Interviews experts EMPL

COMMITTEE ON EMPLOYMENT AND SOCIAL AFFAIRS - INTERVIEWS Mitigating skills and qualification mismatch with Europe‘s labour market requirements: how can Europe best satisfy the demands of its employers and future employees in order to improve the employability and prospects of younger generations?

B.

VAN DER

KLAAUW, PROFESSOR

OF

ECONOMICS

AT THE

FREE UNIVERSITY

OF AMSTERDAM •

Youth unemployment rate vs. ‘normal’ unemployment ratio

Youth unemployment is higher, but it’s more or less a rule that if you take twice the percentage of the normal unemployment rate, you get the percentage of youth unemployment. It goes up twice as fast, and goes down twice as fast. It’s a simple rule, that goes in most countries.

It’s only logical that youngsters need more time, they come from school, they need time to find a job, a good working environment and such. They often start with temporary jobs, and you need a certain amount of those to find the right match. It’s ok for people to search and look around before they find the job they really want.

With older workers, this rule does not really apply. Older workers go off the labour market early and such and they don’t count anymore are unemployed. In many countries in the EU we see that the job participation amongst older workers has been increasing drastically, because there have been a set of fiscal advantages put in place. People stay active longer, which is fine, to keep the economy going. At the same time, there is not a limited amount of jobs, so their activity is not a problem for youngsters. A study has recently shown that youth unemployment and participation on the labour market of older workers are actually not related at all. If an older worker stops, this job most of the time just disappears.

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Why are the jobs disappearing?

They are not doing irrelevant work, but once they stop, a company will reconsider that work and will probably give it a different spin. Youngsters do very different work at a company than older workers. You need both in any company. They are more complimentary than substitutes of each other.

There is not really a competition between these two groups, there are very few jobs that both someone of 25 and 60 are eligible for. Of course there is competition amongst youngsters themselves. This also has to do with the skills needed, for instance leadership skills. Will you give a managing position to a 25 year old?

Physical jobs on the other hand often ask for younger workers. Also in more technical work, you need a certain amount of experience, in the construction industry

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they solve this nicely by letting older workers work together closely with younger workers. They both learn from each other.

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How much as the crisis affected the youth unemployment rate?

The economic crisis is now a complete crisis, on all fronts. Recession on the labour market is difficult, and it will show for the upcoming years for sure. It will now take longer to find a job; you get less social benefits, temporary jobs, less salary, less possibilities to develop yourself. In 5 years, we will still see this and people that enter the labour market now will bear this with them for at least another 10 years. The economic crisis hasn’t been handled very well, but it doesn’t necessarily mean that our policies for unemployment have failed.

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Does that mean we should wait with entering the labour market?

That’s probably the best you can do. If you now enter the labour market, it won’t give you a lot. Or you end up unemployed at home, where you cannot really develop yourself. Maybe you should say to yourself, I will put more time and effort in developing myself, I do another study, and then try again in 2 or 3 years.

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What if we feel we have done this enough and we really do want to start working?

At the base of the labour market is where the real problem is. Higher educated people take jobs on a lower level, and with this all types of qualified people start working under their own qualifications. The middle sectors on the labour market have been disappearing of the last years anyway, such as the automobile industry, or outsourcing of simple tasks. There are now just not enough jobs for these people.

What you want to hope for is that some people will be so well qualified, that they can take on the jobs in the high segment that are still there, and that they don’t take those of others ‘below’ them.

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Let’s talk about the flexibility of the labour market

Flexicurity has been much discussed, and it means we go from job security to income security. You can get fired more easily, but you also have better social benefits. Plus, you will get help finding a new job. We have seen this in Denmark already. Temporary contracts don’t really exist there. Though, everyone is at risk of losing their job, but if that happens there is not so much to worry about. Many other markets in Europe are not so flexible. It’s not good in the Netherlands, but it’s even worse in for example Spain, where it is nearly impossible to fire someone. There is also a big polarisation; on the one hand you have people with a job, that don’t get fired so will consequently work less hard, and people with a temporary job who have to work very hard just to get their next temporary contract.

