Unemployment has always been a challenge for most European countries and the situation has worsened considerably over the last decade. In particular, young people across Europe have been most affected by the recent economic crisis. Between 2008 and 2011, the percentage of unemployed youth aged between 15 and 24 has doubled across EU Member States and unemployment rate has reached an unprecedented level of 23.5% in 2013 (Eurostat Data). Furthermore, disparity in youth unemployment figures throughout the European Union is striking; With only 7,1%, Germany has the lowest youth unemployment rate in Europe, while the percentage of young Mediterraneans out of work is more than alarming : Nearly half of the young Mediterranean population remains jobless; in Italy (41,5%), Croatia (43,6%), Spain (49,3%) and Greece (49,7%)
Why is youth unemployment in the EU so high?
The most apparent reason for the disproportionate ratio of unemployed youth in Europe is the latest economic crisis. In times of recession, young workers are generally more prone to be the first target of large layoffs as they usually have short-term contracts or are employed on a temporary basis. In Europe, older generation benefits from strong job protection to the detriment of current and future generations.
However, the root cause of youth employment is a rather complex issue that extends beyond economic recession. According to the international monetary fund (IMF), other factors such as the output gap and labor market factors also contribute to the problem. Of particular relevance are the opportunity cost of working, labor costs, and spending on active labor market policies. In a recent report published by McKinsey, a mismatch between applicants’ skills and the needs of employers is one of the major issues of youth unemployment in Europe. About 65% of the employers are dissatisfied and consider university graduates ill-prepared for the job. Similarly, 63% of graduate students find it exceedingly difficult to obtain employment. However education providers are overly-optimistic as 74 percent remain confident that graduates have all the necessary work skills.
There is a clear lack of coordination between important stakeholders to ensure Education-to-Employment (E2E). Employers reproach European education system to be mainly focused on hard skills while compromising on other important areas of competency. Managers reported a significant shortage of soft skills such as verbal communication and work ethic among young graduates.
Another communication issue should be raised in this problematic situation: insufficient career information and support services to help students enter the job market.
The Youth Guarantee scheme
The Youth Guarantee scheme was established in 2013 by the European Union as a response to the deterioration of youth employment rate. It consists of a new approach to helping all young people under 25 to obtain concrete career opportunities within 4 months of graduation.
The implementation of the Youth guarantee principle in EU countries requires strong cooperation between all stakeholders: public authorities, education providers, employers, trade unions, etc. Each EU country is in charge of developing its own Youth Guarantee scheme and adapting it to each individual need and situation. The cost of implementing such a plan in the Eurozone is estimated at €21 bn per year (ILO report) but inaction would be more damaging for the economy and would cost €153 bn per year (Eurofound report).
A year later: results
Although youth unemployment remains at a very high level in EU countries, small improvements have been made throughout 2014 and are already showing results; youth unemployment rate at the European level decreased significantly in comparison with 2013. The percentage of young unemployed stands at 21.10% on 31st December 2014 against 23.30% recorded at the end of 2013.
Out of all EU Member states, Finland has developed one of the most efficient personalized Youth Guarantee schemes and yielded successful career offer to 83,5% of its young job seekers within 3 months of unemployment. The driving force behind the Finnish case is the effective partnership approach that reduced the administrative barriers between different stakeholders (i.e. labour market actors, education providers and youth organizations).
Challenges in a nutshell
- Reaching all the young people, not only the high-skilled or ‘job-ready’ graduates. Member states should use a more holistic approach to address all young people in need and particularly those who are more at risk.
- Reforms in the education systems to re-align skill level and solve skill mismatch problem. Learning about work as part of the school program.
- Long-term reforms are needed to remove structural barriers in labor market access as well as reforms in support services to help the student transition from education to employment.
- Quality and continuity of trainings and follow-up consultations for young graduates to ensure that they are effectively re-integrated into the labor market.
Though it currently has limited appeal, the digital sector seems more likely to be the future workplace for the European Youth. The digital revolution is taking place incredibly rapidly worldwide and will impact people of all ages, however only 2% of European companies are exploiting the advantages of new digital technologies. New digital tools such as cloud computing, mobile services, networking are revolutionizing the way companies function (European Commission report).
Today, businesses that miss the opportunity to digitize are more susceptible to exit the global market as competition gets stiffer – digitized companies tend to grow 2 to 3 times faster than traditional firms.
In comparison with the U.S., the digital economy is underexploited in Europe (only 59% companies are digital) and growth prospects in this sector are promising. In addition, the European commission has actively implemented policies aimed at stimulating and supporting digital entrepreneurship in the EU.
In conclusion, it is obvious that there is a high potential for jobs creation in the digital world for the coming years. “Digitized” jobs are likely to be the jobs of the future for young Europeans.
Photo credit: David Iliff