Pietro Garibaldi - europeanseminars.eliamep.greuropeanseminars.eliamep.gr/wp-content/uploads/2013/10/Pietro... · Il Contratto Unico di Inserimento 26 Pietro Garibaldi, July 5h, 2013

Pietro Garibaldi, July 5h, 2013

The Impact of the CrisisOn the European (Youth) Labour

Market:Facts, Challenges, and Policies

Pietro Garibaldi European ConferenceNapflion, July 2013

1


Youth unemployment increased drammatically since 2008

after marked decline between 2005-2008

pre-crisis crisis


Increase in youth unemployment concentrated in Southern Europe

Source: EUROSTAT3

www.carloalberto.org4

Outline• Youth unemploment in Europe

• A tale of two duality– Duality I: Temporary versus open ended contracts

mainly in Southern Europe– Duality II: Skill mismatch and slow school to work

transition

• In search for best practice and policy options


Source: Eurostat , IMF Unemployment, youth total (% of total labor force ages 15-24)5Pietro Garibaldi, July 5h,

2013

The Arc of UnemploymentEU-27

Average in 2012Q4:23.2%

Youth to adult unemployment

Youth and adultunemployment

rates, 2011 Q4a

Source: OECD, 2012 6Pietro Garibaldi, July 5h, 2013


Low-skill workers hit harder than high-skill at all age

7

Time (in months) since an unemployed person last worked breakdown by education level in 2008 - age profile -

0

10

20

30

40

50

60

70

15-24 25-29 30-34 35-39 40-44 45-54 55-64 15-64

1. Low2. Medium3. High

YEAR 2,008 SEX TOTAL INDICE DURATION COUNTRY EU

Sum of VALUE

AGE

HATLEV1D

Source: EU LFS, DG EMPL calculations

Source: Employment in Europe 2010, European Commission


Key messages• The global crisis has hit youth hard and the

short-term outlook is rather gloomy

• Youth unemployment rate likely to remain relatively high in the majority of European Countries in the coming years

• Youth unemployment has long term consequences (more on this in Session I)

• A new social dilemma is emerging8



Youth unemployment: long term consequences

• Economic research shows that poor start in the labor market induces

lower lifetime wages lower future employment opportunitiesother social effects (including Health)

A tale of two duality

• Duality 1: increase in temporary contracts, with worrisome effects in Southern Europe

• Duality 2: skill mismatch and inefficient school-to-work transition


F1

Slide 10

F1 no interpretationFTaddei; 17/07/2012

Duality I: Increase in Temporary Contracts,

with worrisome effects in Southern Europe



Most reforms liberalized temporary contractsEmployment Protection Legislation (EPL) reforms in the EU

Change of EPL index from 1985 to 2008

Reduction Employment protection on

Temp Contracts


Most temporary contracts among youth


Source: Eurostat, LFS

www.carloalberto.org

Temporary contracts todayTemporary work in selected EU countries (% of total number of employees), 2010

0

10

20

30

40

50

60

70

80

SI PL ES DE

SE PT FR NL IT FI

EU-2

7

AT LU BE IE EL HU

CZ

DK

CY SK MT

UK

LV BG LT RO EE

% o

f tot

al e

mpl

oyee

s

15-24

15-64


The issue• Reforms of temporary contracts facilitate

increase in youth employment up to 2008• In the aftermath of the «great» recession,

most labor adjustment took place among the youth covered by temporary contracts

• This trend was particularly marked in Southern Europe, France and Belgium


The human capital loss associated with Dualism = less on-the-job training

Source: ECHP

16Pietro Garibaldi, July 5h, 2013

www.carloalberto.org17 17

• Wage differential (%) between permanent and temporary workers, considering education and age

Austria 20.1 Belgium 13.9Denmark 17.7Finland 19.0France 28.9Germany 26.6Greece 20.2 Ireland 17.8Italy 24.1Netherlands 35.4Portugal 15.8 Spain 16.9 Sweden 44.7United Kingdom 6.5

