European Commission

MEMO

Brussels, 5 December 2012

Youth employment: Commission proposes package of measures – frequently asked questions

(see also IP/12/1311)

Why has the Commission proposed a Youth Employment Package?

The Package has been proposed because the youth unemployment rate (under 25 years old) in the EU is more than twice as high as the rate for adults in most Member States (22.7 % as against 9.2 % in the third quarter of 2012) and has dramatically increased over the last four years.

The percentage of young people under 25 who are neither in employment nor in education or training (so-called NEETs) is rising. In 2011, 12.9 % of youth were NEETs, 2 percentage points more than four years earlier and corresponding to 7.5 million young people.

The dramatic situation of youth unemployment results from the economic crisis, but also shows structural problems, and has an immediate economic cost, in terms of benefits paid out, tax revenue and earnings foregone , has been estimated by Eurofound at over €150 billion per year, or 1.2% of EU GDP. The cost for some countries, such as Bulgaria, Cyprus, Greece, Hungary, Ireland, Italy, Latvia and Poland, is 2% or more of their GDP.

Young people not in employment, education or training (NEET) - EU Member States, 2008, 2010 and 2011 (Source: Eurostat, Labour Force Survey)

Long-term youth unemployment is on the rise: on average, 30.1 % of the young unemployed have been jobless for more than 12 months. The long-term unemployment rate increased by 3.7 percentage points (to 7.3 % of the young labour force) between 2008 and 2012, compared with a 1.8 point increase for adults (to 4.3 %). At the same time, overall employment rates for young people (15-24) fell by almost five percentage points over the last four years (from 37.3 % to 32.8 %) — three times as much as for adults (25-64).

Additionally there are significant differences between Member States in terms of their youth unemployment rates and their measures to tackle them.

What is in the Youth Employment Package?

The Youth Employment Package addresses a number of problems affecting youth employment and proposes remedies and EU-level actions:

1. Youth Guarantee

What is a Youth Guarantee?

The Youth Guarantee is a fully efficient tool developed in Finland and Austriathat ensures that young people receive a good quality offer of employment, continued education, an apprenticeship or a traineeship within a certain time after having left school or become unemployed.

The Commission has developed a comprehensive Youth Guarantee to be financially supported by the European Social Fund and to be integrated in employment policies of Member States. As outlined by the Commission, the Youth Guarantee should be activated for young people within four months of leaving formal education or becoming unemployed.

Why does the Commission think a Youth Guarantee is effective?

The Youth Guarantee’s main objective is to ensure smoother transitions from school to work and requires that all concerned stakeholders are engaging in strong partnerships to deliver such schemes. The Youth Guarantee will help to reduce the current number of NEETs and prevent more young people from falling into this category. The comprehensive Youth Guarantee designed by Finland is a good example of this. A first evaluation recently published by Eurofound shows that 83.5% of young job seekers received a successful intervention within three months of registering as unemployed in 2011. The Finnish youth guarantee notably accelerated the pace at which personalised plans were drawn up, and had resulted in a reduction in unemployment (leading either to employment or further training). Eurofound also comments on the Swedish "job guarantee scheme": 68% of all participants below the age of 25 had some sort of employment 90 days after they completed a New-Start-Job, indicating that the reform is an effective door-opener into the labour market.

Besides the Finnish and the Swedish cases, a variety of initiatives exist in other Member States that would support the success of a fully implemented Youth Guarantee. An overview of these measures is compiled in the Staff Working Document accompanying the proposal for a Council recommendation.

What will be the cost of putting in place a Youth Guarantee?

A Youth Guarantee has a fiscal cost for Member States, but this cost is much lower than the cost of inaction.

First, the cost depends on national circumstances: it will be lower in Member States where supporting measures are well developed (e.g. well-trained Public Employment Service (PES) staff to address young people’s needs). Second, it depends on the way in which the scheme is set up and implemented. Third, it will be greater in countries with high rates of NEETs or of youth unemployment. .

In July 2012, the ILO estimated that the total cost for establishing Youth Guarantee schemes in the eurozone would stand at 0.45% of the eurozone's GDP, or €21 bn. The ILO analysis is based on the Swedish model of "special job-search support", estimated to have an annual cost of €6,000 per unemployed young person plus administrative costs (in terms of resources needed for Public Employment Services to serve the programme) at €600 per participant.

