Youth Unemployment in Greece:Measuring the Challenge

DAVID BELLDIVISION OF ECONOMICSSTIRLING MANAGEMENT SCHOOLUNIVERSITY OF STIRLING

DAVID BLANCHFLOWERDEPARTMENT OF ECONOMICSDARTMOUTH COLLEGE

A Deep-Rooted Problem

• [Youth unemployment is] "perhaps the most pressing problem facing Europe at the present time.... It is highly regrettable that parts of the economic elite assume so little responsibility for the deplorable situation” Angela Merkel, July 2013

EU Policy Response

• The Youth Guarantee

• Member states of the European Union should "ensure that all young people under the age of 25 receive good quality offer of employment, continued education, apprenticeship or a traineeship with enough period of four months of becoming unemployed were leaving formal education." (Council of the European Union, 2013) 

• The Council created the Youth Employment Initiative through which €6 billion will be made available to NUTS 2 regions with an youth unemployment rate above 25% in 2012. These monies have to be distributed between 2014 and 2016. 

• The Youth Guarantee is intended to provide young people with a job, training or education over a defined period. The entitlement is generally given by public institutions such as the public employment service, sometimes acting in concert with private or third sector organizations.

Effectiveness of Interventions to Mitigate Negative Effects of Youth Unemployment

• Evidence of Success Limited

– Differences between countries in the types of programs, which succeed or fail

– Scaling up – management problem

– Time horizon – how long should evaluation last? (may have to rely on cohort studies or administrative data)

– Programs evolve – complicating evaluations

– Evaluations tend to focus on narrow range of measures

– Understanding how allocation to programs may affect outcomes

Scarring Effects of Youth Unemployment

• Experience of unemployment when young

– A temporary disturbance that is part of the search and matching process for those inexperienced in the labour market

– A negative experience that changes the beliefs and preferences of the young about the nature of the labour market and has long-lasting negative effects on their labour market experience

• Most of the evidence supports the latter explanation

Greece and the Youth Guarantee

• Greece is intending to implement a national youth action plan using €517 million, with the aim of benefiting up to 350,000 young people.

• Measures under the plan include a temporary hiring program for unemployed persons below the age of 35 in community-based work programs.

• In July 2013 it introduced a youth internship and employment voucher program under the youth action plan aimed at supporting occasional training and internships for a six-month period for 45,000 people up to the age of 29.

• €1.2 billion is being allocated to help small and medium-sized companies meet liquidity requirements and so assist with the expansion of youth employment.

Analysis

• Using the European Labour Force Survey and Eurostat

• Comparators

– Spain and Portugal - southern European countries that, like Greece, have hit particularly hard by the recession

– The Republic of Ireland has also been hit hard, but has a quite different labor market

– Even though its economic performance has been much stronger, Sweden has experienced persistently high levels of youth unemployment

– Germany, the UK and France to give a perspective on unemployment trends in the European Union as a whole.

Greek Unemployment Rates by Age Group

largest increase among 15-19 year olds

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

70%Ages 15-19

Ages 20-24

Ages 25-29Greece had a substantialyouth unemployment problemprior to the Great Recession

Greek Employment to Population Ratio by Age Group

largest decline among 25-29 year olds

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

70%

80%

Ages 15-19

Ages 20-24

Ages 25-29

Empl

oym

ent t

o Po

pula

tion

Ratio

Rates can give a misleading impression of magnitudes

Age 15-19 20-24 25-29 15-19 20-24 25-29 15-19 20-24 25-29 15-19 20-24 25-29 15-19 20-24 25-29 15-19 20-24 25-29

Year2005 281 333 408 281 334 389 26 159 335 13 109 235 8 34 37 11 54 64

2009 270 294 404 278 280 362 22 134 321 11 90 230 6 31 44 8 43 532012 275 265 366 271 266 325 11 76 211 4 50 159 14 67 116 15 77 106

Activity Rate (%) EPOP Rate (%) Unemployment Rate (%)

2005 12 58 91 9 49 77 9 48 82 5 33 60 24 18 10 46 33 21

2009 11 56 90 7 48 78 8 46 79 4 32 64 22 19 12 43 33 192012 9 54 89 7 48 82 4 29 58 1 19 49 56 47 35 79 61 40

