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Europe can't afford to lose another generation to youth unemployment

Jobseekers queue outside a state employment centre in Madrid. Photograph: Bloomberg/Bloomberg via Getty Images
Jobseekers queue outside a state employment centre in Madrid. Photograph: Bloomberg/Bloomberg via Getty Images

A decade ago, the global financial crisis left deep scars in terms of destroyed opportunities and unemployment for young people. In Europe in particular, youth unemployment persisted. Now the Covid-19 crisis threatens to do the same thing to the under-25s. Yet, none of the leaders of France, Italy or Spain, nor the president of the European commission, prioritised youth unemployment in their latest policy speeches. At the highest political level, the focus must be on averting the risk of a lost generation. Bold policies will be needed.

During the financial crisis, the US youth unemployment rate increased from about 10% to 19%, while in the European Union it increased from 16% to 26%. The rate in the EU only returned to its 2008 level in 2018, while the spike in US youth unemployment was overcome more rapidly. Even in the recovery, some EU countries fared much worse than the EU average. In Greece, Spain and Italy, youth unemployment in 2019 was still higher than it was before the 2008 crash.

Another major surge in youth unemployment brought about by the Covid-19 pandemic could also take a decade or more to heal. The first signs are already visible: US youth unemployment was about twice as high in July as in July 2019. In Europe, youth unemployment has increased by less, but still increased from 15% to more than 17% in the first two quarters of 2020 – while unemployment among the over-55s actually fell. More worryingly, measures of labour market slack are up by some five percentage points, as are the percentages of young people who have even given up searching for a job. Some countries such as Spain or Croatia have been more severely hit. In fact, Spanish youth unemployment increased from a high 32% to almost 40% while the Croatian rate increased from 17% to 24%. In the UK, youth unemployment rose from 11% to almost 14%. With Europe in its second significant lockdown, the risk is that these numbers will rapidly deteriorate further.

Youth unemployment does long-term damage. Workers who are unemployed when young tend to earn significantly less over their lifetime. The young unemployed look at the future less optimistically. They also tend to leave the parental home later and start families later. On average, Italians leave their parents’ home only at the age of about 30, and it is no surprise that the Italian and Spanish fertility rates are among the lowest in Europe.

In short, Europe cannot afford to again forget its youth. The European institutions must contribute to the effort to avoid another lost generation, and national policymakers in particular need to do their bit.

The first big priority is to get the European macroeconomic policy stance right. One of the reasons for the slow recovery in youth employment in the EU after the financial crisis was the second recession that Europe fell into between 2011 and 2013. At the time, fiscal and monetary tightening prematurely choked off the recovery. So far in the response to Covid-19, European policymakers have not repeated that mistake and have provided impressive fiscal and monetary support. Fiscal policies will need to continue to support the EU economy in 2022 and 2023.

Second, policymakers need to set up targeted support programmes for the hiring and retention of young workers. The European commission has pledged that €22bn from the EU recovery fund will be used to support youth employment. But such funding for the EU’s three million young unemployed is insufficient. National policymakers will need to increase their budget lines to support the hiring of young people and the creation of job opportunities.

Third, 10 years ago, and despite pledges to the contrary, education and investment funding and spending on families was cut in many parts of Europe at the expense of the young. This time needs to be different. School closures have meant pupils missing out on teaching, affecting their lifetime earnings expectations. In particular, children from families with weak educational backgrounds have not been able to make up the loss of teaching. In that way, inequalities in opportunity have been further exacerbated. Many European countries are now paying a heavy price for their slowness in the digitalisation of schools and even universities. For instance, many German schools, after more than half a year of Covid-19, have not yet been able to put in place proper online teaching systems.

Massive increases in public debt are shielding business from bankruptcy, and to preserve economic structures. But if Europe wants to stay competitive, it needs to invest more in the economy of the future. There is no better investment than investment in Europe’s young people, who continue to suffer disproportionately from this pandemic.

Guntram Wolff is director of the Brussels-based thinktank, Bruegel.

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