Source: EU-SILC and ECHP

Consequences of dualism on temporary workers



• Dualism affects future pensions by three channels

– Workers with temporary contract earn less than workers with open-ended contracts

– They experience more frequent career breaks– They are generally not covered by unemployment insurance

Additional consequence dualism: future pensions


Duality IIIncrease in Skill Mismatch and

Slow School to Work Transition


Increased skills mismatch?Outwards shifting Beveridge Curve

UR = unemployment rateLSI = labor shortage indicator (number of employers reporting “shortage of labor” as factor limiting production)

Source: EU Employment and Social Situation Quarterly Report, March 2012

Combining education and training: some countries succeed


Fraction of workers aged 18-24 combining education and employment, 2009Source: Eurostat

NEET (Not in Education Employment and Training) Some countries fail to both educate and employ


NEET share in the population aged 15-24 by member states


Outline• Youth unemploment in Europe

• A tale of two duality– Duality I: Temporary versus open ended contracts

mainly in Southern Europe– Duality II: Skill Mismatch and Slow School to

Work Transition

• In search for best practice and policy options



Policy challenges• Phasing out temporary contracts now could

deliver worst outcome– large job losses during the recession – but limited job gains when the recovery comes

• Policy needs to balance at least two forces – Let firms enjoy flexibility at entry. On the labour

demand side, firms benefit from a labour market where experimentation is allowed

– Set a well defined path to stability for workers, through a long-run entrance with an open ended labor contract term

Proposals developed in Spain (100 academic economists, draft bill), France (Blanchard-Tirole, Cahuc-Kramarz) and Italy (Boeri and Garibaldi, draft bill): tenure track to stable jobs with protection increasing with tenure.

Common philosophy, but structure tailored to country-specific regulations.

Contrato Unico, Contratto Unico di Inserimento, Contrat Unique


Italian draft bill differentiates entry through experimentation from genuinely fixed term jobs. Open ended contract with two phases:

• Entry Phase (up to the third year): the worker has the right to severance payments proportional to tenure (independently of firmsize): dismissal without just clause requires up to six months in severance payments (5 days of severance every month). Entry phase lasts three years

• Stability Phase (from third year onward): current legislation (for dismissal without just clause: reinstatement right in firms above 15 employees and six months severance in small firms)

• Fixed term contracts and de-facto dual workers (yet self employed in the books) only with high salaries and higher contributions to unemployment benefits. Employers must pay for higher flexibility

Il Contratto Unico di Inserimento


A Graded Tenure Path


Looking for best practice: German VET (Vocational Education and Training)

• Embedded in the structure of the labor market• The VET has a dual structure

– work-based and school-based learning

• Key elements:– engagement and ownership by employers and other social partners, – checks at administrative and company levels

• Funding: combines public and private funding• Evaluation of VET students dominated by the Chamber exam

– School performance has little weight in the exam – Students may not take their schooling seriously

• Challenge: accessing tertiary education for people in the VET system


• 6 billion to be spent in 2014-15 plus unspent structural funds

• Youth Employment Guarantee: measure to mobilise labor supply

• But problem is on labor demand side• Risk of congestion effects• Subsidies or employment conditional

incentives for low wages• And mobility related to dual systems

European Youth Employment Initiative



Conclusions• In the aftermath of the great recession

– a new social challenge emerged in Europe

• Can not forget an entire generation of workers– Need to stabilize employment– Reduce skill mismatch and help accumulation of skills favorable to

economic transformation and growth

• Crucial challenges for policy– Promote frameworks to facilitate a shift toward regular employment– Promote vocational training and human resource development– Change interaction between industry and academia

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Pietro Garibaldi - europeanseminars.eliamep.greuropeanseminars.eliamep.gr/wp-content/uploads/2013/10/Pietro... · Il Contratto Unico di Inserimento 26 Pietro Garibaldi, July 5h, 2013