School of Business, Economics and Law

Göteborg University

Group Report

Within the course

‚Human Resource Management’

Spring term I in 2006

- Youth Unemployment -

Analysis and comparison of Austria, France,

Germany, Portugal and Sweden

Names: Amandine Desportes

Ulf Fransson

José Nuno Gago

Niklas Kuerten

Norbert Lung

Given to: Ola Bergström

Date: 8^th of March 2006

Table of Contents

1 Introduction

2 Conceptual overview

2.1 Way of Investigation

2.2 Definition of Youth Unemployment

3 Methodology

4 Findings

5 Discussion

5.1 Reasons for youth unemployment

5.2 Main goals to achieve

5.3 Reforms in the passed

5.4 Reforms in the future

6 Conclusions

1 Introduction

With four to seventeen percent unemployment rates, unemployment has become one of the most discussed topics in Europe. With a continued decrease in the number of people hired each year, this problem gains a special importance for young people. In 2004, within the European Union, more than 18,6 % people under the age of 25 were without a job.

This is why during the election campaigns in 2005, in Germany, according to the electors the party’s labour market policy was the most important subject for their decision. One reason for the long-lasting violent demonstrations in French suburbs last autumn was the inequitable chances for young people from these areas to get a job.

Especially for young people, a hesitant and hard beginning in their professional life means a lack in their CV, which can become a big obstacle for later jobs and for their whole career. Furthermore, the first job is often seen as a way of finding identification. A bad start and several rejections can influence the motivation to work and the working performance of young people.

2 Conceptual overview

2.1 Way of Investigation

This paper focuses on the employment market for young job seekers of five different European countries: Austria, France, Germany, Portugal and Sweden.

First of all, these labour markets are presented by giving a brief overview of the situation in each country. Furthermore, they are analysed and compared among each other regarding the reasons for unemployment in the different countries. Then, the main goals to achieve and the solutions offered to solve the problem of young unemployment are presented, before finishing with the conclusions.

2.2 Definition of Youth Unemployment

Young unemployment is understood as a special case of unemployment. In fact, young people between their required school life and their first jobs are very susceptible to unemployment. This is often seen in more deprived areas especially after the eastern enlargement of the European Union and the higher amount of competitors on the labour market.

According to the International Labour Office, a young unemployed has to fit the following conditions: being between the age of 16 and 25, not having a job (which means he has no work during the reference week), being available to work in 15 days and being actively looking for a job.

3 Methodology

Beginning this paper, the authors could choose between using a quantitative projection, which means that this paper is written in an objective and independent way. This made us searching for general knowledge. There is one true reality, which our paper aspires to describe as well as possible with the help of working structured and systematically. The alternative and total opposite to the quantitative approach to this would have been qualitative approach. The authors of this paper decided that a quantitative projection would be the most useful approach for this paper.

This paper is also written out of a positivistic approach. The positivistic approach, which was developed by Pierre Louis in the early 19^th century, implies on coarse data in form of observations, is objective and presumes independence from preconceived opinions. It can also be seemed as a contrast to not verifiable speculation.

According to the presented structure of this work, the paper is based on two different kinds of sources. First of all, to get an economical background of the subject, theoretical knowledge is used. Therefore, books on economical systems, especially on unemployment, providing the macro-economical explanation for unemployment, were discussed. Further on, in order to establish a relation between these theoretical approaches and the reality, current figures of unemployment in the different countries have to be observed and used. This data is usually provided by the national employment centres, the ministries of labour in each country or the Federal Statistical Offices. To get a deeper understanding on this matter we also looked at several critical international articles concerning the current labour situation.

4 Findings

A brief presentation of the situation in each country will now be done concerning the development of unemployment and youth unemployment rates in the recent years. The figures presented below reveal a not satisfying situation within these countries and a real need of inverting the situation.

According to the Institution for unemployed people in Austria, the AMS – Arbeitsmarkservice – general unemployment rate increased by 1.6 % from 2003 to 2004 and in the following year by 0.5 %. The unemployment rate of Austria was 5.2 % on the 31^st of January 2006. It could be figured out a higher increase of the unemployment of women compared to men. The unemployment lasted 107 days on average and around 21 % of all unemployed people are long-term unemployed. The seasonal tourism sector has a major impact on general unemployment [www.ams.or.at, 2006]. In October 2005, youth unemployment was 10.2 %, which meant an increase of 10.4 % in comparison to October 2004. This increase was especially provoked by an increase of unemployment of people between 20 to 24 years. With this, Austria ranges on the fourth place (see appendix 1) within European countries [www.bmwa.gv.at, 2006].

In France, the unemployment rate is very high compared to other countries within the European Union. It slightly decreased from 2004 to 2005 from 9.9 % to 9.7 %. One possible explanation for this unemployment rate can be the higher rate of young unemployment. This rate increased by three points in two years and achieved 23 % in 2004. The figures are frightening since more than 70 % of young employees on this market have a fixed-term contract and 50 % of those have the duration of one month [www.insee.fr, 2006].

