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Commissioner for Employment, Social Affairs and Inclusion
An EU that works for young people
SOAS, University of London
London, 15 May 2014
Dear students, dear staff, ladies and gentlemen,
I would like to thank the University and the Friedrich-Ebert-Stiftung for inviting me to speak here today.
The elections for the European Parliament are upon us. We are at a defining moment in the development of the European Union. The outcome of the elections will have a considerable impact not only on the future of the Union, but on your own future, too. Now is the time for you to go out and let your voice be heard - this is your chance to determine the future trajectory of the Union.
The current young generation is the best-educated, technologically adept and most travelled ever, but there are still large pockets of vulnerable and disadvantaged and alienated young people in every country in the EU.
So, what does the European Union do for young people? What support and opportunities are there?
Throughout my time as European Commissioner for employment, social affairs and inclusion, I endeavoured to turn the title of this event 'An EU that works for young people' into reality.
A major way in which the EU supports young people is to ensure that young people gain a solid foothold in the labour market. For us this is crucial.
It is no secret that the economic crisis of the past few years has hit young jobseekers especially hard.
We are slowly emerging from the worst economic crisis since the 1930's and as is the case after severe economic downturns, jobs are being created with considerable time lag.
We cannot afford to be complacent. Tackling youth unemployment is absolutely essential and remains a policy priority.
The fight against unemployment is a joint effort in different policy areas: education and training, economy, social policy, labour policy and mobility.
Figures and trends
Figures and trends on employment prospects for young people in Europe do not paint a pretty picture. This is likely not news to you – many of you know of friends or acquaintances that are struggling.
The overall youth unemployment rate in Europe, for people under 25, stands at 22.6%1 at the moment, more than twice as high as for the population as a whole. In the worst hit countries, in Greece and in Spain, well over half of young job-seekers are unemployed. Here in the UK the figure stands at close to 19%. Particularly worrying is the increase in long-term unemployment for young people. In 2012 almost a third had been out of work for over a year.
But the problem is of course not just youth unemployment, but also discouragement and inactivity, i.e. dropout from the labour market and giving up on trying to find work.
This is why policy-makers across Europe tend to look at the so-called NEET rate, capturing all those neither in employment, nor in education or training.
The NEET rate has been increasing almost everywhere in Europe in the recent years.
Across the EU, 7.5 million young people in the 15-to-24 age bracket are neither in employment, nor in education or training, and the same applies to another 6.5 million of those aged 25 to 29.
That means we have 14 million NEETs under the age of 30 in the Union, which is about the same as the combined population of Austria and Denmark.
A related problem is the persistent difficulty of filling vacancies, which points to a labour-market mismatch and shows that many young people do not have the right skills for the jobs out there.
The job vacancy rate for the EU is about 1.5%, which means roughly 2.5 million vacant posts.
Our economy is clearly not generating enough work opportunities for all the unemployed people. But we also have a problem in the sense that the job vacancy rate has been quite stable in the past few years, even though unemployment has continued to rise.
For economists in the room: the Beveridge curve for the EU as a whole as well as in most individual countries has been shifting to the right since 2010. The mismatch in terms of skills and geographical availability of jobseekers and vacancies in Europe has grown.
Overall, the situation is therefore very serious. Clearly, what young people need is focused, effective assistance to ease the impact of the crisis on their lives.
If we don't help this generation to get a foothold on the labour market now, their employability, productivity and life-time prospects will be damaged for years and decades to come.
The key measure to combat youth unemployment is the Youth Guarantee scheme set up by the Commission and European Heads of State and Government.
Under this scheme Member States committed to putting in place arrangements under which all young people under 25 within four months of leaving formal education or becoming unemployed, receive a good quality offer of employment, continued education, an apprenticeship or traineeship.
In other words, the recommendation seeks to ensure that every country has a comprehensive scheme in place that can provide support to all those who need it – and especially to those who need it most.
It is well documented that unemployment at the very start of their careers can leave a permanent scar on young people’s psychology but also their economic potential over the entire lifetime.
Prolonged unemployment or labour market inactivity after leaving school carries a higher risk of future unemployment, exclusion, poverty and health problems — all with potentially far-reaching effects.
The European Foundation for the Improvement of Living and Working Conditions published a study last year in which they estimated that only for the year 2011, the economic loss due to the disengagement of young people from the labour market in Europe amounted to €153 billion, corresponding to 1.2% of European GDP.
Part of this cost involves social protection expenditure, but the bulk of the economic cost is foregone economic production: value that could have been created if these people had the chance to work.
Consider this waste of young human capital in the context of our longer-term demographic challenge and the fact that Europe’s workforce is set to be shrinking and ageing in the next two decades:
To maintain solid GDP growth, we would need as many people in the productive age as possible to be employed, and to increase productivity. But current levels of youth unemployment and inactivity mean that we are losing this battle at the very outset.
