(UN)EMPLOYMENT, YOUTH AND EDUCATION

Can it help explain the current mitigated growth of unemployment

(and does it affect inequality) ?

Wiemer Salverda

7 July 2010LLAKES

International Conference London

www.uva-aias.net

2

0. Summary & lay out 1

The current increase in the unemployment rate seems significantly smaller than warranted by the depth of the financial crisis

An important question is whether this is due to a changing functioning of labour markets

Particularly relevant for today’s meeting is the potential contribution of a changing youth labour market in conjunction with expanding educational participation

3

0. Summary & lay out 2

The modesty of unemployment growth is a contention based on a historical perspective, i.e. in comparison to previous downturns: is it true? (dust has not settled yet)

There are good reasons to think that labour markets may have changed indeed:- growth of female participation, and skills;- shifts to part-time jobs, and to services;- changes in policies and regulations

Youth & education is at best part of the story (women and households!), but it is also part of policy making vis-à-vis the labour market (work/train up to 27 years) and the current crisis (200 mln for education)

4

0. Summary & lay out 3

1) Comparison of downturns since 1970 & labour-market effects[delineation & measurement are not trivial]

2) Youth labour market:within this market & relative to the restand in conjunction with education

3) International comparison

Focus of 1) and 2) is the Netherlands [familiar & illuminating] with forays into international comparisons sub 3) [also not trivial]

5

– Choice of a downturn indicator: - volumes of GDP (short-lived),- GDP/capita (over time and cross-country),- investment (closer to behaviour), or - unemployment rate (closer to labour-market effects) ?

– Measurement of downturn duration:- decline only (= peak-to-trough), or - all that remains below initial level (= inclusive of recovery “full-period”) ?

------------------------– International data source: OECD, Economic

Outlook– Quarterly data: within-crisis detail, most up to

date

1. Comparison 1

6

Timing: GDP, GDP/capita, investment, unemployment%

1. Comparison 2

1. 1971Q2-1977Q3(29)

2. 1979Q3-1985Q2(24)

3. 1992Q1-1995Q3(15)

4. 2000Q1-2007Q4(32)

5. 2008Q3-(2009Q4)(6+)

7

Investment changes over the downturns by nature of the time focus

Quarterly averages, NLD (%)

1. Comparison 3

1. 1970s

2. 1980s

3. 1990s

4. 2000s

5. Now

Full-period How many Q?

-0.029

-0.024

-0.315

-0.132

-3.56+

Peak-to-trough Down/up in Q?

-0.9 20/9

-1.813/11

-1.110/5

-1.712/20

-3.56/0

First 6 quartiles

-2.5 -1.8 -1.5 -1.0 -3.5

Speediest year Start in Q?

-3.71

-3.17

-2.45

-3.39

-4.62

8

Other economic variables, changes over the first 6 quartiles (currently available): widespread effects

Quarterly averages, NLD (%)

1. Comparison 4

1. 1970s

2. 1980s

3. 1990s

4. 2000s

5. Now

Prices 2.0 1.7 0.6 1.1 -0.0

Consumption

1.0 0.1 0.2 0.6 -0.5

Imports 0.6 -0.6 -0.1 2.0 -1.5

Exports 1.9 -0.2 0.5 2.0 -1.4

Balance (pcpt)

0.3 -0.2 0.4 -0.2 0.4

Savings /NNI(pcpt) (N.Acc.)

n.a. n.a. -0.1 -0.1 -1.1

9

Labour variables, changes over the first 6 quartiles: going low and high

Quarterly averages, NLD (%)

1. Comparison 5

1. 1970s

2. 1980s

3. 1990s

4. 2000s

5. Now

Productivity 1.4 0.1 0.0 0.1 -0.5

Real wages 1.8 -0.2 0.4 0.0 0.8

Real unit labour costs

0.1

-0.0 0.2 -0.1 1.4

10

Labour-market variables, changes over the first 6 quartiles: also deep (1970 relates to productivity growth)

Quarterly averages, NLD (pcpt)

1. Comparison 7

1. 1970s

2. 1980s

3. 1990s

4. 2000s

5. Now

U-rate 0.22 0.14 0.18 -0.11 0.22

UPOP 0.15 0.10 0.14 -0.08 0.17

EPOP -0.30 -0.10 0.04 0.25 -0.26

EPOP-FTE -0.64 -0.16 0.08 0.27 -0.24

11

Over the downturns the employment FTE-volume falls, but relative to GDP/capita much less this time

