bearing in mind the
recent findings in the evaluation literature mentioned above which suggests that the positive
effects of longer programmes only emerge in the medium to long term – yet it is plausible to
expect that such programmes, if appropriately designed and implemented, are likely to produce
good results in the longer term. 42

Job Search Assistance

A number of countries have put emphasis on enhancing the role of Public Employment
Services in providing job-search assistance (JSA). As noted above, it has been generally found
that JSA measures are amongst the most cost effective type of ALMP. In times of recession –
where the problem is not so much matching of job seekers to available jobs, but rather the lack
of jobs, such measures are likely to be much less effective as noted by OECD (2009b). Thus,
whilst JSA is of central importance in facilitating the job-matching process in general, it is

41
See O‘Higgins (1994). Indeed, Dolton et al. (1994) argued that the programme actually reduced the
likelihood of post-programme employment of participants In practice, the programme was to improve the
employment prospects of participants through two, more or less, explicit mechanisms: first, by reducing
the wage expectations of participants; and second, by enhancing the skills of trainees. O‘Higgins (1995)
in a detailed analysis of the effects of the scheme on participants‘ wage makes it clear that it was the first
of these mechanisms which dominated.
42
See Card (2009).

36
 unlikely that expansion of JSA in times of recession leads to a significant increase of the entry
rates into jobs. If used as a policing mechanism, it may reduce the numbers of unemployment
and social assistance benefit claimants. It may also encourage young people to accept job offers
which are not commensurate to their skills thus reducing rather than increasing the efficiency of
job matching, and, it may push young people towards informality and other forms of casual
employment.

3.2.4 Labour market regulations

The evidence considered above suggests that whilst countries with less labour market
flexibility have, for the most part, faced a less severe recession with employment rates falling
and unemployment rates rising much less than in countries with more flexible labour markets,
there is little evidence to support the notion that recovery is quicker in countries with labour
markets that are more flexible. In Lithuania, one the countries mostly severely hit by the current
recession, the approach adopted has been to increase flexibility in the labour market by
simplifying firing procedures. Whilst the general argument that greater ease in firing may make
firms less hesitant to hire new workers may have some validity – although the evidence is rather
mixed on this - when a country is going through an extremely deep recession, the main effect of
greater flexibility will be to further worsen the labour market situation in the short-run. The
reason is that the greater flexibility argument ignores the macroeconomic effects of mass
redundancies. Increased flexibility will allow even more workers to be laid off in the short-run
which will have the effect of further reducing income with the consequent negative Keynesian
multiplier effects. In as much as greater flexibility improves efficiency in the labour market, this
occurs at the microeconomic level, and, when demand is buoyant, may plausibly increase
employment with also consequent beneficial macroeconomic effects. In the context of a
substantial negative external shock, however, the increase in flexibility will simply provide
incentives for firms to lay-off more workers and further worsen the macroeconomic situation.
Thus, the benefits of greater flexibility are contrasted by the negative multiplier effects of higher
short-run unemployment, impeding the macroeconomic recovery.

In Estonia, similar measures to increase flexibility have also recently been adopted.
However, in this case the reduction of firing costs has been combined with an increase in
unemployment and social assistance benefits. Thus, the negative multiplier effects of the likely
resultant layoffs will, to some extent, be offset. Spain has also moved towards introducing
further flexibility in the labour market. Since now the economy has begun to improve in this
country, it is arguable that such an approach may bring some beneficial effects and may indeed
support recovery encouraging firms to hire more workers. It remains to be seen whether this is
the case. However, it is very clear that introducing greater flexibility in the midst of the
recession is only going to make a bad situation worse.

3.3 What can be done? Some issues of concern

As noted in the introduction, 2010 has seen the return of positive economic growth in the
European Union, Canada and the United States. As yet, the recovery is both gradual and
uneven. However, it is timely to consider some issues concerned with the policy approach to be
adopted during the recovery.

The key issue to be addressed relates to the longer term effects of the recession on the job
prospects of young people entering the labour market during this period. It was noted above that
one particular group of concern are jobless youth. Although comparable data are not yet
available for a broad range of countries, the signs are that this group has increased during the
recession. Labour force participation rates have fallen in many countries (ILO, 2010d) and
Scarpetta et al. (2010) argue that this group – comprised above all of low educated young

37
 people – are more susceptible to the scarring effects of unemployment and joblessness on
leaving school. Possible policy options to contrast the growth of long-term joblessness include,
first and foremost, policies to reduce early school leaving discussed above. Now is a good time
to enact such reforms due to the relatively low opportunity costs. Moreover, preventative action
has generally found to be more effective than remedial intervention (Betcherman et al., 2004;
Godfrey, 2003). These can be complemented by guaranteed placements on a programme for
those at risk of entering long-term unemployment particularly those with low skills. The
concept of such a youth guarantee has long been part of the European Employment Strategy and
of youth employment policy in a number of countries – particularly in Northern Europe. Several
initiatives, such as the Young Person‘s Guarantee in the United Kingdom have re-affirmed the
validity of this concept during the crisis.

A second area of particular concern regards the forms of employment available to young
people. It was noted above that a number of countries have already seen a rise in the incidence
of temporary employment amongst young people. It is predictable that one of the longer run
effects of the crisis will be to further increase the diffusion of temporary employment contracts
as a means of facilitating labour market entry. Although, these contracts can and do facilitate
young people‘s entry into work, there is also the danger that they may lead to persistent job
insecurity (ILO, 2010d). The experiences of Spain referred to above stands out in this regard.
The development of such dual labour market forms is also clearly observable in other
Mediterranean countries. Temporary employment involves not only less stable employment
relations but also lower pay and fewer opportunities for training (ILO, 2008).

4. Conclusions and policy implications

A number of points have emerged from the analysis conducted in this paper. These may be
informative for policy formulation in the EU, Canada and the US – and indeed elsewhere. The
main points can be summarized as follows:

(a) Youth, the hardest hit by the crisis- Young people are clearly a major loser from the crisis
throughout the European Union, Canada and the United States. The degree to which young
people, and different groups of young people, were affected has varied widely. The
employment rates of young people fell most amongst those countries with the severest drop
in GDP, i.e. Ireland and the Baltics. Although Spain experienced a relatively moderate
downturn in GDP, the fall in employment rates of young men was only exceeded by Ireland
and the increase in unemployment rates, by Latvia and Lithuania.

(b) Avoiding the emergence of hard-core excluded youth. One lesson learned from the past
concerns the dangers associated with long-term unemployment, or more broadly, jobless
young people. It is to be hoped that recovery from the recession is already underway and
employment will sooner rather than later return to its former levels. However, even if this
happens, there is a danger that substantial groups of young people who have had the
misfortune to enter the labour market in this difficult period run the risk of remaining
permanently excluded from productive employment. A, if not the, key lesson from the past –
both in the countries of Central and Eastern Europe, but also in Western Europe, Canada and
the United States, is that policies need to have as their first priority the avoidance of a hard-
core group of long-term unemployed.

(c) Avoiding the emergence of permanent instability. Lessons from the past show that times of
recession have typically been accompanied by an increase in temporary and other less stable

38
 and less protected forms of employment. Such a trend towards a higher incidence of
temporary jobs is already observable in some countries and it is predictable that such
employment forms will expand with the recovery. Temporary contracts may facilitate the
entry of young people into long-term employment, although the evidence on this is rather
mixed. There is, however, the danger that the widespread diffusion in the use of temporary
contracts will significantly increase the number of young people who remain in a permanent
cycle of unstable employment or trapped into a spiral of temporary employment combined
with spells of unemployment.

