Europe's Youth Unemployment Nightmare Started Long Before The Euro Crisis

europe youth unemployment

Photo: Deutsche Bank

One of the more tragic outcomes of the euro crisis has been the gut-wrenchingly high youth unemployment rates.  More than half of the young people in Greece and Spain are looking for work.”Europe is facing an often-cited “lost generation” which experiences long periods of unemployment or unstable jobs during their first working years, with serious long-term consequences,” says Deutsche Bank’s Stefan Vetter.

Indeed, Europe’s more recent economic problems have caused these unemployment rates to surge.

But Vetter notes that to youth unemployment has been a long-term, structural problem that has been around even during the good times long before the crisis.

Youth unemployment is currently especially pressing, but it is not a new phenomenon specific to this crisis. The relative youth unemployment rate, i.e. the unemployment rate of those aged 16-24 divided by the total unemployment rate, illustrates that it is a structural problem. For many years the unemployment rate of young adults between 16 and 24 has been roughly twice as high as for the general population. The relative rate is remarkably stable for most countries and does not change significantly even in booms and recessions…

Vetter thinks the solution to this problem becomes apparent when you understand why the relative unemployment rate is so low in Germany.

Reasons for high unemployment among the young include ineffective education systems (the share of early school dropouts is 20% in Italy and 30% in Spain) and dual labour markets with highly protected jobs for older employees. The good performance of Germany is not least a result of the German apprenticeship system, which facilitates labour market access for school leavers by lowering the company’s costs for employing them. The OECD’s latest “Going for Growth” report recommends reforms to strengthen the vocational training systems as one of the most effective ways to fight structural youth unemployment. This would also be a reasonable starting point for the EU’s youth employment programme.

Efforts to address Europe’s youth unemployment crisis can’t come soon enough.

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