The Youth Guarantee therefore represents a structural reform that tries to systematically improve transitions from school to work and on that basis strengthen competitiveness, growth and employment.
Implementation of the Youth Guarantee requires the involvement of all levels of government.
But it also calls for close cooperation with stakeholders outside government — in other words, public and private employment services, business, trade unions, schools and youth organisations.
Providing every young person with a good quality offer of a placement within four months from leaving school cannot happen without systematic and well-organised cooperation between these players.
Often this does not even need to cost money, it’s just about getting better organised.
But it may be well justified for governments to finance training courses, subsidise net new hiring or traineeship or apprenticeship costs, or provide money for start-up grants for young people.
Depending on the country’s challenges, the Youth Guarantee can also involve modernisation of vocational education and training systems to help in tackling labour market mismatches. In other words, strengthening the links between schools, business and unions and ensuring that young people get equipped with skills actually demanded on the labour market.
What is crucial in any case is that job centres apply a personalised approach, providing support and offering options in line with people’s individual needs. They need to be able to help also people who face multiple disadvantage in getting into the labour market.
Financing of Youth Guarantee measures
Of course, the Youth Guarantee, like every investment, comes at a cost.
The International Labour Organisation has estimated the total cost of establishing Youth Guarantee schemes in the euro area at 21 billion euros — or 17.5 billion pounds — which is 0.22% of euro-area GDP. They based this estimate on the Swedish example where the total cost per participant was roughly 6,600 euros, but in many countries it could be of course done less expensively.
Still, the cost of doing nothing would be far greater, both in terms of today’s foregone output and in terms of skills lost. I referred earlier to the EUROFOUND calculation that the annual economic waste resulting from the fact that we have 14 million NEETs is approximately 1.2% of GDP.
Now, as regards the question of where the funding can come from, I have some good news.
At least €6 billion has been ring-fenced within the EU’s long-term budget in order to support youth employment, in particular through the implementation of the Youth Guarantee.
€3 billion of this funding was agreed among governments earlier this year as an urgent response to the growing problem of youth unemployment and inactivity.
These €3 billion will need to be used to fund activities directly benefiting young people neither in employment, nor in education or training. At least 90% of this sum will be targeted at regions where the youth unemployment rate exceeded 25% in 2012. And all of these €3 billion will need to be used in 2014-15.
Let’s see what that 25% criterion means in practice.
This slide shows there are great disparities in youth unemployment rates across EU Member States.
The north-south divide is very visible, with all of Spain and all of Greece, all of southern Italy and all of southern Portugal a dark blue, which corresponds to a youth unemployment rate of 40% or higher.
The rest of Italy and Spain are light blue, corresponding to a rate of 25% and over.
By contrast, northern Europe is in a much better situation.
It is therefore only logical that young people in the worst-affected areas consider taking advantage of freedom of movement for workers to see what employment possibilities exist where the situation is better and the grass — or the map — is greener.
But you can see also that also France and the UK have several regions where the youth unemployment rate exceeds 25%.
Here in the United Kingdom, the regions concerned are Inner London, Merseyside, South Western Scotland, Tees Valley and Durham, and West Midlands.
From the € 3 billion I mentioned, the UK is set to receive about 170 million pounds for 2014-15, to be used predominantly in these regions.
Moreover, besides this relatively new funding, there is the European Social Fund which has existed since 1958 and from which every Member State benefits.
The UK will be receiving something between around 4 billion pounds from the European Social Fund in the coming seven years. It will be obliged to allocate at least 170 million to match the extra funding for youth in the worst-affected regions. That is the principle of the Youth Employment Initiative: a certain amount of new money, to be matched by the same amount from the long-established European Social Fund.
We are now at the stage when Member States are discussing with the Commission the main outlines of their funding programmes for 2014-20.
In this process, we strongly encourage Member States to plan their investments in such a way that they can achieve what the Youth Guarantee recommendation is aiming at, i.e. that every person under 25 gets a labour market opportunity within four months.
But the EU contribution, even if it involves hundreds of millions of pounds, will probably not be enough to address the youth unemployment problem in all of the UK. An additional investment from the national budget is therefore worth considering.
UK specific challenges
Ladies and gentlemen,
Allow me now to zoom-in on the UK and analyse its youth employment challenges in somewhat greater detail.
We saw that the youth unemployment rate in the UK is a little bit lower than the EU average.
However, the rate of those who are neither in employment, nor in education or training reaches 14% in the UK, as compared to 13.1% in the EU as a whole. This indicates quite clearly that part of the young generation suffers from a de facto exclusion from the labour market.
It is also quite noteworthy that the UK’s NEET rate has grown substantially since the financial crisis hit. In 2006, the NEET rate among 15-24 year olds was 8.5%, while in 2012 it reached 14%.
If we look at data for long-term unemployment among young people, we can see that one third of the UK’s jobless 18-24-year-olds (or 250,000 people) have been out of work for more than 12 months, and 15 per cent (or 115,000) for more than 24 months, which is the highest level since 1994.