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With such high unemployment rates, the employer also has much more freedom, you don’t have to offer a high salary, and there will always be someone willing to take the job regardless.

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So what should we do, become more Danish?

Not necessarily, but we should at least look at how we divide the expenses more evenly. You shouldn’t have two groups that are so different, that there is people that will never lose their job and people that cannot get to one of those jobs. The problem of the Danish model is that once there is even the slightest recession, people get fired. In 2009 already there was more unemployment there, and now that has slowly been decreasing. In the Netherlands we only felt the crisis hit the labour market a few years later, but it has in many areas not been so difficult because we had a lot of people here ‘jumping in’, such as freelancers. Some people work as a freelancer as a choice, they have earned a lot of money already so they want to freedom to take on project that they want, but most people don’t freelance as a choice, but have been pushed into this. The downside is that you don’t have any social benefits.

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Are there any sectors that youngsters should be getting into now?

It’s so difficult to predict where we will be in 10 years. Who could have known in 1990 that the IT sector would be so job rich? We barely had Internet at that time. I don’t think pushing people into a certain sector is really a good idea. What will we be telling them? You cannot study Humanities anymore because there are no jobs?

Maybe we should just make studying more expensive so people make better choices, and also take into account their job opportunities later on.

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What concrete measures could we take to help youngsters enter the labour market?

First of all by waiting a bit, but on the other side we should make it more attractive for employers to hire young people, and to generate more jobs in general. Maybe that’s an area that we should subsidise. Though I don’t believe the problem is so very bad, there is a big shadow economy in for instance Spain and Greece, so people actually do have something to do. Solving specific problems in member states will probably help more than going for a European job programme or schooling fund and such.

Their profitability hasn’t been high in the past.

Every country has it’s specific problems. Germany never had such a good labour market, but they really worked on in around 2004, a bit like the flexicurity model. In the Netherlands it has been hard to reform like that because of the labour organisations that have a lot of power.

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Until what extent can we speak of a European labour market, or is it still national labour markets?

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They are very intertwined, especially since the Euro. Before that, we could fix a lot of problems with the rate of exchange. Let us look at Germany and Greece. In Germany, factories are very efficient, the people work 24/7 in those factories and they produce a lot, they make optimal usage of the machines etcetera. In Greece on the other hand, people didn’t want to work at night, or in the weekend. Therefore they are less productive. Because of the rate of exchange, we could solve this, but that’s not possible anymore and also within Europe, we have a 1 on 1 competition.

Germany will produce cheaper goods. So in Greece, we either have to bring the salaries down a lot, or they have to become just as productive. The Euro changed a lot. Of course right away it became an argument that people in the steel industry make a lot less in Portugal than in Germany, and that was then corrected a bit, but we forgot that it’s mostly about productivity when we put together the salary.

What we should do is look at national labour markets and see what the biggest problems are, but also what we can learn from each other – there are a lot of good examples as well!

A. HEYMA, HEAD OF LABOUR AND EDUCATION AT SEO ECONOMIC RESEARCH The world is simple, and economist makes it even simpler. When we look at the labour market, there is supply and demand. The demand comes from companies, and the supply from people who would like to work. The price brings it all together.

In a perfect market, the price ensures that supply and demand are in balance. The more demand, the price will go up and people will think ‘for that salary I’d like to work as well’, and the other way around, when there is a lot of supply, the price will god own.

Unemployment exists always, as it takes time to find a job. But the labour market isn’t perfect. There are many different types of labour. Even if you have the same amount of supply and demand, this will be different types of supply and demand and i twill not necessarily work perfectly together. Youngsters also offer a different type of labour. Moreover, there are measures that make for a greater imbalance, such as minimum wages. The labour market is thus restricted. People that don’t work often can use some type of social benefit, and they will not start working for something that doesn’t give them much money. But let us say you do want to get a job. There are waves in the labour market; there is a continuous creation and destruction of jobs (creative destruction), which ensures economic growth, new products and new technologies. Old jobs go away and new ones are being created.