Males Females Males Females Males Females

Population Employment Unemployment

Table 3: Unemployment, NEET and Educational Status in selected European Countries among those aged 16-29, 2012 (000s)

  Greece Portugal Spain

  StudentNon-

student Total StudentNon-

student Total StudentNon-

student Total

Employed 32 479 511 89 652 742 346 2,120 2,466

Unemployed 36 359 396 57 224 281 372 1,394 1,766

Inactive 729 131 860 681 94 776 2,674 519 3,193

Total 676 970 1,646 701 970 1,671 3,016 4,033 7,049

Unemployment Rate 53.5% 42.8% 43.6% 38.8% 25.5% 27.4% 51.8% 39.7% 41.7%

NEET Rate     27.8%     17.7%     25.8%

  Germany France Sweden

  StudentNon-

student Total StudentNon-

student Total StudentNon-

student Total

Employed 2,797 5,423 8,221 793 4,224 5,017 229 731 960

Unemployed 127 517 644 92 1,004 1,096 92 110 202

Inactive 4,646 863 5,509 4,208 885 5,093 582 93 675

Total 7,416 6,803 14,218 5,093 6,113 11,206 819 934 1,753

Unemployment Rate 4.3% 8.7% 7.3% 10.4% 19.2% 17.9% 28.7% 13.0% 17.4%

NEET Rate     9.6%     16.9%     11.0%

Older NEETs pose a huge challenge for Greece

Sweden Germany United Kingdom

Portugal France European Union

Ireland Spain Greece0

5

10

15

20

25

30

35

40

Age 15-19Age 20-24Age 25-29

Perc

ent N

EET

Source: Eurostat

Percent NEET (Not in Employment, Education or Training) by Country and Age Group 2013

Youth (16-24) to adult ratio is relatively low in Greece.

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

0.0

10.0

20.0

30.0

40.0

50.0

60.0

15-24/25-64 ratio (LHS) Youth unemployment rate (RHS)

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

1.7

1.8

1.9

2.0

2.1

2.2

2.3

0.0

10.0

20.0

30.0

40.0

50.0

60.0 15-24/25-64 ratio (LHS)

Youth unemployment rate (RHS)

1.5

1.7

1.9

2.1

2.3

2.5

2.7

2.9

3.1

3.3

0.0

5.0

10.0

15.0

20.0

25.0

30.0

15-24/25-64 ratio (LHS)

Youth unemployment rate (RHS)

Greece

SpainSweden

Youth cohort has been declining very rapidly in Greece

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

60

70

80

90

100

110

120

Greece

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

50

60

70

80

90

100

110

120

Spain

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

60

70

80

90

100

110

120

UK

Gender differences?

2005 2006 2007 2008 2009 2010 2011 20120%

50%

100%

150%

200%

250%Greece UKSweden PortugalIreland FranceSpain Germany

Ratio

of F

emal

e to

Mal

e Yo

uth

Un-

empl

oym

ent R

ates

How does staying at home influence labour market outcomes?

Table 4: Proportion of those aged 15-29 with parents not in the same household Ages 15-19 Ages 20-24 Ages 25-29 Greece UK Greece UK UK Total Males Females Total Total Males Females Total Total Males Females Total

2005 7.5 6.3 8.8 7.9 31.0 26.8 35.1 49.9 41.7 31.2 52.6 81.0 2006 6.8 5.6 7.9 7.3 30.1 25.3 35.1 48.6 39.9 29.4 51.3 81.3 2007 6.8 5.6 8.0 7.3 31.6 28.5 34.8 49.7 38.3 29.4 48.1 80.5 2008 6.8 6.0 7.5 8.5 33.6 30.4 37.0 48.6 38.0 30.4 46.2 79.7 2009 7.1 6.0 8.2 8.5 36.1 32.3 40.0 47.4 40.5 33.0 48.9 78.5 2010 6.3 5.2 7.5 8.9 33.0 28.2 37.8 47.2 41.4 32.3 51.1 78.4 2011 6.7 6.0 7.5 8.3 30.5 25.6 35.3 50.1 39.3 31.9 47.4 81.1 2012 6.2 5.4 7.1 8.4 30.0 27.7 32.3 45.7 36.2 30.0 43.3 79.5