(d) The role of information – One difference between the current context and that of countries
going through recessions even ten or fifteen years ago is that now data is of better quality–
this allows decision-making on policies based on more evidence and on up-to-date
information. However, there is still room for improvement. In particular, the regular
reporting of the NEET or jobless rate would significantly improve the quality of labour
market monitoring.

(e) No one-size fits all – It should be very clear from the preceding discussion that there has
been a wide degree of variation in the nature and severity of the financial crisis as well as in
the specific effects that the global recession had on young people. These differences depend
on a number of factors – such as the existing institutional framework – which also interact
with each other. The obvious consequence is that specific policy recommendations are
conditional on national and local circumstances which need to be taken onto account.
Bearing this in mind, however, a number of regularities have emerged.

(f) Measures for the more or less educated? – Although there is significant variation across
countries, on the whole, employment rates have dropped more for those with higher levels of
education. On the other hand, the risk of permanent exclusion is greater for those who are
poorly educated. Thus, the discussion above justifies measures for both the more and less
educated. For those with little education, the problem is a chronic one, and the crisis has
marginally worsened their situation. For most of those with higher levels of education the
problem should be of temporary nature and arising from the demand shock itself. Here the
emphasis needs to be placed on maintaining labour market attachment of these young people
and improving their skills until the crisis is over. Short-time working combined with training
and/or educational support is one way of doing this.

(g) The role of employment protection legislation - The findings presented here are consistent
with the idea propounded by, amongst others the OECD (2009b) and the IMF (2009a), and
experiences of previous recessions, that downturns tend to be shallower in countries with
strong labour market institutions. The habitual corollary to this, that the negative effects of
recessions last longer in strong EPL countries, is less supported by the evidence. It is
undoubtedly true that in countries with low EPL, employment recovers at a faster rate once
the economy starts to grow again. However, in such countries employment fell during the
recession more that in countries with regulated labour markets. For this reason, the overall
duration of the effect does not appear to differ greatly – at least on the basis of evidence
from previous recessions. Labour hoarding by firms during a recession may well play a
positive role in mitigating the negative macroeconomic multiplier effects associated with the
initial fall in aggregate demand - very much as suggested by Keynes nearly eighty years ago.
In part, one explanation for the very severe employment effects of the recession in Spain
may lie in the dual nature of that country‘s labour market with a highly flexible labour

39
 market for new entrants combined with more protected employment for established workers.
Indeed, also in other Mediterranean countries such as Italy and Portugal with broadly similar
dual labour market structures and which also suffered relatively modest initial falls in GDP,
and which have progressively introduced more flexibility amongst labour market entrants in
the wake of Spain, the fall in youth employment was substantial. More generally, the picture
emerging is that those countries with weak employment protection such as the United
Kingdom or the United States suffered significant drops in employment but these did not
disproportionately affect young people. In Italy, Portugal and Spain, with their dual labour
market structures, the drop in youth employment was much more severe than for older
workers. Moreover, in countries with relatively strong EPL, the drop in employment was
relatively moderate across the board.

(h) Combining passive with active labour market policy - It is too early to be able to accurately
assess the contribution of the combination of such policies. However, the preceding analysis
it seems that policies which take advantage of the fall in labour demand to support a
combination of training, short-time working and subsidized employment may well prove to
be an effective response to the crisis. More generally, there is a strong argument in favour of
taking advantage of the slack in the labour market to promote policies and programmes
which will support the recovery by improving the human capital of the workforce, and
particularly of young people. In this regard, programmes involving longer periods of
subsidized employment and training for young people may well come into their own in this
context. Although longer programmes have generally been found to be less effective than
shorter ones, in the context of the recession, they may also play a useful income support role.
The most recent findings in the ALMP evaluation literature (Card et al., 2009) support the
notion that the positive effects of longer programmes emerge only in the medium term. This
may in part account for their relatively poor performance in many previous evaluations.
Thus, longer programmes (preferably based with private employers and adequately
monitored) which combine the short–run income support role with the longer run goal of
enhancing labour productivity may well be the most effective form of ALMP response to the
crisis for young people.

(i) Comprehensive packages of youth employment interventions. Several studies of youth

employment programmes have shown that comprehensive youth employment interventions
(i.e. that combine job-search assistance, career guidance, training, subsidized employment,
self-employment support and job placement) are more successful than single measures.
These interventions are more effective when they are: implemented at early stages of
joblessness (unemployment, discouragement or inactivity); designed to respond to labour
market requirements; targeted and tailored to individual needs and labour market
disadvantages; linked to work experience; and implemented with the involvement of the
private sector and of the social partners.

(j) A more radical approach to educational reform? The general principle that a period of
reduced labour demand lowers the opportunity cost (for individuals as well as for firms) of
participating in other activities – and in particular, of increasing levels of human capital -
may also be applied to education. Several countries have introduced minor extensions to
support for educational participation. As both the OECD (2009b) and Bell and Blanchflower
(2010) point out, now may be a good opportunity to encourage young people to remain in, or
return to, education. The OECD (2009b) suggests raising the school-leaving age to eighteen
(where it has not already been done) whilst Bell and Blanchflower (2010) argue for

40
measures to encourage greater participation. The key concern of course, should be avoiding
that unemployment spells caused by temporary demand shocks become more permanent. Of
course, the raising of the school-leaving age, in particular, would require a significant
investment of resources. However, this is certainly the direction in which European Union
policy is moving and the recession may well present the opportunity for more radical steps
to be taken in this direction.

41
Bibliographic references
Arulampalam, W.; Booth, A.L.; Bryan, M.L. 2004. ―Training in Europe‖, in Journal of the
European Economic Association, Vol. 2, No. 2-3, pp. 346-360.

Atkinson, A.B.; Micklewright, J. 1991. ―Unemployment compensation and labor market

transitions: A critical review‖, in Journal of Economic Literature Vol. 29, pp. 1679-1727.

Bassanini, A. et al. 2005. Workplace training in Europe, Discussion Paper No. 1640 (Bonn, IZA).

—. Duval, R. 2006. Employment patterns in OECD countries: Reassessing the role of policies and
institutions, Social, Employment and Migration Working Papers No. 35 (Paris, OECD).

Bell, D.; Blanchflower, D. 2009. What should be done about rising unemployment in the OECD?,
Discussion Paper No. 4455 (Bonn, IZA).

—. 2010. Youth unemployment: Déjà vu?, Discussion Paper No. 4705 (Bonn, IZA).

Betcherman, G.; Olivas, K.; Dar, A. 2004. Impacts of active labor market programmes: New
evidence from evaluations with particular attention to developing and transition countries,
Social Protection Discussion Paper No. 0402 (Washington, D.C.,World Bank).

—. et al. 2007. A review of interventions to support young workers: Findings of the Youth
Employment Inventory, Social Protection Discussion Paper No. 0715 (Washington,
D.C.,World Bank).

Blanchard, O.; Landier, A. 2002. ―The perverse effects of partial labour market reform: Fixed-
term contracts in France‖, in Economic Journal, Vol. 112, No. 480, pp. F214-F244.

Boeri, T. 2009. La crisi non è uguale per tutti, (Milano, Rizzoli).

Booth, A.L.; Francesconi, M.; Frank, J. 2002. ―Temporary jobs: Stepping stones or dead ends?‖,
in Economic Journal, Vol. 112, No. 480, pp. F189-F213.

Card, D.; Kluve, J.; Weber, A. 2009. Active labor market policy evaluation: A meta-analysis, Ruhr
Economic Papers No. 89 (Essen, RWI).

Cazes, S.; Scarpetta, S. 1998. ―Labour market transitions and unemployment duration: Evidence
from Bulgarian and Polish micro-data‖, in Economics of Transition, Vol. 6, pp. 113-144.

—. Verick, S.; Heuer, C. 2009. Labour market policies in times of crisis, Employment Sector
Employment Working Paper No. 35 (Geneva, ILO).

