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Youth unemployment

Growth and employment go hand-in-hand, but what if the economy is stalling? Countries across Europe have been forced to come up with a bunch of solutions to help the young find work.

Dominik Tóth is not a NEET – a term used for young people who are not in employment, education or training – but he is not much better off in his current job. Tóth, 25, works at a logistics center as a forklift truck driver in the outskirts of Budapest. He does afternoon and evening shifts, usually between 2 pm and 10 pm, and makes about HUF 80,000 a month. To qualify for the position, he had to take a driving license for forklifts, a one-and-a-half-month course he paid for himself. It is not his dream job, and not even the prospects of eventually becoming a warehouse director make the position more appealing.

That he ended up here is, by his own admission, largely Tóth’s fault. After taking the final exams in one of the leading catering high schools of the country, he decided not to spend an extra year on specialization. Lacking higher education, he worked mostly as a trained worker in the past five years. He started a state-financed further education program to become a tourist guide a few years ago, but quit as his finances began to dry out. He tried his luck abroad too: as a warehouse worker in the Netherlands where he worked for a total of one year in the past three.

It doesn’t just take unfinished studies to become jobless these days. Highly qualified young people are equally unable to find a job.  The crisis, though, is only partly to blame. “Employment is dependent of economic growth, yet youth unemployment was high even before the crisis started,” said László Andor, EU commissioner for employment, social affairs and inclusion, at a seminar on youth unemployment held in Budapest on January 11. The Hungarian National Economy Ministry’s employment rate comparison of the young (aged 15-24) and the elderly (aged 50-64) proves his point: in 2006, 47.9% of the young were out of work compared to 21.7% of the elderly. Employment within the 15-24-age group was also poor: the 34.1% peak of 2000 had shrunk to 21% by 2007. Europe figures are even more disappointing. There are 5.5 million youths out of work in the Continent – a 22% unemployment rate that is double that of the whole society.

“We should have started yesterday. But we didn’t so we have to start it from where we are,” said Guy Ryder, director general of the International Labor Organization (ILO) referring to newly introduced measures to curb youth unemployment. Numerous solutions have been tried out: the Nordic countries are probably the best to draw from, but Austria, Germany and the Netherlands also have ideas worth looking at.

Take it for granted in Sweden, plan long-term in Italy

Sweden has not been as shaken by the recession as most European countries, nor has its job market suffered as much. One of the reasons for that are the youth guarantee programs that have run for nearly 30 years. Young Swedes between 16 and 24 and jobless for at least 90 days in four months are eligible for a 15-month career coaching-training-star-up subsidy program.

Denmark, Germany and Switzerland offer dual system apprenticeship to help school-to-work transition. Placements at firms are offered according to what the market dictates. As a result, nearly two-thirds of participants secured a job at their apprenticeship employers, who bear 77% of the program costs.

Although not all the young are out of a job, many work in uncertainty and for a low pay. In Europe, four out of ten youths work in temporary jobs, ILO data shows. To push employers to take on the young long-term, Italy now incentivizes permanent job contracts and has increased the tax on short-term work. It has also reduced the costs for employers to lay off workers who had been in highly protected upper tier jobs.

Far-off opportunities

Hungary too has started a number of programs to drive down its 26,1% rate. Aside from the job protection action plan, which reduces the employers’ contribution by 14% up to HUF 100,000 for employees under 25, it put into motion a First Job Guarantee Program. Some 7,000 career starters – people not entitled to welfare – unskilled workers and long-term job seekers have benefited from the program. The state paid their wages and social contribution taxes and travel expenses from September until December 2012. The HUF 3.6 billion project was financed from the national employment fund. For young people who can’t find a job locally, a housing allowance of up to HUF 1.2 million has been offered. The allowance is awarded to people who commute at least six hours per day to and from work. The HUF 2 bln fund earmarked for it will accommodate up to 1,800 people, said Sándor Czomba, state secretary for employment.

Youth guarantee programs are a good way to straighten problems of failed/poor education, but are not a panacea. They tend focus on the under-25 age group and exclude the young who are not fresh starters, but have been employed already. Nor do they solve the problem of long-term unemployment or do much for people like Tóth, who has been in and out of jobs in the past five years.

Funding for young entrepreneurs may be a tool economists welcome more warmly. Self-employment has been a (forced) trend anyway, not only in Hungary but also worldwide. The government is set to give a non-refundable grant of HUF 3 mln from a HUF 7 bln EU fund to 1,500 young entrepreneurs to launch their businesses. The eligible age group here is more loosely defined: people up to 35 can apply for the grant and people up to 40 can receive financial support if they work as head of an agricultural holding for the very first time.

How long until the effects kick in? That depends on the economy mostly but one probably has to look in terms of decades.