First 6-quartile changes, NLD (%)

1. Comparison 8

-5.4

-1.7

-7.7

-5.6

3.8

-10

-8

-6

-4

-2

0

2

4

6

1-1970s 2-1980s 3-1990s 4-2000s 5-now 5 as 1-4 5 as 2-4

GDP/capita EPOP-FTE Difference simulations

12

1. Comparison conclusions

– For the future a prolonged and relatively deep downturn cannot be ruled out

– Differences to previous downturns are intense and are broad: declining investment, savings, trade and productivity, risk of deflation - extending much beyond (un)employment

– (Un)employment effects are as significant as before and modest only relative to the extent of the current downturn

13

2. Youth 1

– Strong overall employment growth together with significant demographic changes in employment over recent decades

– Particular shifts for youth: part-time explosion, rapid flexibility growth

– Radical change in educational participation

14

Youth employment: explosion of part-time jobs (women mainly participated more)

Part-time share of jobs by gender and age, %, NLD, 1979—2009

2. Youth 2

0

10

20

30

40

50

60

70

80

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Youth

Adult men

Adult women

15

The explosion is in small jobs, now 40% of all jobs; without part-time growth youth EPOP had declined

Youth head-count EPOP by working hours, %, NLD, 1987—2009

2. Youth 3

0

10

20

30

40

50

60

70

80

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

<12

12-19

20-34

35+

16

Important youth role in overall changes 1987--2009: all small jobs, may flexible jobs, strong FT decline

Employment change by age, weekly hours and contract type, x1000, NLD

2. Youth 4

343111 61

-396

119345

-183

317 375

1392

350

2434

838

1429

-1000

-500

0

500

1000

1500

2000

2500

3000

<12

12-1

9

20-3

4 35

+tot

al

flexib

le

perm

anen

t

15-24 15-64

17

Part-time employment and low pay now virtually overlap (and, 4065% youth); unchanged for full-time

Incidence of low pay among part-time and full-time, %, NLD, 1979—2009

2. Youth 5

5

10

15

20

25

30

1970 1975 1980 1985 1990 1995 2000 2005

Allen + 7%

Full-time + 0%

Part-time +10%24%

70%

uren-gebaseerd (+5%)

18

Demographic shift in volume of employment: adult women replacing youths, adult men unchanged

Employment FTE1,5 by gender and age, %, NLD, 1985—2009

2. Youth 6

0%

20%

40%

60%

80%

100%

1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

15-24

W25-64

M25-64

19

Full-time equivalent youth employment rate has actually declined, full-time jobs hit strongly

Youth hours-count EPOP by working hours, %, NLD, 1987—2009

2. Youth 7

0

10

20

30

40

50

60

70

80

1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

<12

12-19

20-34

35+

20

Youth employment now largely (2/3rds) overlaps with participation in education

Youth population by activity, 1998-2007, NLD (% of youth)

2. Youth 8

29 2822 21 21 20 22 23 24 22

32 3541 42 42 43 42 41 42 45

28 28 28 28 29 26 25 2424 23

6 4 3 3 3 5 6 6 4 45 5 6 6 6 7 6 6 5 5

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

NEET

Unemp

Emp

OverlapEmp-Edu

EDU

21

Small jobs are very important (60%) for the educational overlap, and vice-versa (96%)

Employment/Education overlap by hours, x1000, 15 24, NLD, 2001 2009

2. Youth 9

0

100

200

300

400

500

600

700

800

900

1000

2002 2003 2004 2005 2006 2007 2008 2009

35+

20-34

12-20

<12

22

Employment growth diverges depending on educational participation

Annual FTE change (%), employed youths, NLD, 2003-2009

2. Youth 10

-6.4 -6.3 -6.0

1.4 1.7

-0.8

-7.2-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

2003 2004 2005 2006 2007 2008 2009

In education Not in education

23

Dotcom and financial crisis: employment effects are strongly diverging between full-time and part-time

Employed by age and full/part-time, NLD, peak quartile = 100

2. Youth 11

75

100

125

1999

Q04

2000

Q02

2000

Q04

2001

Q02

2001

Q04

2002

Q02

2002

Q04

2003

Q02

2003

Q04

2004

Q02

2004

Q04

2005

Q02

2005

Q04

2006

Q02

2006

Q04

2007

Q2

2007

Q4

2008

Q2

2008

Q4

2009

Q2

2009

Q4

25-64 PT

15-24 PT

25-64 FT

15-24 FT

24

Youth employment: more hours sought than supplied, longer hours than in jobs, fluctuating in full-time

