POLICY ACTIONS FOR YOUTH

ENTREPRENEURSHIP

Importance and challenges

Dr. Jonathan Potter

Senior Economist, Centre for Entrepreneurship, SMEs and Local

Development, OECD

Jonathan.Potter@oecd.org

Table of contents

1. Youth unemployment and potential of entrepreneurship

2. Barriers encountered by young entrepreneurs

3. The opportunities to develop policy actions using European Funds

4. Evidence that youth entrepreneurship actions can work

5. Keys to delivering support

6. Conclusions

Unemployment rates in the EU

0

5

10

15

20

25

30

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

Total Males Females

Adults (15 to 64 years old)

Youth(15 to 24 years old)

• Unemployment rates for youth are approximately double the rate for adults.• Gender differences are small: converging for adults but diverging for youth.

Source: Eurostat LFS

Unemployment rates in Member States, 2013

0

10

20

30

40

50

60

70%

Adults (15 to 64 years old) Youth (15 to 24 years old)

• Youth unemployment rates are double the rate for adults in most Member States.

Source: Eurostat LFS

Perceptions and feasibility of self-

employment in the EU, 2012

• 45% of youth have a preference for self-employment and 41% believe that it is feasible to be self-employed in the next 5 years.

Source: Flash Eurobarometer #354 (2012)

0

10

20

30

40

50

60

Total Youth

%

Preference for self-employment Feasibility of self-employment in next 5 years

Self-employment rates in the EU

0

5

10

15

20

25

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

%

Total Males Females

Adults (15 to 64

Youth(15 to 24 years old)

• Self-employment rates have been stable over the last decade.• Youth self-employment rates are approximately one-third of the adult rates.

Source: Eurostat LFS

Self-employment rates in Member States

0

5

10

15

20

25

30

35%

Adults (15 to 64 years old) Youth (15 to 24 years old)

• Youth self-employment rates vary substantially across Member States.

Source: Eurostat LFS

Barriers encountered by young

entrepreneurs

0

5

10

15

20

25

30

Not enoughcapital

Currenteconomic

climate is notgood for start-

ups

Not enoughskills to be self-

employed

No business idea Difficult toreconcile with

familycommitments

Risk of failuresand its legal and

socialconsequences

are too big

Administrativedifficulties

%

Adults (15-64 years old) Youth (15-24 years old)

Source: Flash Eurobarometer #354

• Youth perceive greater barriers to self-employment than adults, particularly related to financing and skills.

Barriers to self-employment, 2012

The opportunities to develop policy

actions using European Funds

1. European Social FundUnder the thematic objective 'promoting sustainable and quality employment and supporting labour mobility':

(i) Access to employment for job-seekers and inactive people, including the long-term unemployed and people far from the labour market, also through local employment initiatives and support for labour mobility;

(ii) Sustainable integration into the labour market of young people, in particular those not in employment, education or training, including young people at risk of social exclusion and young people from marginalised communities, including through the implementation of the Youth Guarantee;

(iii) Self-employment, entrepreneurship and business creation including innovative micro, small and medium sized enterprises;

(iv) Equality between men and women in all areas, including in access to employment, career progression, reconciliation of work and private life and promotion of equal pay for equal work;

(v) Adaptation of workers, enterprises and entrepreneurs to change;

(vi) Active and healthy ageing;

(vii) Modernisation of labour market institutions, such as public and private employment services, and improving the matching of labour market needs, including through actions that enhance transnational labour mobility as well as through mobility schemes and better cooperation between institutions and relevant stakeholders

The opportunities to develop policy

actions using European Funds, continued

2. Youth Employment Initiative– Activities supported include:

1. “Encourage schools and employment services to promote and provide continued guidance on entrepreneurship and self-employment for young people.”

2. “Ensure greater availability of start-up support services.”

3. Europe 2020 Strategy– Recognises entrepreneurship and self-employment as key for achieving smart,

sustainable and inclusive growth

– Several flagship initiatives address entrepreneurship:

1. Agenda for new skills and jobs;

2. Youth on the Move – initiatives on education and employment;

3. European platform against poverty and social exclusion.

4. Entrepreneurship 2020 Action Plan– Section 4.2.4. Unemployed, in particular young people

Given the significant number of unemployed people across Europe, entrepreneurship support schemes should be put in place toencourage business creation as a route out of unemployment. Fewbusiness development support schemes target unemployed youth specifically.

Start-up support as part of ALMPs, 2012

• Start-up support measures are not widely used in active labour market policies

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0%

Source: Eurostat, LMP expenditure by type of action

Evidence that youth entrepreneurship

actions can work

Programme Country Target Type of support

Impact estimate

.garage Hamburg (ongoing)

Germany Unemployed youth under the aged of 35

Training, finance, incubator

83% of participants in 2000-2002 carried on in self-employment and 10% were in employment or apprenticeships.

First business year baskets for youth (2011-2013)

Lithuania Youth under the age of 29

Vouchers for BDS

Improved survival rates: 98.9% for 1 year vs. 63.3% (2012)

Programme for NEETs to move into self-employment (2007-2010)

Slovenia Unemployed youth under the age of 25

Grants; training

Improved survival rates: 85% for first 2 years

The Prince’s Trust Youth Business Scotland(ongoing)

United Kingdom

“Unbankable” youth who are 18-25 years old

Finance; coaching and mentoring; training

Generated 155 additional start-ups in 2004/05 and 416 start-ups started sooner, on a larger scale, or higher quality.

Keys to success

• Support and build sustainable self-employment projects:

1. Use strong selection criteria to identify ideas with the greatest chances of success;

2. Use staged-selection where participants receive increasing levels of support after demonstrating capabilities;

3. Provide complementary supports to ensure that youth develop potentially sustainable projects (e.g. training and mentoring).

Keys to success, continued

• Avoid common pitfalls when designing and implementing entrepreneurship support for youth:

1. Supporting projects in excess supply industries;

2. Financing projects with little chance of success;

3. Providing insufficient financial supports that cannot lead to the creation of sustainable businesses;

4. Providing temporary, one-shot supports.

Conclusions

1. Start-up support programmes are under-utilised in response to youth unemployment.

2. Start-up support programmes need to respond to market failures in accessing finance and developing entrepreneurship skills.

3. Well-designed youth entrepreneurship programmes can work well and have demonstrated success in the EU.

4. The keys to success are:

1. Select ideas with the greatest chances of success;

2. Use staged-selection that based on a demonstration of capabilities;

3. Use complementary supports to ensure that youth develop potentially sustainable projects (e.g. training and mentoring).

More information on youth entrepreneurship

http://www.oecd.org/cfe/leed/inclusive-entrepreneurship.htm