Can an EU Budget Deal Save the Lost Generation? 7/ 18     Print Email

By Caitlin Del Sole, European Affairs Editorial Assistant

The recently approved seven-year budget of the European Union provides a basis for addressing the serious and growing problem of youth unemployment throughout the region.

At the recent European Council summit, the heads of European governments agreed to frontload the 6 billion euro fund for the Youth Employment Initiative to ensure it is operational at the beginning of next year and disbursed in 2014 – 2015 and not over the full seven years of the budget through 2020.

The funds will help governments implement the Youth Guarantee Scheme, which will attempt to ensure that young people up to age 25 receive an offer of employment, traineeship, apprenticeship, or an opportunity to continue their education within four months of becoming unemployed or leaving school.  Member States will directly coordinate with the Commission to implement this plan, respecting different needs of states.

Furthermore, the increased budgetary flexibility will allow unused funds from other areas of the budget to be contributed to a fund to support youth employment, as well as research, development and innovation.  This fund is likely to reach 8 billion euro.

The Council also determined better ways for the European Investment Bank (EIB) to finance small and medium-sized enterprises (SMEs), which could hire more young people.  SMEs account for about 99% of businesses in the EU, and extra funding from the EIB could be used to encourage banks to lend more to those businesses.

Despite these steps forward, the problem of youth unemployment is increasingly prominent and troublesome.  According to a Council factsheet on youth unemployment, in 2012, the EU 27 had a 22.8% youth unemployment rate, measured as the number of people aged 15-24 that are unemployed as a percentage of the labor force. Eurozone members had a slightly higher rate of 23%.  In this same year, Greece had a youth unemployment rate of 55.3%, Spain 53.2%, Portugal 37.7%, Italy 35.3%, and Slovakia had 34%.  Germany and Austria had the lowest youth unemployment rates, at 8.1% and 8.7%, respectively.

In April 2013 the EU 27 youth unemployment rate was 23.5%, up from approximately 16% in 2008.  7.5 million young people are neither in employment, education or training (NEET), according to the Council factsheet.

Nearly 1 in 4 people aged 25 or younger are out of work, and not surprisingly, according to a Stratfor report, the economic crisis has made it more difficult for young people to enter the labor market.  Many countries have increased their retirement age to help curb social spending on retirement. But this leaves older, often less skilled workers in positions longer, causing fewer vacancies for young people to fill.

Consequently, many young Europeans have moved home to live with parents, and coupled with austerity measures taken to cut spending, the social safety net has become increasingly strained.  Furthermore, the foregone income tax revenue from unemployment, and costs of social protection put a direct economic pressure on countries that are already struggling to recover from prolonged recession. This cost of having 14 million young people that are NEET is estimated to be the equivalent of 1.21% of EU GDP, collectively an annual loss of 153 billion euro to the Member States.

The report also notes that in Spain and Greece the median age of university students has increased, and the total number of graduate students has grown by 9% and 8% respectively since 2007.  These two parallel trends of increased attendance in higher education, and decreasing ease of entering the job market has created a “lost generation,” where students are more educated than ever before, but if they can find a job it may not relate to what they are trained for.  By working toward additional degrees, young students feel they are being productive, but fear there will never be a job at the end of their schooling.  Many feel Europe is likely to experience a brain drain as people emigrate to places where they can find work.

Political shifts are beginning to occur, with anti-establishment and anti-European parties growing in strength.  Lack of ability to find jobs has triggered migration in Europe, with many young workers moving from the periphery to countries that have fared better and provide more opportunities for employment than their own, such as Germany, Austria, the UK and other northern countries.

Youth unemployment is unevenly spread across the continent, with those on the periphery with the highest unemployment rates.   Unemployment and its implications, however,  have spread into all areas of Europe.  In late May of this year, Sweden which is known for its social model Folkhemmet --the people’s home -- experienced riots in several Stockholm suburbs. While the causes of the protests are debated, it is generally thought to be related to the economic strain on Sweden’s public services caused by increased immigration to the country.    The riots were directly triggered by a police shooting of a 69 year old Portuguese immigrant in his apartment, said to be armed with a knife.  After demonstrations in response to the attack, police responded with anti-immigrant and derogatory remarks, leading to an escalation of violence into a multi-day riot starting in Husby, a suburb of Stockholm.

Sweden has accepted the second highest number of asylum seekers in the OECD relative to population, accepting 44,000 in 2012, and many Europeans from poorer periphery countries have emigrated to Sweden in search of job opportunities and social support. This trend has strained the generous social spending system and created political tension and an urban-rural divide.

An article in the Portuguese newspaper, Público Lisbon, outlines how youth unemployment is a systemic problem that is difficult to fix.  The author highlights how Portuguese people spent twice as much in percentage of revenue as Germans on dining out before the crisis, with four times as many restaurants and cafés per thousand inhabitants than the European average.  With the economic crisis, consumers couldn’t spend as much and these industries collapsed.

The budget decision and newfound commitment to addressing youth unemployment is promising.  But the coming months will show how effective the measures really are.

 
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