The Economic and Financial Crisis and Precarious Employment amongst Young People in the European Union

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1 The Economic and Financial Crisis and Precarious Employment amongst Young People in the European Union Niall O Higgins LABESS, CELPE Università di Salerno & IZA, Bonn nohiggins@unisa.it

2 Presentation Overview of the effects of the recession on young people in the labour market Growth of precarious forms of employment Factors contributing to the differential experiences of young people across countries Concluding Comments

3 4 Main Points 1. Young people more affected by the recession than other age-groups 2. Low Skilled young people most affected 3. By no means clear that weaker EPL i.e. greater LM flexibility increased young people s chances of finding work 4. Recession has moved us further towards permanent instability in youth labour markets

4 % Change in youth employment 2007Q2-2011Q2 European Union Ireland United Kingdom Austria Belgium France Germany Luxembourg Cyprus Greece Italy Malta Portugal Spain Denmark Finland Netherlands Sweden Bulgaria Czech Republic Hungary Poland Romania Slovakia Slovenia Estonia Latvia Lithuania THE CRISIS & YOUNG PEOPLE Anglo Continent Mediterranean Scandinavia Central Europe Baltics

5 % change in employment 5 0 YOUNG PEOPLE VS. ADULTS I: EMPLOYMENT % CHANGE 2007Q2 2011Q Youths Prime-Age adults

6 YOUNG PEOPLE VS. ADULTS II: UNEMPLOYMENT CHANGE IN RATIO OF YOUTH TO ADULT UE RATES 2007Q3 2010Q Males Females

7 WERE YOUNG PEOPLE MORE AFFECTED BY RECESSION THAN ADULTS? Qualified Yes Typically youth employment rates fell more than adult employment rates; but often, Ratio of youth to adult unemployment rates also fell BUT This ignores different significance of unemployment for young people importance of Long-Term Unemployment

8 18.0 Percentage point change in the incidence of Long-Term Unemployment, Young people, 2007Q1 2011Q Change 2007Q1-2009Q1 Change 2009Q1-2011Q1 Change 2007Q1-2011Q1

9 THE CRISIS & YOUNG PEOPLE More young people affected by the crisis than adults? More importantly - Young people MORE affected by the crisis than others The consequences of un/non-employment early on is likely to be more serious for young people (at least compared to prime age adults) Key issue is what is happening to long-term unemployment

10 % change in Employment Which Young People? % Change in Employment by Education 2007Q3 2010Q Male ISCED 0-2 Male ISCED 3-4 Male ISCED 5-6 Female ISCED 0-2 Female ISCED 3-4 Female ISCED 5-6

11 PRECARIOUS EMPLOYMENT 1. Temporary employment Much depends on the national labour market institutions Not much evidence to suggest that temporary employment acts as a bridge to permanent employment risk that it becomes a bridge to permanent precariousness 2. Part-time employment Employment protection is typically weaker Need to distinguish between voluntary and involuntary part-time employment 3. Self-employment Evidence to suggest that self-employment is often a survival technique where the alternative is unemployment

12 % of workers with temporary contracts 2007 PRECARIOUS EMPLOYMENT: % OF WORKERS IN TEMPORARY JOBS BY AGE, EU Males Females

13 % of young workers in temporary employment PRECARIOUS EMPLOYMENT: % OF YOUNG WORKERS IN TEMPORARY JOBS, 2007, 2009 & Q2 2009Q2 2011Q2

14 % point change PRECARIOUS EMPLOYMENT % POINT CHANGE IN THE INCIDENCE OF TEMPORARY EMPLOYMENT AMONGST YOUNG WORKERS change change change

15 European Union Ireland United Kingdom Austria Belgium France Germany Greece Italy Portugal Spain Denmark Finland Netherlands Sweden Bulgaria Czech Republic Hungary Poland Romania Slovakia Slovenia Estonia Latvia Lithuania % point change 2007Q1-2011Q1 PRECARIOUS EMPLOYMENT % POINT CHANGE IN THE INCIDENCE OF TEMPORARY EMPLOYMENT Anglo Continent Mediterranean Scandinavia Central Europe Baltics

