The EU’s £8bn Youth Unemployment Fund: Can it work?

, by Osmi Anannya

The EU's £8bn Youth Unemployment Fund: Can it work?

In an EU summit last month, European leaders agreed to set aside a further €6bn to tackle youth unemployment, prioritising the deployment of funds to where youth unemployment is higher than 25 percent, namely Greece (59.1 percent), Spain (55.9 percent), Italy (38.4 percent), Portugal (38.3 percent) and France (26.5 percent). The youth represent the future of every European nation, holding the potential to unlock prosperity and dynamism for the continent. In the face of record-high unemployment in Europe, with a decline in household incomes and an increase in the risks of poverty and social exclusion, both EU institutions and respective governments should put more thought into the welfare and growth of young people and come up with new ideas to integrate them into the labour force.

Young workers face high risks as widespread unemployment in Europe continues to prevail. Long-term unemployment rates for this particular diaspora have increased in many countries, accompanied by an increase in skill mismatch. The fourth quarter of 2012 showed the youth unemployment rate (23.3 percent) to be more than twice as high as the general unemployment rate (9.3 percent). In March this year, data reveals almost 6 million young people (24 percent) to be unemployed in the EU-27 area. Also, in the last four years, employment rates for young workers have fallen three times higher than the employment rates for adults.

Youth unemployment in France is double the national rate; in deprived estates and some rural areas it exceeds 40 percent. François Hollande came to power promising to tackle the youth unemployment issue in France, and one of his first measures was the creation of state-aided jobs for young people through a subsidised employment scheme, Jobs for the Future, which intends to create 100,000 jobs this year (150,000 next year) aimed at 16 to 25 year olds with no qualifications and resident of urban or rural areas badly hit by unemployment. The state is to pay 75 percent of the young person’s wage for three years and majority of the jobs are in the public service and non-commercial sector, with work primarily for local authorities and in voluntary, transport and education sectors. The cost is to be €2.3bn this year and the same next, and will be introduced to the commercial sector as well, with a small number of jobs subsidised at a lower rate.

Italy’s new Prime Minister Enrico Letta and his government, meanwhile, have also introduced measures to tackle youth unemployment in the country – a package of tax-breaks for employers who hire workers younger than the age of 30 on permanent contacts, and measures to encourage training, apprenticeship and internship schemes. In Spain, however, the situation continues to be bleak. Prime Minister Mariano Rajoy’s People’s Party has not taken any steps to curb youth unemployment, pointing instead towards newly-introduced labour laws and austerity measures which should slash unemployment figures. Some of these legislations have proven to be quite controversial actually, such as the labour reform bill which reduced compensation for unfair dismissal, leading unions and opposition parties to protest about how this would actually increase unemployment by making it cheaper for employers to lay-off workers.

The German Chancellor Angela Merkel has stated that youth unemployment is the biggest crisis facing Europe, pushing other governments to follow the German system of emphasising apprenticeships, alongside academic study, to prevent the possibility of a growing “lost generation”; Germany has successfully reduced youth unemployment through a means of structural reform since reunification. The €6bn youth unemployment fund can work but by no means does this have to be only through a replicated strict German system of pairing apprenticeships with academic study. The International Labour Organisation (ILO) has highlighted three steps which governments in cooperation with public-private partnerships could take to potentially help curb youth unemployment:

i. Mix classroom with workplace training – this scheme is widely active in Germany, Austria, Switzerland and Denmark, which have the lowest rates of youth unemployment in Europe.

ii. Successful job creation also requires integrating entrepreneurship in technical and vocational training.

iii. Employment services make the transition to work easier.

Policy geared towards tackling youth unemployment is a priority for the EU, with the European Commission recently launching the Youth Opportunities Initiative to provide assistance to young unemployed people through funding for apprenticeships and entrepreneurship schemes, as well as advising young people with innovative business ideas. Furthermore, in December of last year, the European Commission proposed measures, the Youth Employment Package, to help curtail youth unemployment and social exclusion. The package recommends launching a Youth Guarantee in every country, with the Member States moving to ensure that all young people up to the age of 25 receive a good offer of employment, continue education, an apprenticeship or traineeship within four months of leaving formal education or becoming unemployed.

The European Commission is actively advocating all Member States to introduce a Youth Guarantee, and the European Social Fund does exist to help act as EU financial support to put it to practice, but what’s proven to be a challenging discovery is that for many Member States this means that structural reforms will be necessary, including the development of Vocational Education and Training systems, as well as making sure that youth unemployment measures are very much a part of their national budgets. The European Council has also agreed to provide support in the form of €3bn from the EU budget and €3bn from the European Social Fund, for regions most hit with youth unemployment, as part of its Youth Employment Initiative.

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