EU youth unemployment: are politicians failing young people?

The numbers

7.5 MILLION young people unemployed in Europe
23.5% the EU-28 youth unemployment rate
28% Ireland’s youth unemployment rate
€3.9 BILLION EU extra funds to fight youth unemployment
€21 BILLION per year the cost of implementing the Youth Guarantee scheme.
€10 BILLION per year the contribution of the European Social Fund (ESF)

Youth unemployment is a serious problem for Europe. Angela Merkel, speaking at a summit with EU leaders held in Berlin this year, defined it as  “perhaps the most pressing problem facing Europe at the present time.”

Europe has seen a steady increase in youth unemployment rates since the end of 2008, when the economic crisis began: in September 2013 youth unemployment in the EU-28 was above 23.5%, up by 0.4 percentage points when compared to the previous year.

Ireland current rate is 28%, which means that more than 65,000 young people are out of work. Some European countries perform better (such as the UK, 21%, or France, 26%), but others have to deal with an even worse situation (such as Italy, 40%, or Spain, 56% and Greece, 57%).

Europe has reacted to the problem in many ways. Last month, EU negotiators agreed on a budget which includes €3.9 billion in extra funds to try to help the 7.5 million young European citizens currently unemployed. However, many believe that the extra cash is just a ‘drop in the ocean’, consisting of only €200 for each unemployed person, and that the EU is not adopting the right strategy when dealing with unemployment.

“My opinion is that this EU spending on youth unemployment is largely irrelevant to the real issue, ” says Bill Emmott, former editor of The Economist, now working on a film about Europe and its crisis with the Italian journalist Annalisa Piras. “Most likely, it is just a political gesture, designed to allow politicians to claim they are doing something, and to make the EU look better by claiming that something is also being done by the (now often hated) EU. The real issue is growth and economic activity: all the training in the world (and €200 isn’t much) will make no difference at all if jobs are not being created that require the skills young people are being trained with.”

The EU has moved in this direction by introducing the Youth Guarantee scheme, whose aim is to ensure that all people under 25 are offered a good-quality job, an apprenticeship, a traineeship, or continued education within 4 months after leaving formal education or becoming unemployed.

The scheme is going to have a cost for EU member states, estimated at around €21 billion per year overall. However, having 7.5 million young people out of work leads to a much higher cost: €150 billion are lost every year in terms of benefits paid out and lost output.

The European Social Fund (ESF) is the main source of money for the implementation of the scheme: “We know that in the next period 2014-2020 the whole budget is about 10 billion per year for all the member states, for all the actions under the European Social Fund. We don’t know yet the allocations per country, but it will be for each country to decide where they will spend the money,” a spokesperson for László Andor, EU Commisioner for Employment, clarifies.

Ireland and Europe

How is the Irish government going to use such money? When asked, the Department of Social Protection declined to answer.  In any case, the government will have to submit a Youth Guarantee implementation plan to the EU Commission by the end of 2013.

According to James Doorley, spokesperson for the National Youth Council of Ireland, “funding should be used to enhance career guidance and job counselling, important to assist young jobseekers to make the right choices about their future. […]Also some of the funding should be used to assist young entrepreneurs especially with regard to start up capital which is difficult to access from the banks at the moment.”

But whatever the government does, “it should be in the context of a very careful strategically coherent approach. And it seems to me that what the Irish government has done in general is not strategically coherent at all,” David Jacobson, Emeritus Professor of Economics at Dublin City University, believes.

From the same University, Professor Gary Murphy, head of the Law and Government department, holds that EU decisions made at a Council of Ministers or European Commission level have no great clarity, and that there seems to be a certain ‘ad-hoc’ nature in relation to the granting of the money: “I would much rather see a scenario where budget are targeted, whereby states have to actually bid into a larger fund and have a specific plan.”

Looking to the future

Solving the problem of unemployment implies the creation of jobs. Bill Emmott is convinced that, given Europe’s public debts and welfare-state crisis, job creation will have to take place mainly in the private sector.

“And for the private sector to create more jobs requires a mixture of removing barriers to businesses (e.g. single market in services, faster processes to set up and expand companies, and so on) and expanding demand, which is about cleaning up and reforming banks so that they can lend, and (at across the EU as a whole, not the most indebted countries) using fiscal and monetary policy. Just as (mostly) America has done, which is in part why US unemployment is 7% and euro-zone unemployment is 12%. But then ever since the 1980s, Europe has always had higher unemployment than the US, while from 1950-83 it always had lower unemployment.”

An unpublished EU report, accompanying the Communication from the Commission on Annual Growth Survey 2014, states that employment is likely to improve, at least slightly, in the near future, primarily as a consequence of GDP increases. According to the report, new jobs will be created in the ICT sector, in health-related services, and in hi-tech reliant sectors (such as the transport industry). Besides, the greening of the economy might lead to an increase of green jobs as well.

However, Professor David Jacobson mistrusts economists who make predictions, since “nobody knows the future and economists who try to tell you the future are usually wrong.”

His advice for young people is to look around and be well aware of what is available to them: “I think the solution for individual unemployed youth is very often there, but not seen. You’ve got to find out. You can’t simply say ‘nobody is doing anything for me’. I do think that there are a lot of people who do not pursue all the options.”

If on one hand he considers the critical arguments against Europe as well funded and well based, on the other he reinforces the idea that, from an individual perspective, people have to make the best out of the situation they find themselves in: “And to do that requires very often time and effort to find out what options are available to you, and maybe you have to accept second best. But if you accept second best, who knows what the future can hold? Maybe you can emerge from that into some first best.”


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