It’s an on going on process. More or less 10 per cent of old jobs disappear and get newly created. In times of crisis, fewer jobs are created, and unemployment rates go up.

With youngsters it’s even worse, because if you do have a job, you will stay there, and you will only take up another job is something improves for you. There are insiders and outsiders on the labour market. Youngsters are the outsiders.

Youngsters mostly benefit from newly created jobs. Youngsters come with new knowledge, which older people don’t often have. Now that youth unemployment is

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so high in times of crisis, we can only say that that is how the economy works, youngsters are not more or less qualified. When the economy gets better, youngsters will be the first ones benefitting from that. So what can we do now? Not so much, it’s really something structural, and we shouldn’t really respond to the crisis in a structural way. It will go away. With legislation and such we always are ‘too late’, and thus the measures we take will most probably be wasted money.

Structurally, something is wrong. Youngsters ensure all kinds of new things, and we should get our power from them. What we can do is educate them to become something we do need; we can direct them to the right fields where we need people.

Now that we are making it more expensive to study longer in the Netherlands doesn’t make it very attractive and that’s a big problem. Though if you think more technical studies are more beneficial for the economy, we have to make that less expensive. There are some trends that we know a good time in advance, for instance the industry sector hasn’t really been growing, so that might not be the most interesting for youngsters. Also, we have to look beyond our national borders and look at the labour exchange within Europe. The problem remains that we want to do everything nationally. In America, there is a much larger market, you are educated and then you look for a job in one of the 50 states, which gives you a much larger choice. We don’t have that yet in Europe. Though a good step was to make education more comparable, with for instance the Bachelor/Master system.

Soon, there will be a lot of older people retiring and we can only hope that this will give a big chance to a lot of young people. Though they will not work under the same conditions as the previous generations. Also because we have to ensure the living conditions of those out of work, and taxes will definitely keep rising. It’s just a really bad time to get on the labour market right now. We are not sure if there will be a real ‘scarring effect’ on this generation, but we will see.

Youngsters are not necessarily less qualified; it’s just a different type of qualification.

For companies, two types of people are interesting; those with a lot of experience, where you can see very practically out of previous work what this person has done, and young people, that know the latest technologies and such, and that you can still shape accordingly. But of course this also has a price, but as youngsters get paid a lot less, this evens each other out quite nicely.

There recently has been a study, where they looked at the attractiveness of youngsters against older workers. Though companies want youngsters in theory, working experience is compensating it. You know for sure that this person with working experience will be productive enough to compensate for the salary you are giving. Once you’re on the labour market, it’s a lot easier. Youngsters just really have to make this new knowledge their unique selling point, especially knowledge that they have also shown to be able to apply, for instance during internships.

We have to wait for the economy to start again on a good level. In between, the best you can do is to keep investing in your knowledge, and of course you can try to start something up yourself, with a new product. And we have to continue to try to bring businesses and newly educated people together. The main problem now is that on the one hand there is not so much trust in the economy, and there is very small labour flow, older people are participating a lot more again now.

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We have to do something structurally, Right now is really a different situation, we can’t do much now. We have to keep training people, and make sure they end up at in the right field of education for them, on the highest possible level. On a European level, we could think of making it easier to move, and find a job in another country.

But that is really only for well-educated people. Others just have to get the best possible out of themselves, so now you don’t want to be educated for different types of industry, but rather to work in a hospital or so.

Traineeships are rather cheap now, and companies can ‘try out’ people. Really big companies though mostly do traineeships. We cannot ask smaller companies to also take on an intern. And most of the jobs aren’t in the big companies, but everything outside that.

A more flexible labour market might also be good for youngsters. I think this will create more jobs; more chances on the labour market, and you will probably be unemployed for a smaller period of time, though at the same time the working conditions are a lot less.

There will be better times. Right now, we have to keep people sharp while we wait for the economy to start up again. It will take some time for the labour market to respond to this, so we are looking at 2015 or later. At this point, if you can find something that might be temporary, but is relevant to your field of studies, you really should take that chance. Later on, you will be able to show a potential employer what you have done and what you can do, and they will know as well that it has been difficult for this generation.

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