16 PRECARIOUS EMPLOYMENT % POINT CHANGE IN THE INCIDENCE OF TEMPORARY EMPLOYMENT BY AGE

17 PRECARIOUS EMPLOYMENT % POINT CHANGE IN THE INCIDENCE OF TEMPORARY EMPLOYMENT AMONGST YOUNG WORKERS BY EDUCATION, EU Primary Secondary Tertiary change change change

18 % point change PRECARIOUS EMPLOYMENT % POINT CHANGE IN THE INCIDENCE OF PART-TIME EMPLOYMENT AMONGST YOUNG WORKERS, change change change

19 % point change PRECARIOUS EMPLOYMENT % POINT CHANGE IN THE INCIDENCE OF PART-TIME EMPLOYMENT OF YOUNG PEOPLE BY EDUCATION Primary Secondary Tertiary

20 % change PRECARIOUS EMPLOYMENT % CHANGE IN SELF-EMPLOYMENT AMONGST YOUNG PEOPLE % change % change %change

21 % change PRECARIOUS EMPLOYMENT % CHANGE IN SELF-EMPLOYMENT AMONGST YOUNG WOKRERS BY EDUCATION , EU all primary secondary tertiary

22 0.0 WHY? CROSS-COUNTRY DIFFERENCES NOT (FULLY) ACCOUNTED FOR BY CHANGES IN GDP depth of recession (MA based) % change in youth employment 2007Q1-2011Q1

23 Depth of recession WHY? TEMPORARY EMPLOYMENT CHANGES HAD VERY LITTLE TO DO WITH THE DEPTH OF THE RECESSION Change in incidence Budapest of Temporary November, 2011 Employment

24 OLS: Dep. Vbl.s = Dyouth emp rate; Dyouth OLF rate Change in Emp/Pop ratio 2007Q1-2011Q1 Change in OLF/Pop ratio 2007Q1-2011Q1 Males Females Males Females Coeff S.E. Coeff S.E. Coeff S.E. Coeff S.E , Emp/pop ratio emp/pop ratio Depth of recession EPL Index (aggregate) Dual Youth as % of working age population Intercept Adjusted R-sq n

25 OLS: Dep. Vbl.s = Dyouth unemp/pop ratio; D incidence of LT unemp Change in Unemp/Pop ratio 2007Q1-2011Q1 MF Change in incidence of LT Unemp 2007Q1-2011Q1 MF Coeff S.E. Coeff S.E , Emp/pop ratio Emp/pop ratio Depth of recession EPL Index (aggregate) Dual Youth as % of working age population Intercept Adjusted R-sq n 25 20

26 Comments on regressions 1. recession induced change in GDP is positively associated with the change in the employment-population ratio, and negatively with labour force exit. 2. pre-recession employment-population ratio of year olds was negatively related to the change in youth employment-population ratio educational participation. youth employment fell less in countries with a high secondary/tertiary educational participation rate (not the whole story). 3. Strong EPL Positively associated with employment growth (and negatively with LM exit). in countries where EPL is strong, young people were less likely to become discouraged workers 4. Dual apprenticeship system - consistently statistically significant, and strongly associated with labour market success in terms of the maintenance of both employment and labour market attachment. 5. Relative size of the youth population is also positively associated with employment changes and negatively with labour market withdrawal. not supportive of the cohort crowding hypothesis à la Korenman & Neumark (2000) - more in line with the findings of Shimer (2001) for the USA.

27 EPL & Youth Labour Markets EPL evidence that EPL leads to shallower recessions, but not at all clear that they last longer (typical corollary), e.g. USA Vs. Germany & low EPL Vs. High EPL groups cited by IMF (2009). Some evidence that strong EPL associated with better youth LM performance some countries increased LM flexibility during the recession e.g. Lithuania about the worst time to do so - at least without accompanying measures to dampen the negative income effects (e.g. Estonia)

28 Concluding comments Much Cross-country variation much depends on country specific institutions Problem of low skilled, low educated young people emergence of a hard-core of unemployed (& unemployable?) youth a more radical approach to the reform of educational policy? Problem of permanent precariousness Growth in temporary (and other atypical forms of) employment Concentrated amongst the young Concentrated amongst the least educated Role of EPL needs to be examined more carefully not at all clear that greater flexibility helps cyclical adjustment no evidence at all that atypical forms help adjustment Major challenge for TUs What to do about the Youth? How to engage young people in precarious work forms