How different are youth and adult labour market transitions?

How different are youth and adult labour market transitions? 2017-08-17T15:50:11+00:00

Why are youth labour market transitions different?

Youth transitions are different for several reasons. First, only a fraction of school-leavers and university graduates immediately manage to find a stable and satisfactory job. The rest initially face unemployment or frequent job changes combined with repeated unemployment spells. This situation is attributed to educational mismatch, to a lack of work experience and to the absence of firm-specific skills. Second, youth employment tends to be unstable even when education, skills and other characteristics match the employer’s requirements. Young employees are still more likely to be exposed to layoffs, for instance because of the practice of fixed-term labour contracts, seniority-weighted redundancy payments or last-in first-out rules.

These long-term patterns of youth transitions illustrate the marginalised status of young people on the labour markets. The Great Recession has further amplified the existing difficulties of young people − a situation that has resulted in youth (16-34) unemployment rates increasing faster than prime-age unemployment rates (35-54). Despite the reasonably good and varied amount of partial findings collected so far, we believed that a synthetic, cross-national view on youth labour market dynamics during the Great Recession was still largely lacking. To understand these effects, we analysed the youth labour market dynamics in selected EU countries over various stages of the Great Recession (Flek and Mysíková 2016; 2017). We were interested in a group of young individuals aged 16-34, and we compared these results with a reference group involving the prime-age population (35-54).

We wanted to find out:

  1. How do the movements (gross flows) of young people between employment, unemployment and inactivity differ from the dynamics of the prime-age labour market?
  2. What are the differences in the probabilities of young and prime-age individuals changing their labour market states?
  3. Do the most marked differences between the evolution of youth and the prime-age unemployment rates lie in a relatively different exposure to job loss, in the prospects for exiting unemployment, or in transitions between inactivity and the labour market?
  4. What individual characteristics affect youth/prime-age transitions from employment to unemployment?
  5. How do unemployment durations and the characteristics of young/prime-age unemployed influence their chances of finding a job?

We used longitudinal data from the European Union Survey on Income and Living Conditions (EU-SILC) from January 2008 to December 2012. We provide analysis for a selection of countries that represent the south-west of Europe: France, Italy and Spain; the former communist economies of the East: Czech Republic and Poland; and Austria as a country with low levels of youth unemployment and high productivity. Applying estimation techniques such as variance decompositions, duration models and probit models, the analysis yields a number of key findings.

Findings:

Young people make more transitions than older workers

Youth is relatively more involved in gross flows than prime-age groups. This holds true uniformly across the countries analysed over the period 2008–2012 and supports the less recent evidence on a higher aggregate fluidity of youth labour markets compared to prime-age markets.

Young people face a higher probability of job loss

The policy priority should be to reduce the gap between the unemployment risks faced by a young and a prime-age worker. This gap is characteristic for all the labour markets analysed and concerns countries with substantially different labour market performance, institutions, EU-membership history and other national specificities.

Drivers of youth unemployment versus prime-age unemployment

Inflows of young workers into unemployment account for far higher increases in youth unemployment rates compared to prime-age unemployment rates where the inflows have not been as high. This finding additionally confirms the presence of a strong disparity in (formal and/or informal) employment protection between the two age groups analysed.

Experience and education reduce risk of job loss among youth

Young people need to gain work experience promptly so as to minimize the probability of job loss. Also, the effect of education on lowering the risk of job loss is significant for young people. Higher education actually decreases the probability of becoming unemployed more substantially for young workers than for prime-age workers.

Unemployment durations negatively affect the probability of finding a job

From 2010 onward, the job-finding prospects of young unemployed could be viewed as a diminishing function of unemployment duration in all countries analysed. This can be attributed to stigmatisation and discouragement effects of prolonged unemployment duration. However, prime-age unemployed are still likely to suffer relatively more heavily from this duration dependence effect.

The individual characteristics of young unemployed matter

Higher education significantly increases the job-finding probability of young unemployed. Furthermore, employers avoid hiring the relatively immature young unemployed aged less than 24. In the absence of other members in respondents’ households, the pressure to find a job imposed on young unemployed appears to be significantly higher.

References

Flek, Vladislav, Martin Hála and Martina Mysíková. Forthcoming. ‘How do youth labor flows differ from those of older workers?’ In Youth Labor in Transition, edited by Jacqueline O’Reilly, Janine Leschke, Renate Ortlieb, Martin Seeleib-Kaiser and Paola Villa. New York: Oxford University Press.

Flek, Vladislav, and Martina Mysíková. 2016. Youth transitions and labour market flows – who moves and how? STYLE Working Paper WP5.2 Youth Transitions and Labour Market Flows