Dolado, J.J.; García-Serrano, C.; Jimeno, J.F. 2002. ―Drawing lessons from the boom of
temporary jobs in Spain‖, in Economic Journal, Vol. 112, No. 480, pp. F270-F295.

Dolton, P. J.; Makepeace, G. H.; Treble, J.G. 1994. ―The Youth Training Scheme and the school-
to-work transition,‖ in Oxford Economic Papers, Vol. 46, No. 4, pp. 629-649.

Earle, J. S.; Pauna, C. 1998. ―Long-term unemployment, social assistance and labor market
policies in Romania‖, in Empirical Economics, Vol. 23, No.1/2, pp. 203-235

Ellwood, D. 1982. ―Teenage unemployment: Permanent scars or temporary blemishes?‖, in R.B.

Freeman and D. Wise (eds.): The youth labour market problem: Its nature, causes and
consequences (Chicago, University of Chicago Press), pp. 349-385.

42
European Commission. 2009. Employment in Europe 2009, DG Employment, (Brussels, European
Commission).

Fay, R.G. 1996. Enhancing the effectiveness of active labour market policies: Evidence from
programme evaluations in OECD countries, Labour Market and Social Policy Occasional
Papers No. 18 (Paris, OECD).

Fougere, D.; Kramarz, F.; Pouget, J. 2009. ―Youth unemployment and crime in France‖, in
Journal of the European Economic Association, Vol. 7, No. 5, pp. 909-938.

Godfrey, M. 2003. Youth employment policy in developing and transition countries: Prevention as
well as cure, Social Protection Discussion Paper Series No. 320 (Washington, DC, World
Bank).

Grubb, W.N.; Ryan, P. 1999. The roles of evaluation for vocational education and training: Plain
talk on the field of dreams (Geneva, ILO).

Heckman, J.J., LaLonde, R.J.; Smith, J.A. 1999. ―The economics and econometrics of active
labour market programmes‖, in O. Ashenfelter and D. Card (eds): Handbook of Labor
Economics Vol.3, (Amsterdam, Elsevier), pp-1865-2097.

Holmlund, B.; Storrie, D. 2002. ―Temporary work in turbulent times: The Swedish experience‖, in
Economic Journal, Vol. 112, No. 480, pp. F245-F269.

Hoshi, T.; Kashyap, A.K. 2008. Will the U.S. bank recapitalization succeed? Lessons from Japan,
Working Paper No. 14401 (Cambridge Massachusetts, NBER).

International Labour Office (ILO). 1999. Decent work, Report of the Director-General,
International Labour Conference, 87th Session, Geneva, 1999 (Geneva).

—. 2001. Reducing the decent work deficit: A global challenge, Report of the Director General,
International Labour Conference, 89th Session, Geneva, 2001 (Geneva).

—. 2003. Working out of poverty, Report of the Director-General, International Labour

Conference, 91st Session, Geneva, 2003 (Geneva).

—. 2006. Implementing the Global Employment Agenda: Employment strategies in support of

decent work, ―Vision” document (Geneva).

—. 2009. Tackling the global jobs crisis: Recovery through decent work policies, Report of the
Director-General, International Labour Conference 98th Session, Geneva, 2009 (Geneva).

—. 2010a. Promoting employment recovery while meeting fiscal goals, International Institute for
Labour Studies Policy Brief (Geneva).

—. 2010b. France: Recession sparked rising numbers of unemployed and falling hours of work,
G20 Statistical Update prepared for the G20 Meeting of Labour and Employment Ministers,
20 – 21 April Washington, DC (Geneva).

—. 2010c. Spain: Steep increases in unemployment, particularly among youth, due to the crisis,
G20 Statistical Update prepared for the G20 Meeting of Labour and Employment Ministers,
20 – 21 April Washington, DC (Geneva).

43
—. 2010d. Youth employment in crisis: A background paper for the Informal Meeting of Ministers
of Labour and Social Affairs during the 99th session of the International Labour Conference
(Geneva).

International Monetary Fund (IMF). 2009a. World economic outlook: Crisis and recovery, April
(Washington D.C.).

—. 2009b. World economic outlook: Sustaining the recovery, October (Washington D.C.).

—. 2010. World economic outlook: Update, January 26th (Washington D.C.).

Kluve, J. 2006. The effectiveness of European active labor market policy, Discussion Paper No.
2018 (Bonn, IZA).

Knight, G. 2010. Job seekers regime and flexible new deal, the six month offer and support for the
newly unemployed evaluations: An early process study, Research report No. 624 (London,
Department for Work and Pensions).

Lubyova, M.; Van Ours, J. 1999. ―Unemployment duration of job losers in a labour market in
transition‖, in Economics of Transition, Vol. 7, No. 3, pp. 665-86.

Martin, J.P.; Grubb, D. 2001. What works and for whom: A review of OECD countries’
experiences with active labour market policies, IFAU Working Paper No. 14 (Paris,
OECD).

Messenger, J. 2009. Work sharing: a strategy to preserve jobs during the global jobs crisis,
TRAVAIL Policy Brief No.1 (Geneva, ILO).

Micklewright, J.; Nagy, Gy. 1998. The implications of exhausting unemployment benefit
entitlement in Hungary, Working Papers on the Labour Market No. 1998/2 (Budapest,
University of Economics).

Organisation for Economic Co-operation and Development (OECD). 2007. Jobs for youth: Spain
(Paris).

—. 2009a. Helping youth get a firm foothold in the labour market (Paris).

—. 2009b. Employment outlook 2009 (Paris).

—. 2009c. Jobs for youth: United Kingdom (Paris).

O‘Higgins, N. 1994. ―YTS, employment and sample selection bias‖, in Oxford Economic Papers,
Vol. 46, No. 4, pp. 605-628.

—. 1995. Why did the Youth Training Scheme reduce the wages of young people? A story of
human capital formation, reservation wages and job offers, Discussion Paper No. 18
(Salerno, CELPE).

—. 2001. Youth unemployment and employment policy: A global perspective (Geneva, ILO).

—. 2003. Trends in the youth labor market in developing and transition countries, Social
Protection Discussion Paper No. 0321, (Washington, D.C., World Bank).

—. 2008. ―Still with us after all of these years: Trends in youth labour market entry, home-leaving
and human capital accumulation in Italy 1993-2003‖, in G. DeFreitas (ed.): Young workers
in the global economy: Job issues in North America, Europe and Japan (Cheltenham,
Edward Elgar).

44
—. 2010. Youth labour markets in Europe and Central Asia, Discussion Paper No. 5094 (Bonn,
IZA).

—. Forthcoming. ―Italy and the global financial and economic crisis‖, in Vaughan-Whitehead, D.
(ed.): Inequality in the world of work: The effects of the crisis (Cheltenham, Edward Elgar).

Puerto, O. S.; Rother, F.; 2007. Interventions to support young workers in OECD countries,
Regional report of the Youth Employment Inventory (Washington D.C., World Bank).

Quintini, G.; Martin, S. 2006. Starting well or losing their way? The Position of Youth in the
Labour Market in OECD Countries, Social, Employment and Migration Working Papers
No. 39 (Paris, OECD).

Reinhart, C. M.; Rogoff, K. S. 2010. Growth in a time of debt, Working Paper No. 15639
(Cambridge Massachusetts, NBER).

Ryan, P. 2001. ―The school-to-work transition: A cross-national perspective‖, in Journal of

Economic Literature, Vol. 39, No. 1, pp. 34-92.

Scarpetta, S.; Sonnet, A.; Manfredi, T. 2010. Rising youth unemployment during the crisis: How
to prevent negative long-term consequences for a generation? (Paris, OECD).