Unemployed by hours of work sought, x1000, 15—24, NLD, 1996—2009

2. Youth 12

0

20

40

60

80

100

120

1996

1997

1998

1999

2000

2001

voor

revis

ie

2001

na re

visie

2002

2003

2004

2005

2006

2007

2008

2009

12-20

20-35

35+

25

Youth employment: more hours sought than supplied, bring both on a FTE basis

Average hours unemployed and employed youth, NLD, 1996—2009

2. Youth 13

15

20

25

30

35

1996

1997

1998

1999

2000

2001

voor

revi

sie

2001

na re

visie

2002

2003

2004

2005

2006

2007

2008

2009

Employed

Unemployed

26

2. Youth conclusions

– Clearly there is a longer-time (FT) employment problem for youth

– Educational participation has become essential to youth employment, and by its overlap with employment it is hiding unemployment problems

– Thus its contribution to mitigating the labour-market effects of the current crisis is not so much that they withdraw in education and but that they continue working for much fewer hours.

– A growing discrepancy of job seeking to job supply

27

A more general effect of part-time employment.We need to adapt the definition of the

unemployment rate, at least accounting for working hours

Adapt the standardised Urate: use FTE-employment forthe denominator

Still then the effect of the crisis remains modestQuarterly averages 1st 6 quartiles, NLD (pcpt)

2. Youth conclusions

1. 1970s

2. 1980s

3. 1990s

4. 2000s

5. Now

U-rate 0.22 0.14 0.18 -0.11 0.22

U-rate FTE

0.29 0.18 0.29 -0.21 0.34

28

3. International 1

Youth overlap is much larger in the Netherlands and Denmark

Youth population by activity, 2007, 14 countries (% of youth)

56

23

38 35

57

39

51 52

2231

4738 39

23

13

44

2723

3

17

8 4

4523

633 28

25

15 2118

27 2122

2421

23

3329

1215

28

66

7 65 8

8

7

45

6 9 1010

10 6 10 9 13 14 1017

5 8 12 8 914

0

10

20

30

40

50

60

70

80

90

100

BEL DNK DEU IRL GRC ESP FRA ITA NLD AUT PRT FIN SWE GBR

NEET

Unemp

Emp 14.9

OverlapEmp-Edu

EDU

29

3. International 2

Youth overlap is growing rapidly in many countries, including Netherlands and Denmark

Youth population by activity, 2007, 14 countries (% of youth)

11

36

24

13

69 8 7

35

106

29

1418

1

8

3

10

-3

8

0-3

10

13

0

3

14 6

-5

0

5

10

15

20

25

30

35

40

45

BEL DNK DEU IRL GRC ESP FRA ITA NLD AUT PRT FIN SWE GBR

Growth

Level1999

30

Women and youth trading places in jobs volume FTE1,5-Employment shares by age and gender, international, 1987-

2009

3. International 3

-15

-10

-5

0

5

10

15

20

EU15 BEL DNK DEU IRL GRC ESP FRA ITA NLD AUT PRT FIN SWE UK

M 25-64

W 25-64

Youth

31

Negative effects on youth employment everywhere albeit with significant differences

FTE1,5 employment-population rates, divergence of youth to M25-49, international (peak quartile = 100)

3. International 4

-35

-30

-25

-20

-15

-10

-5

0

5

10

15

20AUT

EU15

BEL

DNK

DEU

GRC

ESP

FRA

ITA

NLD

PRT

SWE

UK

IRL

FIN

32

Swedish EPOPs suffered and never fully restored, and youth bore the brunt, in contrast with Japan

Employment-population rates, 1998-2007 (%)

3. International 5

Sweden Japan

35

40

45

50

55

60

65

70

75

80

85

90

95

1971 1977 1983 1989 1995 2001 2007

15-24 15-64

25-54 55-64

35

40

45

50

55

60

65

70

75

80

85

90

95

1971 1977 1983 1989 1995 2001 2007

15-24 15-64

25-54 55-64

33

4. Conclusions

In the end, do we want all youths to remain in education ?

Youth are likely to pay a dramatic bill; think about intergenerational effects of inequality

For crisis management look beyond the financial markets to include labour-market effects, esp. for youths:Sweden (rapid restoration of banks and stock market but permanent employment loss) vs Japan (never fully restored financial market but also no marked employment deterioration)