Abstract
AbstractSince the economic crisis in 2008, European youth unemployment rates have been persistently high at around 20% on average. The majority of European countries spends significant resources each year on active labor market programs (ALMP) with the aim of improving the integration prospects of struggling youths. Among the most common programs used are training courses, job search assistance and monitoring, subsidized employment, and public work programs. For policy makers, it is of upmost importance to know which of these programs work and which are able to achieve the intended goals – may it be the integration into the first labor market or further education. Based on a detailed assessment of the particularities of the youth labor market situation, we discuss the pros and cons of different ALMP types. We then provide a comprehensive survey of the recent evidence on the effectiveness of these ALMP for youth in Europe, highlighting factors that seem to promote or impede their effectiveness in practice. Overall, the findings with respect to employment outcomes are only partly promising. While job search assistance (with and without monitoring) results in overwhelmingly positive effects, we find more mixed effects for training and wage subsidies, whereas the effects for public work programs are clearly negative. The evidence on the impact of ALMP on furthering education participation as well as employment quality is scarce, requiring additional research and allowing only limited conclusions so far.JEL codes:J13, J68, J64
Highlights
Young individuals entering the labor market are generally considered to be an at-risk population
Between 2008 and 2009 youth unemployment rates increased by about five percentage points to a 20% average, until 2013 they further climbed to 24%; during the same time period, adult unemployment rate changed from 6% to 10%
In line with the previous literature, we focus on the micro-evidence of the effectiveness of active labor market programs (ALMP), distinguishing between the four types of programs that are most commonly employed to promote a direct labor market entry: labor market training, job search assistance and monitoring, wage subsidies and public sector work programs
Summary
Young individuals entering the labor market are generally considered to be an at-risk population. They face a higher risk of unemployment than older workers, are more likely to switch between states of joblessness, training and working, and are more likely to enter temporary or precarious types of employment (see, e.g., Quintini et al 2007). Firms commonly face higher costs of investment and lower costs of termination when employing young workers, making the youth labor market situation more sensitive to demand-side fluctuations, which was recently demonstrated in the aftermath of Caliendo and Schmidl IZA Journal of Labor Policy (2016) 5:1 the financial crisis 2007/2008 (Bell and Blanchflower 2010; Choudhry et al 2012; Verick 2011). Between 2008 and 2009 youth unemployment rates increased by about five percentage points to a 20% average, until 2013 they further climbed to 24%; during the same time period, adult unemployment rate changed from 6% to 10%.1
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