However, these costs should be compared with the costs of unemployment, inactivity and lost productivity. The costs of benefits paid out to unemployed young people, foregone earnings and taxes , are estimated by Eurofound to be the equivalent of 1.21 % of GDP, i.e. an annual loss of €153 billion for the EU. In addition, for young people themselves, being unemployed at a young age can have a long-lasting negative ‘scarring effect’.

These young people face not only higher risks of future unemployment, but also higher risks of exclusion, of poverty and of health problems.

Further information on the cost-benefits of the Youth Guarantee can be found in the Staff Working Document accompanying the Proposal for a Council Recommendation.

Why is the European Commission proposing a Council Recommendation?

So as to give Member States a clear benchmark and precise guidelines for establishing their own Youth Guarantee scheme, that will be effective in helping young people to make a successful transition from school to work and that will also enable Member States to make best use of Cohesion Funds, and in particular of the European Social Fund, to support the scheme.

The proposal recognises that different situations in individual Member States (or at regional or local level) could lead to differences in how the scheme would be set up and implemented.

The implementation of the recommendation will be monitored by the Commission, as well as the results on the ground.

Moreover, the implementation of Youth Guarantee schemes in individual Member States has been integrated in the Commission policy guidance to Member States in the AGS 2013. Implementation will therefore also be monitored thgh the European Semester and possibly addressed through Country Specific Recommendations.

How would Member States be able to put in place the Youth Guarantee given their different situations and limited fiscal room for manoeuvre?

First, the proposal for a Council Recommendation recognises that Youth Guarantee schemes need to take into account the diversity and different starting points of the Member States as regards their levels of youth unemployment, institutional set-up and capacity of the various labour market players. It also recognises that supportive measures should be geared to national, regional and local circumstances.

Second, the Commission considers that a Youth Guarantee would generate positive returns on Member States' economic situation in the long run and therefore constitute an investment, in the same way as education. In the 2013 Annual Growth Survey (see IP/12/1274) the Commission considers that investments in education should be prioritised and strengthened, while ensuring the efficiency of such expenditure. The 2013 Annual Growth Survey also explicitly indicates that particular attention should also be paid by Member States to maintaining or reinforcing the coverage and effectiveness of employment services and active labour market policies, such as Youth Guarantee schemes.

Third, not all measures are expensive in terms of public expenditure. Building up partnership-based approaches for example does not require large budgets, but would significantly contribute towards the success of the Youth Guarantee.

How would EU funding support Youth Guarantees?

The Youth Guarantee can be supported by EU Structural Funds and in particular the European Social Fund.

Examples of Youth Guarantee activities/interventions that can be supported by the ESF

How much money will be available from the European Social Fund after 2014?

The proposed ESF Regulation for the next programming period 2014-2020 includes a dedicated ESF investment priority targeting the sustainable labour market integration of young NEETs. Member States facing high youth unemployment rates are thus expected to identify young unemployed persons as a specific target group for ESF funding. Member States' Partnership Agreements and Operational Programmes for the period 2014-2020 are expected to focus on school-to-work transitions and the possibility to introduce Youth Guarantee schemes, as well as on labour market integration of young people.

During the negotiations between the Commission and Member States about the future Operational Programmes will define specific amounts allocated to these priorities. The Commission expects adequate funding to be allocated to youth guarantees. However, the exact amounts will be determined in the negotiations with Member States.

What happens with the Recommendation now and when does the EC expect it to be implemented?

The Commissioner is due to present the proposed Recommendation to the EU's Council of Employment and Social Affairs Ministers on 6 December 2012. Negotiations in the Council working group will start immediately with a view to adoption of the proposal at the Council on 28 February 2013. The Commission will urge Members States to implement the Youth Guarantee as soon as possible, preferably as from the start of the 2014-2020 Multiannual Financial Framework.

2. Traineeships

What exactly is the Commission proposing?

The Youth Employment Package includes a Commission Communication launching a second stage consultation of European social partners on a quality framework for traineeships. The Communication¹ outlines the main results of the first-stage social partner consultation, as well as recent evidence about quality problems related to traineeships. It goes on to set out three options for EU-level action:

• the quality framework, for example in the form of a Recommendation; this could include quality requirements like a compulsory traineeship contract specifying social security coverage and remuneration/compensation (if applicable), the definition of professional and learning objectives, transparency of information, proper guidance through the traineeship, limited duration, the limitation of successive traineeships and the building of partnerships among stakeholders

• a voluntary quality label with similar quality requirements

• the creation of an information website.