Sianesi, B.; Van Reenen, J. 2003. ―Returns to Education: Macroeconomics‖, in Journal of

Economic Surveys, Vol. 17, No. 2, pp. 157-200.

Van Reenen, J. 2003. Active labour market policies and the British New Deal for the young
unemployed in context, Working Paper No. 9576 (Cambridge Massachusetts, NBER).

Verick, S. 2009. Who is hit hardest during a financial crisis? The vulnerability of young men and
women to unemployment in an economic downturn, Discussion Paper No. 4359 (Bonn,
IZA).

Vodopivec, M.; Wörgötter, A.; Dhushyanth, R. 2003. Unemployment benefit systems in Central
and Eastern Europe: A review of the 1990s, Social Protection Discussion Paper Series No.
0310 (Washington, D.C., World Bank).

World Bank. 2006. World development report 2007: Development and the next generation
(Washington D.C.).

Zijl, M.; Van Leeuwan, M. 2005. Temporary jobs: Intermediate positions or jumping boards,
Discussion Paper No. 38 (Amsterdam, SEO).

—. Van den Berg, G. J.; Heyma, A. Forthcoming ―Stepping stones for the unemployed: the effect
of temporary jobs on the duration until (regular) work‖, in Journal of Population
Economics.

45
Annex I:

Youth employment measures adopted to mitigate the

consequences of the economic and financial crisis
This annex presents a partial inventory of policies and programmes introduced or extended
in order to counteract the negative effects of the recession on young people. The inventory
includes measures directed at young people, but also other measures which are likely to affect
significantly the situation of young people even where they are not directly targeted at them.
The country groupings follow those used by Verick (2009) and correspond broadly speaking to
similarities in the nature of labour markets and labour market institutions in these countries
rather than strict geographical boundaries.

46
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects

Anglo Countries
Employment New subsidized jobs programme targeted at Aboriginal people, youth and SME’s Youth,
Subsidy hiring science or business graduates for up to one year. Aboriginal
people
All workers
Work sharing Extension of duration of work sharing from 38 to 52 weeks during 2009 and
2010.
CANADA

Employment subsidies for small businesses, non-profit organizations and public Youth
Employment sector to offer summer jobs for youth and
subsidy Freeze on employer and employee insurance contribution rates for 2009 and New and other
2010. workers
Training Temporary extension of graduate scholarships and internship places and Tertiary
introduction of bonus payments for the completion of apprenticeships. graduates and
apprentices
Employment “Employment Subsidy Scheme” introduced in 2009 to support employment in All workers €9,100 per worker 27,400
Subsidy companies affected by the crisis. for 15 months
€249,340,000
47

overall
Work placement The “Work Placement Programme” targeting young people was extended. It Youth 2,000
IRELAND

targets young graduates who have been awarded at level 7 or above on the
National Qualifications Framework and young people receiving job seekers’
allowance for at least 6 months.
Job search Employment services, including local employment services, expanded to provide All workers
assistance and direct subsidies (support grants) for unemployed and pay for training and re-
training training with a budget up to Euro 2,500 per person.

Training The “Train to Gain” initiative has been expanded to those at risk of redundancy All workers
KINGDOM

as part of the Rapid Response Service. A survey carried out by the business
UNITED

organisation the Confederation of British Industry (CBI) showed that two thirds of
companies have changed working practices to preserve jobs (such as flexible
working and extended holidays).
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Employment and The Future Jobs Fund aims to encourage local authorities and partners to create Youth £1 Billion 150, 000
Training 150,000 new jobs for the benefit of the local community. The Fund targets
primarily 18-24 year olds who have been out of work for a year. It supports a
guarantee that from 2010 everyone in this age group who has been looking for
work for a year will get an offer of a job or training lasting at least 6 months.
The Young Person’s Guarantee (early 2010) consists of a package of over £1
billion to support the creation of jobs for long-term unemployed youth and other
unemployed who face significant disadvantage in the labour market. The
programme consists of: a) support to take a job through sector-specific training,
employment subsidies and on-the-job training; b) a work-focused training place,
lasting up to six months; and, c) a place on a Community Task Force to improve
individuals’ employability and deliver services to local communities.
The Programme Funding for Care First offers 50,000 traineeships to young
people in the care sector. Social care providers receive a subsidy for offering
employment and training to young people.
Job search Public employment services expanded £1,7 Billion were
assistance spent in 2009 to
expand services
Employment Expansion of existing programme of tax credits to apply to employers hiring Disconnected
subsidy older workers or disconnected youth (16-24 years old) in 2009 and 2010 youth, veterans
UNITED STATES OF AMERIICA
48

Employment and Expansion of funding to support summer jobs for young people and to Youth,
training sponsor projects employing at-risk youth undertaking vocational training. at-risk youth
Additional funding allocated for the construction, rehabilitation or acquisition
of training centres for the Job Corps programme (residential training
programme for disadvantaged 16-24 year old).
Training Competitive grants for training and job placement in high-growth and All workers
emerging industry sectors, with emphasis on jobs in the energy-efficient and
renewable-energy industries and in the health care sector.
Job search Expansion in funding for job search assistance and career counselling Unemployed
assistance provided through public employment services

Continental Europe Countries

Short-time New opportunities for “partial employment” (extended from 12 to 18 months and All workers 47,000 (March 2009)
AUSTRIA

working and 24 (since July 2009). These policies are connected to the policies to “up-skill
Training employees” through training programmes.
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
In 2009, the Government introduced the “Future for Youth” (19-24 year olds) to
Training and provide individualized training through PES and the “Youth foundations” which Young people 2,000 (in training in 2009)
Employment provides employment services to young people who lost their jobs after having (19-24, in 2009)
Subsidy worked at least three months. Other two measures introduced in 2008 are a
“solidarity bonus” that provides funding to companies occupying short-time
workers and the “youth employment package” provide training for young people.
Several opportunities are being created in the green industry.
Job search Public employment services expanded with the recruitment of 200 new All workers
assistance counsellors.
Short-time Short-time working programmes, which before the crisis applied only to blue- All workers
working collar workers, have been extended to all workers. The condition for access is a
reduction of 20 per cent in firm turnover. Workers are paid unemployment benefit
for the hours not worked for up to 16 weeks on zero hours or the equivalent
spread over 26 weeks. Training can be provided by regional governments.
BELGIUM

Training The Programme was established in 2009 to provide new employment Young people
opportunities to young people at regional and local levels. The Programme aims
to increase the number of apprenticeships and vocational training opportunities.
Employment services have been expanded and the staff of the Public
Job search Employment Service trained to deal with high-qualified job seekers in order to All workers
49

assistance reduce the long-term effects of the crisis

Short-time The “Partial Unemployment Scheme” has been reviewed and extended in 2009. All workers
working The most important changes relate to the efficiency of the scheme (easier
dialogue between entrepreneurs and the agencies providing support to
enterprises during dismissals), the financial aspects (extension of maximum
duration of short-time working from 600 to 800 hours, higher benefits covered by
the State) and the possibility to access training opportunities.
Training and A specific recovery plan has been introduced in 2009 to support young workers Young people 1.3 billion Euro 500,000
employment affected by the economic crisis. The amount of Euro1.3 billion funding has been (16-25) (2009-2010)
FRANCE

subsidies pledged to assist 500,000 young people in 2010. The plan consists of: a)
increased apprenticeship opportunities (320,000 between June 2009 and June
2010); b) provision of grants to employers recruiting young unemployed people;
and c) provision of employment subsidies to approximately 30,000 young people
to work in local governments and NGOs.
Job search The provision of public employment services has been improved with various All workers 26 billion Euro
assistance measures, including through the establishment of a 24-hour internet portal for job
seekers. A National Employment Council was set up to coordinate service
provision.
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Short-time Short-time work allowance extended from 6 to 24 months, accompanied by skills All workers 1.12 million Euro
working development opportunities (March 2009). Public Employment Services cover full

GERMANY

GERMANY

ESTONIA
training costs for those re-training for specific jobs (2009-2010). Employment
GERMANY

subsidies available to employers that recruit re-trained workers.