In Sweden a total of 60,000 young people without a job could be found in January 2006, which represents a total young unemployment rate of 8.0 %. In comparison to January 2005 this rate slightly decreased from 8.2 %. In fact, the figure for 2006 includes 26,000 young people working in programs of the government. Although, without seeing them as unemployed, the unemployment rate of young people would change to 5.9 % [www.ams.se, 2006].

In Germany there are approximately 5 million people unemployed, which makes the country facing a rate of 8.8 % in January 2006. Of these unemployed, more than 1.8 million are unemployed for long-term. In comparison to January 2005 it can be recognized a decrease of 9.5 %. 110,000 to 140,000 people under 25 are without a job, which means 13.4 %. Parallel to the decrease of the general unemployment rate, less unemployed young people could be seen in January 2006 [www.destatis.de, 2006].

In Portugal, the general unemployment rate recently increased from 6.7 % to 7.5 %. The youth unemployment rate is very significant, being more than double of the last. Recent developments showed that unemployment in these ages is growing under people with low and average levels of educational attainment. However, it should also be pointed out the high level of unemployment among young graduated people as well. In fact, the unemployment of those with higher education has increased by 15.9 % from 2003 to 2004 [www.iefp.pt, 2006].

Summarizing up, in all analysed countries, but particularly in France where it registers the highest figures, a high level of youth unemployment can be observed (see appendix 2). However, apart from France, all the studied economies are situated below the overall European Union’s average of 18.6 %.

5 Discussion

After exposing the current situations of the five countries in the previous part, the different reasons for the presented levels of young unemployment will now be emphasised, as well as the main measures implemented in order to fight it.

5.1 Reasons for youth unemployment

There are several different reasons that can originate and rise the levels of youth unemployment. The biggest problem that could be found out in every country was the lack of motivation and education. In Portugal, approximately 40 % leave university (see appendix 3) before having graduated [www.bportugal.pt, 2006]. On the other hand, young employees are often not enough trained, have too little practical work experience or require more specialisation. This reveals the existence of a certain lack between the requirements of the jobs and the competences of the employees that apply for those positions. Sometimes this problem occurs the other way around. Having gone back to university to continue studying and receiving further competences, young employees are not often satisfied with their tasks because they do not find it challenging enough. This is an usual problem found in France [www.lesechos.fr, 2006].

Furthermore, some human and social reasons can be considered. A problem like that can usually bear when young people are not considered to get a position due to their origin or their colour of the skin. The situation in the French suburbs [www.monde-diplomatique.fr, 2006] or the discrimination of black people illustrates very well this kind of problem [unknown author, 1997].

Although the previous reasons described are considered mainly as ‘employee-sided’, there are also ‘company-sided’ reasons for youth unemployment. As the current economic situation forces the companies to reduce expenses and costs, it often results in hiring less new employees, especially untrained young employees with a few practical experience in order to save money instead of expanding the pay role. On the other hand, a consequence of this development is the limited duration of contracts, which is more and more common nowadays. In fact, in Germany a certain decrease of apprenticeship training positions can be recognized.

5.2 Main goals to achieve

Considering the main objectives of the countries in study, we can easily notice that all of them chase the general decrease of unemployment. Especially, during election years, like in Sweden this year, new approaches against unemployment get additional importance. However, the measures adopted to fight the youth unemployment are slightly different. In Sweden, a special program for young unemployed is organized by the Labour Market Board to get young people out of the statistics to reduce the rate of young unemployment [www.ams.se, 2006] which can be seen as a doubtful short-term approach to reduce the unemployment figures. In Austria, the focus is set on the education system by improving the performance of institutions such as schools and universities, which can be considered a long-perspective approach. This can be seen further in all countries, that the education level has to be improved to meet the requirements of the offered vacancies. A further goal in Portugal, that has been present in several governmental measures due to is extreme importance, is to decrease the high levels of school leaving.

All these goals are approaches to improve the performance of the applicants. To facilitate hiring of new employees, companies have to be supported. For example in Germany, the ancillary wage costs are very high, which makes new employees very costly. If these costs were reduced, more companies would think about hiring new employees or offering more apprenticeship training positions. To improve the situation in the very long run, government and companies should work and cooperate better together. If there were less bureaucracy, better communication, less contribution and just better relations between all participants, countries would reach a certain competitive advantage by comparison with other countries, which would lead to more profits and more growth with the consequence of more hired people.

5.3 Reforms in the past

There could be recognized different reforms in the past to fight against the problem of youth unemployment. In Austria, especially fiscal and tax reforms should help on the labour market.

Furthermore, Austria received funds from European organisations, such as the European Science Foundation, of around € 548 million for active labour market policy. The national government plans to implement new working laws in combination with tax reforms for organizations and individuals [www.bmbwk.gv.at, 2006]. In France, a few years ago, the working week with 39 hours was decreased to 35 hours to enable companies to employ more people [www.lepoint.fr, 2006]. Another example is the campaign ‘Emploi Jeune’ which gave companies the opportunity to employ young unemployed for the limited time of five years. During 1997 and 2005, more than 450 000 young French received the possibility to work because of this campaign [vosdroits.service-public.fr, 2006].