To help the social partners prepare their replies to this consultation, this Communication is accompanied by an analytical document giving background information and analysis (e.g. a definition of traineeships' types, their benefits and costs, reporting stakeholders views, problem definition and policy objectives)².

Why is this necessary?

Traineeships can be very useful to ensure a smooth transition from education and training to the world of work, but do not always live up to their role: they sometimes fail to help young people to gain the skills and knowledge necessary on the labour market, they lack a proper learning content; trainees are sometimes exploited and used as cheap or free workforce.

The recent study on a 'Comprehensive overview of traineeship arrangements in Member States(see IP/12/731) confirmed that young trainees face different problems during their traineeship(s) in most EU Member States. These problems mostly relate to the lack of a high quality learning content, low or no remuneration, poor working conditions other than remuneration/compensation (e.g. lack of proper social protection coverage, long working hours, no equal treatment etc.) and – as a consequence of the previous problems combined with the differences in national traineeship legislations – a relatively low level of intra-EU mobility of trainees.

A quality framework for traineeships could contribute to ensuring that traineeships really help smooth school to work transitions and do not replace regular jobs.

What would happen if social partners did not agree to negotiate?

Social partners have six weeks to decide whether to enter into negotiations on a quality framework for traineeships. The possible outcomes of this procedure are the following: social partners can enter into negotiations, and may reach an autonomous agreement or they may ask the Commission to make a legislative proposal based on their agreement. If social partners fail to agree or decide not to negotiate, the Commission has to assess the situation and decide whether to present its own proposal on a quality framework on traineeships.

3. Apprenticeships

Why is the Commission advocating apprenticeship schemes?

Company-based apprenticeship schemes (also known as 'dual' or 'twin-track' apprenticeships) enable a young person to gain work experience and practical skills through a work-contract in a company as well as acquire theoretical knowledge, often through an educational institution. There are good examples in the EU of how to use apprenticeship schemes optimally to smooth the transition from education to work.

In 2012, the Council addressed Country-Specific Recommendations to seven Member States on apprenticeships and to three on vocational training. Even in the other Member States, much could be done to improve the functioning of the apprenticeship system, and to make better use of ESF funding to this end.

How is the EU going to support Member States in the field of vocational education and training?

Given the need to improve the supply and quality of apprenticeships and to support Member States' cooperation in the field of vocational education and training, the Commission will set up a European alliance for apprenticeships. This alliance will bring together stakeholders from authorities, business and social partners, vocational education and training researchers and practitioners and youth representatives. It will pool the various streams of existing actions under a common umbrella and promote the benefits and ways of successful apprenticeship schemes and ways to build them up.

The Commission will also promote national partnerships for developing dual learning. These will bring together business representatives, authorities responsible for education and employment, ESF managing authorities and social partners in order to work out how the role of apprenticeships in the Member State's labour market and education system can be strengthened and how national ESF allocations can be drawn upon in the design and implementation of dual-learning systems.

4. Mobility

How can mobility benefit young people?

The substantial differences existing between youth unemployment levels, coupled with a rise in vacancy rates in some Member States, highlight that intra-EU mobility can give young people access to more employment opportunities. Transnational traineeships and apprenticeships offer many advantages in this regard, together the possibility of trying out working in another country without immediately committing to long-term employment. However, they are not yet widespread. This is in direct contrast to the openness towards mobility generally shown by young people and to the success enjoyed by programmes aimed at studying abroad, such as Erasmus and Leonardo da Vinci.

What is the Commission proposing to improve mobility for young people?

The Commission launched its first specific initiative on supporting through financial incentives youth mobility with the preparatory action 'Your first EURES Job' (see IP/12/492). The action helps young EU nationals aged 18 to 30 to find work in other Member States by combining customised job-matching and job placement services with EU financial incentives (contributions to travel expenses for job interviews, pre-job training and work, integration activities). As it is testing a new concept, EU resources (€11 million 2011-2013) and its overall target (5,000 placements by 2014) are limited.

As part of its November 2012 decision to modernise and improve EURES, the pan-EU job search network (see IP/12/1262) by inter alia supporting targeted mobility schemes for young people, the Commission will launch in the first half of 2013 a consultation with stakeholders on developing a EURES jobs for young people programme. This will be part of the future EURES axis of the Programme for Social Change and Innovation, which would build on the lessons learnt with Your First EURES Job and those in the area of education (Erasmus and Leonardo da Vinci).