Source: European Labor Force Survey

Change 2005-08 to 2009-2012

Employment Unemployment InactivityShare of Cohort

No formal qualifications -4.0% 11.5% -7.5% 0.7%

Primary -11.6% 7.4% 4.2% 6.9%

Lower Secondary -6.5% 2.0% 4.5% 25.7%

Upper Secondary -11.9% 10.1% 1.8% 2.9%Upper Secondary with quals -6.7% 5.1% 1.6% 39.5%Non-tertiary post-sec -12.5% 11.3% 1.2% 7.5%

First stage tertiary -8.3% 10.7% -2.4% 16.6%Second stage tertiary 7.7% 0.1% -7.7% 0.1%

The Role of Education

Long-term unemployment

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60% Germany Spain France

Greece Ireland Portugal

Sweden UK

Perc

ent o

f Une

mpl

oyed

with

dur

atio

n >

12 m

onth

s

Greece had a substantial long-term unemployment problemprior to the Great Recession

Long-term Unemployment in Greece

• The average age of the long-term unemployed is lower in Greece than in our comparator countries with the exception of the UK and Ireland

• Among our comparator countries Greece has the highest proportion of females among the long-term unemployed

• Other Sources of Variation in Long-term Unemployment– Education– Nationality

Age 20-24

Age 25-29

Age 30-34

Age 35-39

Age 40-44

Age 45-49

Age 50-54

Age 55-59

Age 60-64

-0.10

-0.05

0.00

0.05

0.10

0.15

0.20

Long-term unemploy-mentUnemployment

Prob

abili

ty c

ompa

red

with

16-

19

year

old

Conditional probability of(lt) unemployment by age

Amongst our group of countries, Greece experienced the largest fall in well-being with the recession

    2000-07     2008-2012   Changes 2000-2007 to 2008-2012  Age Group Age Group Age Group  15-24 25-29 30+ All 15-24 25-29 30+ All 15-24 25-29 30+ AllGreece 2.89 2.8 2.59 2.66 2.68 2.51 2.27 2.34 -0.21 -0.29 -0.32 -0.32Germany 2.9 2.89 2.9 2.9 3.1 3 3.01 3.02 0.2 0.11 0.11 0.12

France 3.02 3 2.9 2.93 3.14 2.97 2.92 2.95 0.12 -0.03 0.02 0.02Spain 3.15 3.09 3.01 3.04 3.07 2.88 2.85 2.88 -0.08 -0.21 -0.16 -0.16UK 3.19 3.16 3.2 3.19 3.33 3.22 3.26 3.26 0.14 0.06 0.06 0.07Ireland 3.25 3.21 3.25 3.24 3.23 3.15 3.24 3.23 -0.02 -0.06 -0.01 -0.01Sweden 3.36 3.37 3.36 3.36 3.52 3.42 3.45 3.46 0.16 0.05 0.09 0.1

But it was not concentrated among the young

Source: Eurobarometer

Conclusion

• In general, the evidence that ALMPs work is not strong. Careful evaluation in the correct context is essential.

• The age group 25-29 in Greece is probably of greatest concern• Student (part-time) employment and unemployment is less common in Greece than

in other European countries• The European Labor Force Survey indicates that numbers in Greece in the 15-29

age group have fallen sharply• Gender differentials in the Greek labor market are more marked than in many other

EU states.• Greek youths are much more likely to live at home than are young people in Northern

Europe.• Greece has the highest proportions of the young unemployed that have been without

work for more than a year• The decline in Greek well-being since the beginning of the recession has been the

most rapid in Europe.

0 - Pre-primary education; 1- Primary education or first stage of basic education; 2- Lower secondary education or second stage of basic education; 3 - Upper secondary education; 4 - Post-secondary non-tertiary education; 5a - First stage of tertiary education (theoretical); 5b - First stage of tertiary education (technical, practical); shorter6 - Second stage of tertiary