Job search Public Employment Services have been expanded to reduce the client/staff ratio. Young people
assistance Social partners have established a “training pact” to improve effectiveness of entering the
training policies and programmes labour market
Working time and The government started a training programme with co-financing of the European All workers 14 million Euro
LUXEMBOURG

Training Social Fund (September 2009-September 2013). This programme targets

unemployed people or workers belonging to companies that plan to reduce
working time

Mediterranean Countries
Employment A special Prevention Act has been implemented in 2009 (Human Resource All workers 303,142 Euro per
Subsidies and Development Authority + Ministry of Labour). Two main policies: a) Employers worker +
50

Training can retain dismissed workers on training courses that specific to the firm and 1,142,000 Euro
decided by the entrepreneurs. In the period February-June 2009, 44 firms (estimated for the
CYPRUS

submitted 313 projects (2,301 workers); subsidies amount to 303,142 Euro per period 2009-2013)
worker. b) Training programmes organised by PES and the Ministry of Labour
(in May 2009: 36 programmes for 560 unemployed). These programmes were
specific to some sectors, with a special care for sectors (hotels, restaurants)
where there are seasonal downturn which can be more difficult during the crisis.
In April 2009, the Ministry of Employment announced an “anti-crisis action plan”
Employment and aimed at preserving jobs and enhance job creation. Special attention is devoted Young people
Training to vulnerable groups. Within the anti-crisis action plan, a new programme of
GREECE

subsidized employment for young people has been introduced. Subsidies are
also given to employees who hire unemployed young people. PES services and
other agencies are running special training programmes for early school leavers
young scientists and young entrepreneurs.
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Short-Time “Malta Enterprise”, with the assistance of the Employment and Training All workers
working and Corporation (ETC), provides cash grants to employers opting for a 4-day week
Training working time and who were either planning to invest in their own organization or
going to increase their employment capacity in the subsequent six months.
Employers fulfilling the criteria are provided with cash grants which consist in a
minimum wage to workers who receive training by ETC. Training consists of
MALTA

transferable skills and specific skills which can improve productivity of workers.
This initiative is supported by the social partners.

Employment and Youth employment programme targeting youth under 25 years of age who are Young people 726,046 Euro
training unemployed or are losing their current job and school leavers (supported by
European Social
Fund
Income support A Government decree (DL 185/2008) transformed into law in January 2009 (Law Workers on Eight billion Euro
and Training 2/2009) widened the field of application of “discretionary” unemployment temporary/fixed- (Funded by
benefits. Coverage was extended to include workers on temporary contracts and term contracts, regional
apprentices. apprentices governments
ITALY

Job search The PARI programme provides access to employment for disadvantage groups Mainly young
assistance and by providing job-search assistance and training opportunities people
51

training

Training Apprenticeship measures in place since 1997 were amended in January 2009 Young people
with changes to extend access and participation. The programme is now open (16-35 years)
for young people aged 16 to 35 (previously maximum 30 years of age). The
duration was extended from 9 to 12 months
PORTUGAL

Short-time Extension of measures allowing for the temporary reduction of working time All workers
working and (from 6 to 12 months). The employee receives two-thirds of the normal salary of
Training which 30 per cent is funded by the employer and 70 per cent by the social
security system. If an employee attends agreed vocational training during the
period of reduced working time, the compensation is subsidized by the Public
Employment Service.
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Training The Qualification-Employment programme has been created. This was a All workers on
temporary measure, in force up to 31 December 2009, with the following short-time
characteristics: working
1) open to workers on reduced hours working;
2) vocational training should be delivered during working hours (more
competition for the firm, more qualification for the workers);
3) 6 months, renewable for a further 6 months; and,
4) workers who refuse to participate in the vocational training actions offered to
them under the programme lose the right to the benefits.

Employment The “Plan Empleo” has a special programme aimed to create new jobs for young
Subsidy unemployed people but also for unemployed people with family responsibilities.
The programme consists of a local investment Fund and other specific
interventions in sectors such as tourism.
SPAIN

Job search Assistance by the Public Employment Service increased in 2009 Young people 11 million Euro 300,000
assistance and adults.
52

Scandinavian Countries
Short-time Specific programmes were introduced to promote work-sharing or short-time All workers
working and work working arrangements.
sharing Change in programmes regulating dismissals in order to extend them to small
enterprises.

Training Agreement among social partners to implement training programmes. Such Young people
DENMARK

programmes identify sectors and skills which are in need or are likely to be in
need in the future. Rules for eligibility to these programmes were changed and
unemployed young people can access after only 13 weeks of unemployment.
The special targets of these programmes are low skilled job seekers.
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Working time In June 2009, 3,200 workers were working a reduced working week. For older All workers
workers the policy focus remains to retain them in the labour market. Rather than
laying off older workers, employers are encouraged to use partial retirement
schemes

Training and The budget proposal includes a package of measures that aim at quickly and Young Euro 54.65 million
FINLAND

Employment efficiently supporting employment and finding jobs for school leavers. Training unemployed
Subsidy for employment will be increased in the current, exceptionally difficult
employment situation. To alleviate youth unemployment, additional funding is
allocated to finding jobs for young people and increasing initial vocational
training. The additional financial input amounts to a total of 50 million Euro, with
additional 4.65 million Euro for outreach activities. Apprenticeship-type
continuing education will also be offered to graduates of higher education.

In November 2008, the government introduced a “short-time working regulation. All workers 200 million Euro 20,000
Companies that can demonstrate they were facing a reduction of demand of at (March-April
Short-time least 30 per cent can apply for this regulation. Workers receive the same wage 2009)
working and but are involved in training or secondment. For these workers the company is +950 million Euro
training compensated by the government. The programme works in conjunction with the (since April 2009)
Public Employment Service which started mobility centres in 30 regions. In
53

March 2009, the government extended part-time unemployment benefits

NETHERLANDS

specifically directed to skilled workers who could be retained in the same

company.
Training , Job In order to create new jobs, the government launched a Youth Action Plan in Young people 250 million Euro
search assistance June 2009. It consists of five main outcomes that aim at a) keeping youngsters
and employment longer in education (10,000 youth with low education to continue; 16 million
subsidies Euro); b) creating employment opportunities at local level (allocation of
resources: 153 million Euro) to create; c) assisting youth through coaching and
job-search assistance by Public Employment Service (10 million Euro); d)
provision of real job opportunities (charities, apprenticeship) (25 million Euro);
and, e) implementing specific interventions for vulnerable youngsters (40 million
Euro).
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Short-time Several Swedish companies have made arrangements with unions to reduce All workers
working and working time in order to avoid dismissals. Generally, wages and salaries are
passive labour proportionally reduced. Employees keep their jobs but do not have any economic
market policies compensation for loss of working time. The working time reductions are most
widespread in the metal- and engineering industries. The government is
generally not involved in reduced working time arrangements. This is in general
agreement with the Swedish government strategy to meet the crisis. Instead, the
government mitigates social effects. Increasing support is given to research and
development and investments in infrastructure and entrepreneurship aiming at
future expansion of business and welfare.
Job search In addition to the already-existing “Job Programme” that targets young people Young people
SWEDEN

assistance entering the labour market after 90 days of unemployment, the Swedish Public
Employment Service has established the following measures:
a) local mentoring programmes through which local entrepreneurs and
managers provide support to young unemployed people for establishing a first
contact with the local labour market.
b) job clubs on the internet operated by the customer service to provide virtual
meetings with job coaches, chats with employers, guidance material and the
ability to communicate with other young people online. The Career Guide
includes proposals for various job-search strategies, tips and checklists to apply
54

for a job, the rights and obligations at work and interviews with professionals in
various industries.
c) initiatives to promote youth entrepreneurship at the local level.

