Europe Attempts to Avoid Negative Long-Term Consequences of High Youth Employment Rates

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Out of concern for the long-term negative consequences related to youth unemployment, the European Union (EU), along with member state governments and a consortium of private businesses have adopted plans to put young people to work in Europe. In July 2012, the unemployment rate in the EU reached 11.3%, signifying 18 million Europeans were out of work. This was the highest level of unemployment in the EU since the euro was adopted in 1999. European companies have hesitated to invest and hire new workers due to weak consumer spending, triggered in part by government payrolls cuts, higher taxes, and volatility in the financial markets. European companies have also hesitated to expand their work forces because strict European labor laws make it difficult to lay off workers during tough economic times.

While the overall unemployment rate in the EU is high, its youth unemployment rate is even higher. In July 2012, the unemployment rate for workers under the age of 24 reached 22.5%, up from an already high 21.3% one year earlier. However, this increase was not uniform across the EU. The youth unemployment rate actually decreased in ten EU member states during July and increased greatly in several countries located in Europe’s economic periphery, including Greece and Spain. During July, the youth unemployment rate reached 53.8% in Greece and 52.9% in Spain, the highest levels in the EU.

A prolonged high youth unemployment rate has many long-term negative consequences for workers and businesses. A person’s job skills and work experience begin to fade rapidly after about six months of unemployment. This means that the longer a person is unemployed, the harder it becomes for that person to find a permanent job at a competitive wage. The EU’s challenging labor markets have already forced many out of work youth to accept part-time and temporary jobs for low wages. However, the International Labor Organization (ILO) believes that if a person accepts such work early in his or her career, that person will have a more difficult time finding permanent employment with proper advancement opportunities later on. The negative impact from working in these low-level positions can hamper a person’s career for up to 15 years according to Ekkehard Ernst, Chief of the ILO Employment Trends Unit. Businesses can also be hurt by sustained youth unemployment in the long run. As unemployed youth move abroad in search of better job opportunities, companies in countries with high youth unemployment rates will eventually be unable to find qualified workers to fill vacancies.

To prevent these long-term negative consequences, the EU, a group of private businesses, and several member states have adopted plans to put people to work. The EU already contributed €3 billion to education and apprenticeship programs designed to reduce youth unemployment in Greece, Ireland, Italy, Latvia, Lithuania, Portugal, Slovakia, and Spain. The EU also recently proposed a Youth Guarantee program, which would help young people find employment or training opportunities within a few months of losing their jobs. Private businesses are also trying to reduce youth unemployment. A task force at the Business-20 Summit, a gathering of global business leaders, called for companies to increase their apprenticeships and internships by 20% over the next year in order to put young people to work. Several companies have already responded. For example, Starbucks recently launched a twelve-month apprenticeship program in the U.K. Finally, individual governments are trying to reduce youth unemployment within their borders. For instance, the Italian and Spanish governments have proposed tax breaks for businesses that hire young workers. In addition, the French government recently proposed to pay up to 75% of the salaries for young workers hired by private companies during the first three years of their employment. France hopes the plan will put 150,000 new young people to work over the next two years.

Despite the best efforts of the EU, private businesses, and individual member states, youth unemployment is likely to continue to be a problem in Europe going forward. Due to the continuing problems associated with the European financial crisis, the ILO forecasts that over the next five years the youth unemployment rate in the EU will decrease only slightly to 21.4% from 22.4% today. Such a prolonged period of youth unemployment could produce a “lost generation” of young workers who suffer long-term career setbacks. It could also negatively impact long-term business productivity and competitiveness in the countries experiencing the highest rates of youth unemployment today.