EU’s Youth Guarantee is unlikely to dramatically help Slovakia’s young unemployed

On December 5, the European Commission proposed a package of measures to help deal with youth unemployment. However, concerns persist about the effectiveness of the package. Slovakia has one of the highest youth unemployment rates in the EU. It serves as an example of a country where half-hearted measures have failed in the absence of a proper active labour market strategy to channel the young into meaningful jobs.

Foto: Creative Commons/ Matthew Kenwrick

Central to the Commission’s proposal is the Youth Guarantee: a pledge underpinned by policy measures to provide employment, continued education or training for people younger than 25 within four months of leaving formal education or becoming unemployed. It is up to the member states to choose the exact form of implementing this in practice. The financing framework is yet to be agreed upon, but will likely come at the Ministers’ Council on February 28. It is expected that the funding, coming from the European Social Fund, will be relatively generous. The sum proposed for the next 7-year financial framework is 6 billion euro.

Some countries already have schemes in place similar to the proposed Youth Guarantee. The Finnish and Austrian systems, in fact, partly served as an inspiration for the EU proposal. Similar measures can be found outside the continent as well. For example, New Zealand has started a Youth Guarantee Scheme in 2013. But can a guarantee resolve deep-seated labour market problems?

The new EU member states spend very little on active labour market measures. According to Eurostat, the EU’s statistical body, the V4 countries’ expenditure on active labour market policies (ALMP) is below the EU average. It is the lowest in the Czech Republic and Slovakia, at 0.22 and 0.23% of GDP respectively. In Hungary, it is 0.53%, and in Poland 0.60%. In Slovakia, the public investment into ALPM constitutes only 25% of all labour market expenditures, compared to 32% in the Czech Republic and 40% in Hungary. At the same time, Slovakia is where active measures would be most needed.

Why the young do not have work in Slovakia

Unemployment in Slovakia, including youth unemployment, is the highest of the V4 states. Among 15- to 24-year-olds, the percentage of people out of work, measured by the so-called Neither in Employment nor in Education or Training (NEET) rate, is 13.8%. Hungary is not far off with 13.3%, Poland does better with 11.6 % and the Czech Republic has a relatively low rate of 8.3%.

Using a different measure, the simple unemployment rate for this age group, Slovakia is currently in the third worst position in the EU, with 34.5%. Only Portugal (37.7%) and Spain (53.2%) are worse. These percentages are higher than in NEET figures, because they are calculated from a narrower base, of people available for employment, rather than the whole age group.

In fact, even during the economic boom of 2005-7, Slovakia had one of the highest youth unemployment rates in the EU. So, for a long time, young people, especially those with elementary and secondary education, have been experiencing major difficulties finding a job. Yet, very few active labour market measures can be said to be targeted at this group.

In 2002, Slovakia enacted the Law on Employment Services, a state-financed framework for internships and apprenticeships. The intention was to guarantee the young unemployed some employment experience and to prevent them from working illegally. The mechanism is currently used by employers mostly for temporary jobs and it is mostly viewed as a tool for preserving the working experience of the unemployed. Employers bear no labour costs for employing young people temporarily and the young unemployed are not bound by any working contract. This allows employers to rotate the young unemployed without creating real jobs. The state-sponsored internship scheme does have some positive effects, as it at least provides some work experience. However, similar to other internship programs, only a very low number of participants find a permanent job through this mechanism.

Internship trap?

Slovakia´s experience, while worse than others, is not dramatically different from the situation elsewhere. Young people have been encountering problems finding a job for a long time in the majority of EU member states. Internships, with a weak prospect of turning into a real job, are widespread in many older EU member states. In Great Britain, for example, it is estimated that only 9 percent of all interns stay at their position after the internship ends. This negative experience should be taken as a warning in further implementation of the Youth Guarantee in other member states, including V4 countries.

In this context, the European Commission’s recommendation looks like a well-intentioned policy that could misfire, due to a lack of a supportive context. In Austria and Finland, close cooperation with employers, the education system and job centres form the bedrock of the policy, and the long-term effect is ensured through a conceptual approach aimed at school-to-work transitions. The effects are visible in Eurostat figures. For example, Austria, with its 7% NEET rate, has one of the lowest number of young unemployed in the EU. Simply put, the efficiency of the Youth Guarantee is based on long-term cooperation with employers. If this cannot be ensured, the policy can lead to undesirable outcomes, such as a frequent turnover of the unemployed in internships or trainee programs with no real job prospects.

In Slovakia, with its ineffective active labour market policy, this danger of creating too many temporary placements that do not lead to stable jobs is quite real. The Youth Guarantee could not only be ineffective: it could even create a larger youth unemployment trap. With a ready supply of cheap interns, employers might even decrease the availability of regular jobs. The problem is that the guarantee lacks supportive measures that would help lock graduates in jobs by providing them with training, for example. According to the Law on Employment Services, young people are considered to be one of the disadvantaged groups on the labour market. This qualifies them to some ALMP support besides the internship scheme, such as additional training and education. However, the government does not provide the money. Expenditures on education and training of the unemployed is persistently one of the lowest in the EU.

Not bad but not enough

The Youth Guarantee is not a bad policy. The question is whether in the individual states the scheme is going to change the approach to labour market policy and improve the connectivity of labour market needs and education of school graduates, or whether it will, perversely, lead dropouts and graduates into a never-ending chain of internships. The example of Slovakia, where the government never provided a complex framework for school-to-work transitions even in the face of staggeringly high youth unemployment, is not encouraging. Policy makers should use the momentum provided by the ongoing discussion on the Youth Guarantee to pressure the weak-performing member states into a range of further labour market reforms.

Monika Martišková

Monika Martišková

is an associate researcher at the Central European Labour Studies Institute (CELSI). She is also a PhD candidate at Prague's Charles University.