Central Europe
Training with Apprenticeship Programme (12 months maximum) that provides an allowance to Young people
BULGARI

employment students and employment subsidies to companies. with low

BULGARIA

subsidy education and

early school
A

leavers
Employment Work placement in public administration is provided with funding from the University
subsidy Operational Programme for Human Resources Development (OPHRD). graduates
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Short-time Companies can double the time they can use part-time workers in the case of All workers but 120 BGN per 62,650 people
working reduced volume of work. They can apply for subsidies to introduce partial with special month (3 months
employment funding for max) for part-time;
training of young 132 BGN per
workers month for training
(5 months max)
Public works Programmes of Public Expenditure for employment in construction and Applicable to all 9,000 +
renovation (OPHRD co-funds training). workers 83,000 in training

Job search Individualized employment plans and subsidies for vulnerable groups to support Disadvantaged
assistance and employment of redundant young (e.g. single parents, youth with disabilities). youth
employment Subsidies are available for training and employment in companies.
subsidy
and Job Search
Assistance
Training The Programme “Educate Yourself” was launched in March 2009 to support All workers 27,563
companies exposed to the impact of the economic and financial crisis. It
CZECH REPUBLIC

provides training opportunities to part-time workers. The Programme is funded

by the European Social Fund
55

Training The Programme “Anticipating Labour Market and Skill Needs” is designed to Young people
build g a system of skills anticipation needs at national, regional and sectoral entering the
level. labour market
Employment Special subsides to firms which create new jobs both in the IT sector and for All workers
subsidies small and medium firms creating at least 2 jobs (65-70% of job costs covered)..
Job search “Pathways to work” programme has been re-organised and now provides job All workers
assistance and search assistance and training
training
Public works Public works programmes were introduced to support long-term unemployed Long-term 80,000
HUNGARY

programmes persons. unemployed

Job search Regional employment offices have been granted additional fundingto run tailor Vulnerable
Assistance made services to integrate older workers, low-skilled and long-term unemployed groups
individuals into the labour market
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Short time Programme to allow for the reduction of working time to half for up to six months. All workers 255,000
working, Workers receive 100 per cent of unemployment benefit. Such scheme is subject
unemployment to agreement between social partners, work council or employee
benefit and representatives. Special incentives are also made available to support training
training during reduced hours working. The act also provides for greater flexibility in the
POLAND

organization of working time and limits temporary employment contracts to the

period of no more than 24 months.
Training Public Employment Service can fund 12-month apprenticeships during which the Young people 170,000 young people
young person receives 120 per cent of unemployment benefit. reached

Temporary To prevent large-scale lay-offs, employers and workers can be exempt from All workers
employment payment of social security contributions during a temporary interruption of
subsidy and activity if employment is maintained. The Public Employment Service provides
training 50 per cent support for the cost of continuous vocational training for employees.
Training grants for enterprises have also been introduced to up-skill the
ROMANIA

workforce.
Employment Companies that recruit unemployed persons or keep workers threatened by Unemployed 61 million Euro
subsidy unemployment receive a subsidy of 50 per cent of the salary to be paid to and vulnerable
workers for up to 12 months. For hard to place workers (e.g. persons with workers
56

disabilities, long-term unemployed) the subsidy can rise to 75 per cent for up to
24 months.

Temporary An amendment of the Labour Code, which came into force in March 2009 and All workers
employment will apply until December 2012, allows employers facing economic difficulties, in
subsidy agreement with the trade unions, to provide time off during which the employee
63,000
receives the basic wage. In addition, the Ministry in charge of employment
adopted measures that preserved over 60,000 jobs, created around 3,000 new
jobs and contributed to employees’ wages.
SLOVAKIA

Training, work Measures were introduced to provide youth with training and preparation for the Young people
experience and labour market, including through job-search assistance. Such measures can be
job search funded up to 100 per cent by the Public Employment Service and can further be
assistance supported with subsistence allowances (e.g. accommodation and transportation
costs) and childcare. Training during working hours is also part of these
measures. For young graduates without work experience, specific schemes are
available.
 Number of young people
Country Type of Programme Target Group Costs reached and estimates of
Programme description effects
Short-time An Act on the partial subsidizing of full-time jobs was passed in January 2009 to All workers By 15
working assist employers affected by the crisis. The subsidy aims to assist workers with a July 2009, 782 applications
shortened working week of 36 hours or – on the basis of collective agreement – were received from
SLOVENIA

no less than 32 hours. A subsidy of 60 Euro is provided per month for those employers for 67,208 workers
working 36 hours and additional 60 Euro for those working 32 hours.
Employment Measures to increase work experience during the final year of study have been Young
subsidy strengthened and subsidies are available to employers for the recruitment of graduates
graduates. Subsidies for self-employment are also available for young people, as
well as specific grants for those with low skills.

Baltic countries
Training In July 2009 the government extended the period of training for unemployed All workers
individuals and allowed workers to continue training even after finding temporary
jobs
ESTONIA

Job search Since 2008, the Government has started job search clubs for unemployed young Young job
assistance individuals. These clubs take care of training and provide apprenticeship places. seekers

Income support The Employment Contracts Act introduced on July 2009 reduces the advance All job-seekers .
dismissal time by 30 days and increases the level of unemployment and social
57

security benefits.
Training Employees working reduced hours have the opportunity to participate in training All workers 9.9 million LVL
programmes. They receive a voucher of 711 Euro that can be spent in training (2009-2013); 1.8
programmes that have a maximum duration of 6 months. million LVL (2009)
LATVIA

Public works The public work programme pays an allowance of about 142 Euro per month to All workers 34 million Euro 38-50,000
programmes participants paid to the beneficiaries is 142 Euro – equivalent to 80 per cent of
the minimum wage. This programme is co-financed by the European Social
Fund and the total allocation equalled 24 million LVL (34 million Euro).
Programme participants can also participate in training programmes.
Temporary The “First job” programme provides employment subsidies to school leavers and
LITHUANIA

employment graduates with a view to gaining work experience Young people

subsidy

Sources: The inventory was compiled on the basis of documents available from the following organizations: Bureau of Labor statistics http://www.bls.gov/; European Employment Observatory, http://www.eu-employment-
observatory.net/ ; OECD, www.oecd.org; and Service Canada http://www.servicecanada.gc.ca/eng/subjects/employment/index.shtml as well as from European National Employment services.
Annex II: The jobless rate
In order to further elucidate on some of the advantage of the jobless rate as an
indicator, it is worth stating the simple formulas for the youth unemployment and jobless
rates explicitly:

no. of young people who are unemployed

Youth Unemployment Rate 
no. of young people in the labour market (1)

no. of young people who arenot employed or in education

Youth Jobless Rate 
no. of young people (2)

Clearly, the difference between the indicators lies in differences in both the
numerators and the denominators of the expressions. Specifically, the numerator and
denominator are both larger in the case of the jobless rate;43 all those who are unemployed
are by definition not in education or employment, but the latter also includes those not
seeking work. Similarly not all young people participate in the labour market either
because they participate in education or for some other reason do not actively search for
work. The consequence is that the jobless rate may be bigger (or smaller) than the
unemployment rate according to whether the proportion of the inactive population, as
traditionally defined, which is not participating in education is greater (or less than) the
proportion of the active population who are unemployed44. In other words, other things
being equal, the higher the educational participation rate, the lower will be the jobless rate
vis-à-vis the unemployment rate.

