DALE T. MORTENSENBERGAMO CONFERENCE

JUNE 18, 2013

The Real EU Crisis: Youth Unemployment

Introduction

It is almost four years since the end of the Great Recession, yet global employment continues to be well below trend.

In the EU, there has been no recovery and indeed unemployment continues to rise, particular among the youth in the southern tier.

What are the explanations for the continuing unemployment problem in the EU?

Unemployment RatesEU 17-Dk blueEU 25-YellowUS-BlackJapan-Lt blue

Another (German) Economic Miracle?

Source: Rinne and Zimmermann, IZA Journal of Labor Policy 2012, 1:3

EU-US GDP Growth Rates

Change in Unemployment Rate vsChange in GDP Growth Rate, 2011-

2012

Difference in GDP Growth Rates

Red-EUBlue-non EU

EU Youth Unemployment Rates

EU: Youth Unemployment Rates by year

10

0

20

30

40

50

60

GRSP

IT

PT

FR

IR

UK

GE

EU

“Scarring” Effects of Youth Unemployment

Boeri, OECD Policy Forum for Jobs for Youth, Oslo, Sept 20, 2011

Unemployment Rates: Ages 15-24

Source: OECD

Unemployment Rates: Ages 25-34

Source: OECD

Unemployment Rates: Ages 35-44

Source: OECD

Unemployment Rates: Ages 45-54

Source: OECD

Short term contract reform in Italy

Tealdi, “How Do Employment Contract Reforms Affect Welfare?,” 2011

Boeri, SZW-CDB Conference on the Danish Model, February, 2011.

Boeri, “Do we need more flexibility and security?,” March 2011

Tealdi Conclusions

Tealdi, “How Do Employment Contract Reforms Affect Welfare?,” May 2011

Based on a quantitative Mortensen-Pissarides model before and after reform …

Boeri, “Do we need more flexibility and security?,” March 10, 2011

Summary of EU Unemployment Experience

Unlike the US, EU unemployment rates increased sharply after the Great Recession.

Increased unemployment has been born primarily by the young in the “financially distressed” countries.

These facts call into questions the efficacy of EU and IMF imposed “austerity” policies.

Still, rigid “two-tier” labor market structures also a major problem in need of reform.