Let's stop talking about Europe's 'lost generation' of young jobless

Years of crisis in so many of the EU’s member states have hardened into a single key question: How can we save European youth from becoming a “lost generation”?

Most people across Europe care far less about interest rates on sovereign bonds than about the fate of young people in their neighbourhood or their own family. And most of us strongly believe that politics should be about providing young people with peace, stability and prosperity through education, training and job opportunities.

Settling young Europeans into work would have an enormously positive impact on the EU economy and social fabric. And although we have made significant progress in dealing with the crisis, it is still far too early to declare victory. Only when sustainable new jobs are created will the crisis be truly over.

Long before the 2008 financial crisis and the subsequent economic slowdown, Europe’s young people aged between 15 and 24 were already the most affected by unemployment. Over the last five years, the situation deteriorated dramatically. Over 5.5m young people in the EU of 28 are unemployed, nearly a million of them in Spain alone. But youth unemployment doesn’t just affect the southern European countries hit hardest by the crisis. It is also a challenge to countries that have escaped relatively unscathed like the United Kingdom, where the numbers of young unemployed increased by 60% between 2004 and 2013. In the Netherlands, youth unemployment has seen a sharp rise of 75%, leaving Germany as the only EU member state where youth unemployment has been steadily dropping since 2005. Although a closer look at the demographics of the unemployed reveals that it is the less qualified who are over-represented amongst the jobless, the unemployment rate for young graduates in the EU-27 from 12% to 18% between 2008 and 2012. And the problem has become much more structural, with about one third of Europe’s jobless young now registered as long-term unemployed.

Unemployment figures provide only a limited picture of what’s happening. Eurofound has estimated that in 2012 more than 700,000 adolescents in the EU-27 were so discouraged that they did even not look for jobs and so don’t figure in the unemployment statistics. The fairly new concept of the NEETs – those “Not in Education, Employment or Training” has been established to measure the percentage of adolescents who fall into that group. In Spain, Greece, Italy or Croatia, a very worrying one fifth of those countries’ young populations are now classified as such.

As well as all this, young Europeans often face the challenge of atypical employment contracts and the related problem of what’s being called “labour market segmentation”. In 2011, 42.5% of young Europeans were on a fixed-term contract, with a third of them doing so involuntarily. Fixed-term contracts imply economic uncertainty because in some countries they involve limited social security coverage. And when in conjunction with labour legislation that protects permanent contracts, it is workers with fixed-term contracts who are the first to be dismissed at times of crisis. Recent analyses suggest that the share of young people who work in Europe’s informal economy – about 17% – is more than double the level of older workers. In other words, young people in the EU are more at risk from both a legal and economic stand point.

When adolescents are hit by unemployment they undergo a “scarring” effect. To begin with, suffering from youth unemployment can negatively affect their level of wages for decades to come. Having been without a job in one’s past is the most significant factor explaining a person’s current unemployment. And, of course, anyone who was unemployed in their youth can eventually expect lower state pension benefits.

The personal consequences of unemployment are obviously very damaging, correlating as they do with social exclusion, poverty and poorer health. Being unable to support a family of their own keeps many young Europeans at home: in 2008, 46% of 18 to 34 year-olds in the EU were still living with at least one parent, making them far less likely to start their own family. Psychologically, unemployment leads to lower self-esteem and discouragement, sometimes causing mental illness. Some studies have even found a correlation between youth unemployment and suicide, along with lower life expectancy.

Beyond these personal costs, society as a whole is affected negatively by youth unemployment at a fiscal and economic level. On the public revenue side, no job implies no contribution to social security and no payment of income tax. As to the public expenditure side, when eligible, the young unemployed receive social assistance or unemployment insurance and benefit from labour market policies and special programmes. The economy suffers from lost productivity and lower consumption, while indirect societal consequences like higher crime rates cannot be underestimated. Against a background of Europe’s falling demographic development, the deterioration of young people’s skills during periods of inactivity is equally problematic.