In order to see the arguments concerning the superiority of the youth jobless rate, a
little basic algebra may help. If U is the no. of unemployed young people, N the number of
employed (young people),45 E the number of young people in education, D the number of
―discouraged‖ (young) people neither in employment, ILO unemployment or education
and P is the (youth) population, two equivalent expressions for the (youth) unemployment
rate, u, are:

43
Strictly speaking, the numerator and denominator respectively of the jobless rate are actually
―greater than or equal to‖ those of the youth unemployment rate, however, for them to be equal, all
those not in employment would have to actively seeking work and no young people would be
participating in education, conditions which will never be satisfied in practice.

ab a b a
44
It is a matter if elementary algebra that,    . If a stands for the unemployed, b
cd c d c
the number of those who are neither employed, (ILO) unemployed, or in education, c the size of the
labour force, and d stands for the population not in the labour force, then we have the condition
stated in the text.
45
I use parentheses here since these formulas are obviously valid for any group of people, or indeed
for the economy as a whole.

59
 U
u
UN (1‘)

and since P = N + U + D + E

U
u
P  E  D (1‘‘)

Similarly two equivalent expressions for the (youth) jobless rate, j, are:

U D
j
P (2‘)

PN E
j  1 n  e
P (2‘‘)

where j is the jobless rate, n the employment rate and e the educational participation
rate of young people. Assuming that the youth population is exogenously given, then -
from (2‘‘) - the youth jobless rate will fall (rise) if the proportion of young people in either
employment or education rises (falls). On the other hand, – from (1‘‘) - the unemployment
rate will increase if, ceteris paribus, participation in education increases, but as with the
jobless rate, from (1‘) will fall if employment increases. The point here is that, using the
unemployment rate, an improvement in a ―good‖ indicator – the educational participation
rate – can produce a worsening of a ―bad‖ indicator – the youth unemployment rate. For
the jobless rate, improvements in either of the ―good‖ indicators, educational participation
and the employment rate, improve (i.e. reduce) the bad indicator, the jobless rate.

60
Employment Working Papers

2008

1 Challenging the myths about learning and training in small and medium-sized enterprises:
Implications for public policy;
ISBN 92-2-120555-5 (print); 92-2-120556-2 (web pdf)
David Ashton, Johnny Sung, Arwen Raddon and Trevor Riordan

2 Integrating mass media in small enterprise development. Current knowledge and good
practices;
ISBN 92-2-121142-6 (print); 92-2-121143-3 (web pdf)
Gavin Anderson. Edited by Karl-Oskar Olming and Nicolas MacFarquhar

3 Recognizing ability: The skills and productivity of persons with disabilities.

A literature review;
ISBN 978-92-2-121271-3 (print); 978-92-2-121272-0 (web pdf)
Tony Powers

4 Offshoring and employment in the developing world: The case of Costa Rica;
ISBN 978-92-2-121259-1 (print); 978-92-2-121260-7 (web pdf)
Christoph Ernst and Diego Sanchez-Ancochea

5 Skills and productivity in the informal economy;

ISBN 978-92-2-121273-7 (print); 978-92-2-121274-4 (web pdf)
Robert Palmer

6 Challenges and approaches to connect skills development to productivity and employment

growth: India;
unpublished
C. S. Venkata Ratnam and Arvind Chaturvedi

7 Improving skills and productivity of disadvantaged youth;

ISBN 978-92-2-121277-5 (print); 978-92-2-121278-2 (web pdf)
David H. Freedman

8 Skills development for industrial clusters: A preliminary review;

ISBN 978-92-2-121279-9 (print); 978-92-2-121280-5 (web pdf)
Marco Marchese and Akiko Sakamoto

9 The impact of globalization and macroeconomic change on employment in Mauritius: What

next in the post-MFA era?;
ISBN 978-92-2-120235-6 (print); 978-92-2-120236-3 (web pdf)
Naoko Otobe

61
10 School-to-work transition: Evidence from Nepal;
ISBN 978-92-2-121354-3 (print); 978-92-2-121355-0 (web pdf)
New Era

11 A perspective from the MNE Declaration to the present: Mistakes, surprises and newly
important policy implications;
ISBN 978-92-2-120606-4 (print); 978-92-2-120607-1 (web pdf)
Theodore H. Moran

12 Gobiernos locales, turismo comunitario y sus redes

Memoria: V Encuentro consultivo regional (REDTURS);
ISBN 978-92-2-321430-2 (print); 978-92-2-321431-9 (web pdf)

13 Assessing vulnerable employment: The role of status and sector indicators in Pakistan,
Namibia and Brazil;
ISBN 978-92-2-121283-6 (print); 978-92-2-121284-3 (web pdf)
Theo Sparreboom and Michael P.F. de Gier

14 School-to-work transitions in Mongolia;

ISBN 978-92-2-121524-0 (print); 978-92-2-121525-7 (web pdf)
Francesco Pastore

15 Are there optimal global configurations of labour market flexibility and security?
Tackling the ―flexicurity‖ oxymoron;
ISBN 978-92-2-121536-3 (print); 978-92-2-121537-0 (web pdf)
Miriam Abu Sharkh

16 The impact of macroeconomic change on employment in the retail sector in India:

Policy implications for growth, sectoral change and employment;
ISBN 978-92-2-120736-8 (print); 978-92-2-120727-6 (web pdf)
Jayati Ghosh, Amitayu Sengupta and Anamitra Roychoudhury

17 From corporate-centred security to flexicurity in Japan;

ISBN 978-92-2-121776-3 (print); 978-92-2-121777-0 (web pdf)
Kazutoshi Chatani

18 A view on international labour standards, labour law and MSEs;

ISBN 978-92-2-121753-4 (print);978-92-2-121754-1(web pdf)
Julio Faundez

19 Economic growth, employment and poverty in the Middle East and North Africa;
ISBN 978-92-2-121782-4 (print); 978-92-2-121783-1 (web pdf)
Mahmood Messkoub

62
 20 Employment and social issues in fresh fruit and vegetables;
ISBN 978-92-2-1219415(print); 978-92-2-1219422 (web pdf)
Sarah Best, Ivanka Mamic

21 Trade agreements and employment: Chile 1996-2003;

ISBN 978-2-1211962-0 (print); 978-2-121963-7 (web pdf)

22 The employment effects of North-South trade and technological change;

ISBN 978-92-2-121964-4 (print); 978-92-2-121965-1 (web pdf)
Nomaan Majid

23 Voluntary social initiatives in fresh fruit and vegetables value chains;

ISBN 978-92-2-122007-7 (print); 978-92-2-122008-4 (web pdf)
Sarah Best and Ivanka Mamic

24 Crecimiento Económico y Empleo de Jóvenes en Chile. Análisis sectorial y proyecciones;

ISBN 978-92-2-321599-6 (print); 978-92-2-321600-9 (web pdf)
Mario D. Velásquez Pinto

25 The impact of codes and standards on investment flows to developing countries;

ISBN 978-92-2-122114-2 (print); 978-92.2.122115-9 (web pdf)
Dirk Willem te Velde

26 The promotion of respect for workers‘ rights in the banking sector:

Current practice and future prospects;
ISBN 978-92-2-122116-6 (print); 978-2-122117-3 (web pdf)
Emily Sims

2009

27 Labour Market information and analysis for skills development;

ISBN 978-92-2-122151-7 (print); 978-92-2-122152-4 (web pdf)
Theo Sparreboom and Marcus Powell

28 Global reach - Local relationships : Corporate social responsibility, worker‘s rights and
local development;
ISBN 978-92-2-122222-4 (print); 978-92-2-122212-5 (web pdf)
Anne Posthuma, Emily Sims