In Germany, there were two different of campaigns. On the one hand, private institutions like ‘Deutsche BP Stiftung’ have struggled against youth unemployment in the Ruhr area, where are a lot of unemployed people due to the decline of the mining industry [www.aral-stiftung.de, 2006]. On the other hand, there are campaigns instigated by the government to fight the unemployment problem. One major example is the ‘bridge to work’, which is a campaign focused on ‘learning by doing’ in order to get young people back to work. However, the biggest program was ‘JUMP’ set in 1999 by the German institute for work, in order to reduce the youth unemployment. The target group was young unemployment people for more than one year, which means that they were unemployment for a long-perspective, and the annual budget available was € 1 billion [Dietrich, 2001].

In Portugal, there were three big reforms to facilitate the entry of young people in the labour market. The ‘Programme of Professional Qualification for Intermediate and Graduated Individuals’ (FORDESQ) has as main objectives to increase the probability of integration in the labour market of young people, mainly to people with degrees in the areas of Social Sciences, Teaching, and the Arts. The program provides the unemployed with a higher level of education a possibility to acquire a set of new professional skills, especially in the areas of management, information- and communication technologies. Secondly, the government wants to retrain unemployed graduates through courses of specialization in areas in which the public administration registered lack of people, being also possible for young people with a secondary education to attend these courses. Finally, the national plan for the prevention of school leaving was set to decrease the worrying rates of school abandonment registered in this country. Besides the objective of reducing this rate, the government also wanted to create certain conditions to improve the school success.

5.4 Reforms in the future

Having looked at the measures already implemented, another question that rises is how countries will fight youth unemployment in the future. The government in Austria wants to increase the overall level of education and learning. For that purpose, further subsidies for the labour market have to be realized [europa.eu.int, 2006]. Another task Austria wants to fulfil is the creation of new jobs in rural areas, especially in its Eastern part within the framework of EUREK [europa.eu.int, 2006], the European concept for new space development. In France, the actual government tries to improve the situation by implementing different reforms, namely a policy of internships that last at least three months and will be done in the majors of a student to give them the opportunity of practical work experiences. Secondly, there is a program to study and work in a company that is supported by the country. Finally, the creation of a specific contract of the first employment - ‘contrat de première embauche’- which is a permanent contract that gives unemployed the possibility to receive certain rights already after four months instead of after one year and it also confers the unemployed the right to begin training in the first month.

Moreover, in all countries the future is strongly influenced by demographic factors of the economy. In Sweden, the government expects many employees to retire in the next years. These positions can then be filled with new and younger employees, fact that will certainly have a great influence in the young unemployment rate in Sweden.

6 Conclusions

As presented in the paper, unemployment, and particularly youth unemployment, is a major problem threatening many countries, even developed economies as the ones in study. Almost all economies have to deal with it, either in a small or big scale. Different countries have high young unemployment rates due to a large range of reasons and they implement different programs to face it. Examples of these different approaches to decrease young unemployment are programs focussed on internships in Canada [Sheldon, 1999], programs starting in school in the United States [unknown author, 1999] or approaches based on training and new recruitment methods in the United Kingdom [Stevens, 1997]. In general, the reasons pointed out previously for youth unemployment are structural and they require demand for deep solutions within the whole labour market.

In all focussed countries, although they are industry or service based countries, the unemployment and mainly the young unemployment problem exist. The point is that unemployment is not a problem of just one specific country but it's a society phenomenon within different countries.

The youth unemployment threats the development of economies and that’s why this problem has been in the top of the agenda of almost all governments. However, these policies are costly and they have revealed some inefficiency to solve it.

The problem is deeper than that; it is also a demographical problem. Young people cannot find jobs because the labour market is saturated. Especially people who were born during the ‘baby-boom’ are still an important and large fraction of the work population. They have the skills and the experience so they detain the current positions in the labour market demand. This is one reason, why today’s work-population has a competitive advantage compared to young employees. But exactly this will lead to a big problem in the short- and long-term perspective. Due to little employments of young workers today the current ‘older’ work population isn’t and will not be able to form big parts of the following ‘young’ work population.

It is absolutely necessary that governments work on this problem out of a long-term perspective to enable short- as well as long-term results.

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Appendix

Appendix 1

Comparison of General Unemployment

Source: AMS Austria http://www.ams.or.at/neu/001_AL-Quoten-im-EU-Vergleich_160206.jpg February, 2006.

Appendix 2

Development of Youth Unemployment in

Portugal

France

Germany

Sweden

Source: http://www.ingentaconnect.com/content/oecd/02553627, February 2006.

Appendix 3

Youth Unemployment Rate by Educational Levels in Portugal

	1998	1999	2000	2001	2002	2003	2004
Basic (1^st and 2^nd)	8.3	7.1	8.3	8.0	11.2	13.5	17.6
Basic (3^rd)	10.5	8.9	8.4	9.9	11.4	13.4	13.4
High School	12.3	9.3	9.1	9.3	9.8	14.2	13.5
University	14.5	11.2	10.0	13.4	17.3	23.8	20.5

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