The UK appears to have a special problem of a lack of skills among a part of its young population.
The problem is also addressed quite directly in one of the Country-Specific Recommendations which the UK received from the EU in July 2013.
This is a recommendation proposed by the Commission and endorsed by the EU Heads of State or Government. Early June a new set of recommendations will be proposed by the Commission.
The point here is that it is precisely through the introduction of the Youth Guarantee that the UK could reduce its relatively large number of young people who are neither in employment, nor in education or training.
The UK education and training system produces a certain percentage of people with skills and qualifications so low that they struggle to find not only a place in the labour market but even further training opportunities.
The UK is by no means the only country with this kind of a problem, and the solution may also be similar: improve the way schools, companies, job centres and other bodies work together, in order to better provide young people with work-based skills.
UK employers could help in this respect by offering apprenticeships. Combining classroom education with company-based training has worked very well in German-speaking and Nordic countries, and the idea could certainly be adapted to the UK.
Strengthening the vocational training system and introducing a greater number of apprenticeships is a reform that fits into the Youth Guarantee concept.
In short, there is room for more ambition on youth employment policies in the UK.
Ladies and gentlemen, dear students,
Let me now draw your attention to two related initiatives we took in connection with the Youth Guarantee.
First of all we launched in July last year the European Alliance for Apprenticeships. It aims at spreading dual training models across Europe and ensuring greater availability of good quality apprenticeship places in the context of the Youth Guarantee.
The Alliance encourages knowledge transfer between governments, companies and other stakeholders across Europe. A growing number of companies have pledged to take practical action within the next few months to improve the quality and increase the offer of apprenticeships.
Finally, the Commission has also put forward a proposal for a Quality Framework for Traineeships.
Here in the United Kingdom, many refer to “internships” rather than “traineeships” when it comes to work experience on the open labour market, after the completion of an educational programme.
But whatever the terminology, the idea of the Quality Framework stems from concern that in today’s labour market, many traineeships or internships have low learning content and tend to be treated by some employers simply as a source of cheap labour, essentially replacing entry-level jobs.
The Quality Framework provides guidelines on how to improve the learning content and fair working conditions of traineeships, so that they really play a role of good-quality training and a stepping stone towards regular employment.
Ladies and gentlemen, dear students,
In today's world, a person's ability to find a job – their employability – is more than anything dependent on their education. Data shows clearly that young people who have a higher education degree are more likely to be in work – and at a higher salary – than those who have only completed, or failed to complete, secondary education.
This trend is expected to continue, and indeed to intensify. According to recent forecasts, in the next ten years, close to half the jobs on offer in the EU will require high-skills while barely one out of ten will be low-skilled.
Not only will there be a real need for certain generic professional, more specific skills, more and more employers require soft or interpersonal skills in their workforce. Scientific subjects are also essential. The demand for a qualified workforce in technology and research intensive sectors is and remains high.
From a policy point of view, this has led us at European level to urge Member States – who are responsible for their national education systems - to radically rethink their education systems and make them fit for purpose. The European Social Fund can play a role for example by the modernisation of curricula.
One of the best known EU programmes is the Erasmus programme.
Thanks to the Erasmus programme, over 3 million students have been able to study or train in another country in the last 26 years. They returned more skilled, more self-confident and with a stronger attachment to Europe.
Erasmus traineeships, too, are increasingly sought after and more than 45.000 students a year are able to gain work experience abroad during their studies.
Such experience is much valued by employers who appreciate the adaptability and interpersonal and intercultural skills exhibited by those who have gained international experience.
And now there is Erasmus+, the new EU programme for education training, youth and sport. Erasmus+ builds on this impressive legacy.
Through Erasmus+ some 4 million students will study, train or volunteer abroad, both in Europe and beyond. This will include 2 million higher education students, 650 000 vocational training students and apprentices, as well as more than 500 000 going on youth exchanges or volunteering abroad. Students planning a full Master's degree abroad, for which national grants or loans are seldom available, will benefit from a new loan guarantee scheme run by the European Investment Fund.
Erasmus+ will also provide funding for education and training staff mobility, and for partnerships between universities, colleges, schools, enterprises, and not-for-profit organisations.
This support comes on top of the important investment the EU is making in research and innovation with nearly 80 billion euro available for the period 2014-2020. UK universities and research institutes are hugely benefiting from this support.
Ladies and gentlemen, dear students,
Heading out into the world, moving from education to a working life can be daunting. We hope that through our efforts we can make this transition easier and less daunting. The future prosperity and growth of the Union rests on your shoulders, on your talents, energy, creativity and ability to innovate.
I wish the young people here today every success in their future careers.
And remember to go and vote. I would urge you to take advantage of this opportunity and to go out and vote for your representatives in Europe next Thursday. Do not waste it.
And good luck in your exams.
Eurostat: March 2014 (EU27).