63
29 The use of ILS in equity markets: Investing in the work force social investors and
international labour standards;
ISBN 978-92-2-122288-0 (print); 978-92-2-122289-7 (web pdf)
Elizabeth Umlas

30 Rising food prices and their implications for employment, decent work and
poverty reduction;
ISBN 978-92-2-122331-3 (print); 978-92-2-122332-0 (web pdf)
Rizwanul Islam and Graeme Buckley

31 Economic implications of labour and labour-related laws on MSEs: A quick review of the
Latin American experience;
ISBN 978-92-2-122368-9 (print); 978-92-2-122369-6 (web pdf)
Juan Chacaltana

32 Understanding informal apprenticeship – Findings from empirical research in Tanzania;

ISBN 978-2-122351-1 (print); 978-92-2-122352-8 (web pdf)
Irmgard Nübler, Christine Hofmann, Clemens Greiner

33 Partnerships for youth employment. A review of selected community-based initiatives;

ISBN 978-92-2-122468-6 (print); 978-92-2-122469-3 (web pdf)
Peter Kenyon

34 The effects of fiscal stimulus packages on employment;

ISBN 978-92-2-122489-1 (print); 978-92-2-122490-7 (web pdf)
Veena Jha

35 Labour market policies in times of crisis;

ISBN 978-92-2-122510-2 (print); 978-92-2-122511-9 (web pdf)
Sandrine Cazes, Sher Verick

36 The global economic crisis and developing countries: Transmission channels, fiscal and
policy space and the design of national responses;
ISBN 978-92-2-122544-7 (print); 978-92-2-122545-4 (web pdf)
Iyanatul Islam

37 Rethinking monetary and financial policy:

Practical suggestions for monitoring financial stability while generating employment and
poverty reduction
ISBN 978-92-2-122514-0 (print); 978-92-2-122515-7 (web pdf)
Gerald Epstein

64
38 Promoting employment-intensive growth in Bangladesh: Policy analysis of the
manufacturing and service sectors;
ISBN 978-92-2-122540-9 (print); 978-92-2-122541-6 (web pdf)
Nazneen Ahmed, Mohammad Yunus, Harunur Rashid Bhuyan

39 The well-being of labour in contemporary Indian economy;

ISBN 978-92-2-122622-2 (print); 978-92-2-122623-9 (web pdf)
Praveen Jha

40 The global recession and developing countries;

ISBN 978-92-2-122847-9 (print); 978-92-2-122848-6 (web pdf)
Nomaan Majid

41 Offshoring and employment in the developing world: Business process outsourcing in the
Philippines;
ISBN 978-92-2-122845-5 (print); 978-92-2-122846-2 (web pdf)
Miriam Bird, Christoph Ernst

42 A survey of the Great Depression, as recorded in the International Labour Review, 1931-
1939;
ISBN 978-92-2-122843-1 (print); 978-92-2-122844-8 (web pdf)
Rod Mamudi

43 The price of exclusion:

The economic consequences of excluding people with disabilities from the world or work
ISBN 978-92-2-122921-6 (print); 978-92-2-122922-3 (web pdf)
Sebastian Buckup

44 Researching NQFs:
Some conceptual issues
ISBN 978-92-2-123066-3 (print), 978-92-2-123067-0 (web pdf)
Stephanie Allais, David Raffe, Michael Young

45 Learning from the first qualifications frameworks

ISBN 978-92-2-123068-7 (print), 978-92-2-123069-4 (web pdf)
Stepahnie Allais, David Raffe, Rob Strathdee, leesa Wheelahan, Michael Young

46 International framework agreements and global social dialogue: Lessons from the Daimler
case
ISBN 978-92-2-122353-5 (print); 978-92-2-122354-2 (web pdf)
Dimitris Stevis

65
2010

47 International framework agreements and global social dialogue: Parameters and prospects
ISBN 978-92-2-123298-8 (print); 978-92-2-122299-5 (web pdf)
Dimitris Stevis

48 Unravelling the impact of the global financial crisis on the South African labour market
ISBN 978-92-2-123296-4 (print; 978-92-2-123297-1 (web pdf)
Sher Verick

49 Guiding structural change

The role of government in development
ISBN 978-92-2-123340-4 (print); 978-92-2-123341-1 (web pdf)
Matthew Carson

50 Les politiques du marché du travail et de l'emploi au Burkina Faso

ISBN 978-92-2-223394-6 (print); 978-92-2-223395-3 (web pdf)
Lassané Ouedraogo et Adama Zerbo

51 Characterizing the school-to-work transitions of young men and women

Evidence from the ILO school-to-work transition surveys
ISBN 978-92-2-123396-1 (print); 978-92-2-123397-8 (web pdf)
Makiko Matsumoto and Sara Elder

52 Exploring the linkages between investment and employment in Moldova - A time-series

analysis
ISBN 978-92-2-122990-2 (print); 978-92-2-122991-9 (web pdf)
Stefania Villa

53 The crisis of orthodox macroeconomic policy

The case for a renewed commitment to full employment
ISBN 978-92-2-123512 (print); 978-92-2-123513 (web pdf)
Mohammed Muqtada

54 Trade contraction in the post-2007 crisis

Employment and inequality effects in India and South Africa
Forthcoming
Marion Jansen, Leanne Roncolato and Erik von Uexkull

66
55 The impact of crisis-related changes in trade flows on employment:
Incomes, regional and sectoral development in Brazil
Forthcoming
Scott McDonald, Marion Jansen and Erik von Uexkull

56 Envejecimiento y Empleo en América Latina y el Caribe

ISBN 978-92-2-323631-1 (print); 978-92-2-323632-8 (web pdf)
Jorge A. Paz

57 Demographic ageing and employment in China

ISBN 978-92-2-123580-4 (print); 978-92-2-123581-1 (web pdf)
Du Yang and Wrang Meiyan

58 Employment, poverty and economic development

in Madagascar
A microeconomic paper
ISBN 978-92-2-1233985 (print); 978-92-2-1233992 (web pdf)
Gerald Epstein, James Heintz, Léonce Ndikumana and Grace Change

59 The Korean labour market

Some historical macroeconomic perspectives
ISBN 978-92-2-123675-7 (print); 978-92-2-123676-4 (web pdf)
Anne Zooyob

60 Les accords de partenariat économique et le travail décent

Quels enjeux pour l‘Afrique de l‘ouest et l‘Afrique central ?
ISBN 978-92-2-223727-2 (print); 978-92-2-223728-9 (web pdf)
Eléonore d’Achon, Nicolas Gérand

61 The great recession of 2008-2009

Causes, consequences and policy responses
ISBN 978-92-2-123729-7 (print); 978-92-2-123730-3 (web pdf)
Iyanatul Islam and Sher Verick

62 Rwanda forging ahead

The challenge of getting everybody on board
ISBN 978-92-2-123771-6 (print); 978-92-2-123772-3(web pdf)
Per Ronna, Elina Scheja,Karl Backeus

67
63 Growth, economic policies and employment linkages in Mediterranean countries
The cases of Egypt, Israel, Morocco and Turkey
ISBN 978-92-2-123779-2 (print); 798-92-2-123780-8 (web pdf)
Gouda Abdel-Khalek

64 Labour market policies and institutions with a focus on inclusion, equal opportunities and
the informal economy
ISBN 978-92-2-123787-7 (print); 978-92-2-123788-4 (web pdf)
Mariangles Fortuny and Jalal Al Husseini

A complete list of previous working papers can be found on:

http://www.ilo.org/employment

68
Employment Sector

For more information visit our site:

http://www.ilo.org/employment

International Labour Office

Employment Sector
4, route des Morillons
CH-1211 Geneva 22

Email: edempdoc@ilo.org

69