Abstract
Abstract We analyse theoretically and empirically the effects on young people’s labour market outcomes of two specific labour market institutions and their interaction: employment protection legislation and active labour market policy. The paper examines recent policy reforms in Italy focussing on the impact of the 2012 Fornero reforms of employment protection legislation as well as the initial impact of the EU-wide Youth Guarantee scheme introduced in Italy in March 2014. The paper then examines how these two policy reforms interacted. The analysis first confirms the finding that the Fornero reform increased permanent hires particularly amongst the very youngest workers; it then goes on to find that the YG was indeed successful in increasing the hires of young people, although this operated through a statistically significant increase in female hires on temporary contracts. Third, it finds some evidence of a dampening effect of the YG on EPL reforms as predicted by theory.
Highlights
The Great Recession precipitated by the Global Economic and Financial Crisis had – and still has – a large labour market impact in the EU, inducing a large decrease in employment rates in many Member States
The results suggest that the Youth Guarantee increased hires, albeit slightly (column (1)); the effect is statistically significant for overall hires and the size of the coefficient suggests an increase of a little under one per cent
This paper has analysed the impact of complementarities between employment protection legislation and active labour market policy on the youth labour market
Summary
The Great Recession precipitated by the Global Economic and Financial Crisis had – and still has – a large labour market impact in the EU, inducing a large decrease in employment rates in many Member States. In 2017, at 16.8 per cent, youth unemployment rates in the EU were still over one percentage point higher than they had been in pre-recession 2007 (15.7 per cent). A number of relatively recent and some not so recent papers have looked at the factors driving youth employment and unemployment, in recent years focusing on the role of labour market institutions (LMI). Throughout this literature, from its beginnings in the 1980s, studies have unanimously found a major role for aggregate demand in determining youth labour market outcomes with a more variable role played by demographic and, above all, institutional factors.
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