The most important consequences on a societal level are the decline of social cohesion as well as a dwindling of confidence in public institutions. This crisis of trust is often projected onto the EU-level, where both the crisis and the hardship caused by necessary adjustment measures are perceived to stem from. Unemployment creates an unequal society that divides generations to come between insiders and outsiders, winners and losers. Those on the losing side are more inclined to mistrust our political institutions currently in place, on both a national and European level. It’s a crucial challenge for the EU, because if Europe is to be more closely integrated both economically and politically, that will have to be based on the support of its citizens.

With this firmly in mind, we need to look forward to policies for the future. Europe has never seen as well-educated a generation as today’s. We must therefore develop a new discourse on how to make best use of their competences by providing young people with the balanced mix of freedom and support that will ensure they become a creative force.

The whole nature of the global economy has undergone major change due to new communications and other technologies and changing political power structures. Countries need to adapt their policies to this changing environment, for the aftermath of the worldwide economic crisis presents a window of opportunity for necessary structural reforms.

These reforms differ in each EU member state. For some, the priority should be to change labour legislation and fight the segmentation of the labour market that discriminates against young people. Other countries should prioritise education and training reforms. In Germany, the dual system of vocational training has proven an effective instrument for education and training that also facilitates smooth labour market integration, inspiring the EU to launch the European Alliance for Apprenticeship. Germany has shown its support by signing several Memoranda of Understanding with other EU countries most affected by the crisis, but it takes time to establish apprenticeship schemes. Internships can be an alternative source of practical experience, and the EU labour ministers have recently adopted the Quality Framework for Traineeships.

Many structural reforms rely on support from the social partners, yet in some EU countries the relationships between these partners is itself in serious need of reform. Historical reasons or labour market changes mean that collective bargaining might not be co-ordinated enough for social partners to fill their role and provide for an effective labour market and training system. The EU plans, therefore, to foster social dialogues at national and European level.

Using the EU Youth Guarantee that was adopted in February 2013, all structural reforms concerning youth unemployment could be brought together. This offers an opportunity to think strategically about all the issues attached to youth unemployment, and to develop clear-sighted plans for sustainable employment policies that concentrate on the potential of the generation to come. And the EU’s Youth Employment Initiative support the implementation of these plans with €6bn.

The geographical disequilibrium of labour supply and demand is serious, yet mobility could also serve as a mechanism to encourage entry into the labour market of young people. Labour mobility can help overcome the skills shortages in thriving but ageing economies, and if it is to support mobility within the EU, the EURES network of European employment services should be made a more effective placement service.

When it comes to encouraging mobility amongst young people, another example from Germany that could benefit other European countries is the MobiPro-EU programme. It offers young Europeans logistical and financial assistance help for taking up an apprenticeship in Germany or seeking qualified employment in areas where Germany’s own market lacks an adequate supply. It’s a programme that’s been so successful that even after a tripling of its funding, no further applications can be received at present.

As well as its obvious economic advantages, mobility increases inter-cultural and language skills for migrants themselves and among their hosts. Mobility can foster the European identity by creating personal ties, for it is through small companies, schools and universities that Europeans come together.

Jobs aren’t created out of the blue, and the best matching system is useless without the job opportunities to be matched. Throughout the EU, two thirds of the non-financial business economy workforce is employed by small and medium enterprises, and in Germany four out of five apprentices are trained in them. Targeted support for SMEs through the European Investment Bank is highly valuable, and its “Skills and Jobs – Investing for Youth“ programme is now offering €6bn every year to businesses and public institutions that employ and train young people.

In these times of economic restructuring, it’s crucial that people should start new businesses. Today’s well-educated young generation is an immense source for new ideas and initiatives, and to help the starting of new businesses, the EU has several programmes for micro loans. That’s important, as is the EU’s resolve to encourage youth entrepreneurship. But most important of all is the need to overcome any discourse about Europe’s “lost generation”.