The EU Youth Guarantee in the Spotlight

AROBy Ana Rovzar, International Energy Graduate of Sciences Po Paris

More needs to be done to reduce youth unemployment in the EU

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Last November, European Union (EU) leaders signed a scheme to combat rising youth unemployment in the region. Dubbed the ‘Youth Guarantee’, the scheme aims to ensure that young Europeans – aged between 15-24 years of age – get a quality job, internship or education within 4 months of entering the labour market. Its overall objective is to give the most vulnerable young Europeans a chance at employment in these difficult times, all the while cementing skills for a more employable future.

Though the scheme indicates the EU is serious about dealing with youth unemployment and represents a step in the right direction, some analysts believe the Youth Guarantee does not go far enough. Furthermore, insufficient funds, economic austerity, and a lack in political will, are likely to obstruct the path towards the scheme’s goal. More needs to be done to ensure not only the success of the scheme but also to overcome this issue.

Youth unemployment has indeed been identified as “Europe’s most pressing problem” by German Chancellor Angela Merkel, and with good reason. In October 2013 youth unemployment came in at 23.7% for 18-24 year olds in the 28 EU countries, and remained over 50% in Spain, Greece and Croatia. Into 2014 Youth unemployment continues to present one of the strongest challenges to Europe’s long-term economic recovery.

The problem is deep rooted. In November last year, around 5,7 million young Europeans were not in education, employment or vocational training – a group now known as the ‘NEETs’. Furthermore, the disparity between member states is dramatic, ranging from Austria’s 9.4 percent and Germany’s 7.8 percent to 41.2 percent and 58 percent in Spain and Greece respectively (dated November 2013). Around ten other EU member states have numbers reaching above 25 percent.

For those lucky enough to be employed, difficult working terms frequently follow. Most can only score “junk contracts” of intermittent or temporary work, with few benefits and low pay, often below their education level. Such contracts facilitate easy lay-offs, and rarely include the guarantee of a fixed employment for good performance. Unsurprisingly, these difficult work circumstances have led to an embittered and disillusioned generation struggling to become independent.

As history could have predicted, the unemployment crisis prompted  migration. Many youngsters from the most-affected economies with backgrounds in science, medicine, engineering, and social sciences are leaving their native homes to look for better job opportunities elsewhere in northern European countries or even outside the EU. Ironically, these are the very brains and fiscal contributors that stagnant countries need most for their economic recovery. Those who remain run a higher risk of becoming permanently unemployed and living in poverty; adding to the state’s fiscal burden.

At least in words, the EU has understood the severity of the problem; “without a targeted investment in our human capital we risk a lost generation“, stated László Andor, European Commissioner for Employment, Social Affairs and Inclusion. The Youth Guarantee also fits in as part of a larger EU Youth Employment Initiative, which the European Commission has recommended all member states to adopt. Mirrored on Finnish and Austrian best practices, the measure is particularly directed towards countries with youth unemployment rates higher than 25%.

It is however up to the member states to design, implement and partly fund their national Youth Guarantee. Estimates suggest the EU Youth Guarantee will cost the union a total of €21 billion per year or 0.21% of GDP. To put this in perspective, the International Labour Organization and Eurofound pit the cost of not intervening at €153 billion per year, due to foregone taxes and economic productivity. In November last year, EU heads of state met in Paris and agreed to make the integral budget for 2014-2016 immediately available for implementation.

Like all ideas, the scheme has met its fair share of criticism. Given the scale of the problem, some argue the funds allocated are peanuts and insufficient to make an impact. The European Youth Foundation has also called for a greater emphasis on quality traineeships, increased participation by young Europeans in the policy-making processes, as well as an extension of the scheme to 25-30 year olds. Other critics go as far as qualifying the project as a German PR project geared towards appeasing embittered southern-European countries. Most importantly, a more skilled and employable young workforce becomes an asset when there is economic recovery as a whole. As long as economic growth doesn’t pick up, the scheme isn’t sustainable and merely provides a short-term band-aid solution.

The success of the Youth Guarantee also relies on the member states’ political will to implement a clear strategy. After all, social affairs and employment remain a national prerogative. This requires countries to orchestrate deep structural reforms in sectors such as employment, administrative services, and education. They must also strengthen co-operation between education and business, improve the integration of low-skilled young people in the labour market, address skills mismatches, promote apprenticeships and traineeships in key economic sectors, and stimulate youth entrepreneurship. Quite a heavy – but important – to-do list. No one said it would be easy.

The core of the solution boils down to economic recovery and the political determinism to get there. The Youth Guarantee is by no means void of good intention and certainly represents a step in the right direction. Other proposals to boost the success of the Youth Guarantee include introducing milder austerity measures, liberalising labour rules for permanent workers, cutting payroll taxes for hiring young employees, reducing social contributions, as appropriate, and shifting taxation away from labour to boost job creation. If these recommendations are taken into account in a constructive matter, there is room and indeed an imperative for this joint EU & national action.

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3 thoughts on “The EU Youth Guarantee in the Spotlight

  1. Great article and summary of the situation. One aspect, however, that somehow completely escapes public attention is that we should no longer talk about “youth” unemployment, as understood as the unemployment rate of those under 24. The cutting point was those who graduated before 2008 and those who graduated after 2008 – not the age. As such, people who finished grad school/PhD programs or college after 2008 are facing the same problems as those who came out of BAs after 2008. Because of this, we are talking about a large age cohort between 18 and early 30s. The problems that 18 year olds are facing (whether to invest in an expensive degree or not) are radically different from those who are getting closer to 30 (oooups, how the heck am I gonna pay my student loans / will I ever be able to have children on internships…). We are therefore dealing with a very diverse group in terms of education level, age and even cultural/linguistic background. Cookie-cutter or one-time solutions will at best, if at all, help one and a small segment of this group. One solution idea I often hear is that young people should express their opinions through the polls – but, oh wait!, a large part of this population no longer lives where he/she has voting rights. I am not very optimistic regarding EU action to alleviate the problem but I am interested to see how this situation will change economic behavior. Could we (young people) start businesses that cater to the needs of young people? Could we create fora and self-help organisations? Could we organize ourselves across borders to express our opinion? In other words, we should maybe think about how to solve our problem on our own and not wait for the Eurocrats – they just don’t get it.

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