Introductory session

While overall employment rates have been low and stagnant in Southeast Europe (SEE), they are particularly low among youth. Among young people who are out of work, a significant share are also out of school. This pattern has been compounded by the ongoing economic downturn. As part of the recovery efforts, it will be critical to lay the foundation for a more inclusive growth path in which youth are central to socio-economic development. This will require a better understanding of the role of macroeconomic policies, markets, incentives, skills and other enablers, and promising policy options to integrate young people into the labor market.

Against this background, the main objectives of the introduction are to:

• Lay out the main issues related to youth employment within a holistic framework,
• Present selected evidence on trends in youth unemployment and inactivity; and the underlying enabling and limiting conditions,
• Quickstart discussion on promising policy options.

Session 1: Challenges of Youth Employment

The first session of the Policy Dialogue includes a panel of high-level policy makers, i.e. Ministers of Labour or their representatives from SEE. It will be moderated by Pierre Jacquet, GDN president, and will be open to the public and media representatives. The discussion will cover three key objectives:

• Assess the youth unemployment problem, the main challenges and trends in the respective SEE countries,
• Discuss the policy responses - already tried as well as new proposals,
• Evaluate how academic research can help in tackling the problem of youth unemployment in the region.

Session 2: Youth Employment – Macroeconomic Policies

A low employment rate in Southeast Europe is a long-term fact. The same goes for youth employment. There are, however, cyclical variations too. In particular, employment has declined significantly and in some cases dramatically in the current crisis. Therefore, the current state of the labour markets in this region has both structural and cyclical causes; the former are responsible for the relative levels of overall versus the employment of the young while the latter for the variability. The cyclical ones will be the focus of this session.

Most countries in SEE find themselves constrained both by high fiscal and foreign debts, which are exacerbated in the current environment. Consequently, both fiscal and financial policies are pro-cyclical. The states and the banks are deleveraging and thus both consumption and investment are declining or stagnating at best. In particular, small and medium size enterprises have a hard time getting financing. In general, the current macroeconomic framework is most likely going to make labour markets even more depressed in the short run.

The disproportionately large negative effect of the financial and fiscal crisis on the young is related to cuts in public spending and private investment, particularly in areas that affect youth employment most; youth dependence on new businesses; and the lack of flexibility of the real wage; among other factors. The discussion will look at the possible reasons for cyclical effects on youth employment.

Session 3: Youth Employment – Markets and Incentives

High levels of unemployment among young people are persistent in Southeast Europe. Various explanations can account for that fact. Some refer to the characteristic of the labour markets, e.g. to their flexibility. The others point to problems in the product and financial markets that disproportionately affect the young. Finally, there is the role of mobility and outward migration that may distort the incentives in the labour markets in the sense that part of the unemployed are those who are looking to work abroad.

Once identified, both the labour market institutions and the incentives for employment are treatable by appropriate regulatory and fiscal policies. In a number of cases, labour laws will be biased towards the insiders and thus disadvantage the first time job seekers. In addition, the tax wedge may be especially high for the young, in part because their initial productivity may be lower due to learning by doing effects. Both lack of some types of flexibility, e.g. collective bargaining, and of increased flexibility, e.g. temporary employment, may disadvantage the young. Finally, the ease of starting a business and the ability to get the necessary financing may be hurting the young.

This session will discuss challenges and potential policy entry points in these different areas.

Session 4: Youth Employment - Skills and Other Enablers

Low youth employment rates reflect the high share of youth that is unemployed but also the high share of youth that is not seeking work nor studying. These outcomes are only partially explained by macroeconomic conditions, labour demand and/or labour market institutions. Skills mismatches, as reflected in employer surveys and in high unemployment rates even among youth with tertiary education, are central to the story of low youth employment. However, other factors –often not considered in the traditional view of labour markets- are at work, and affect particularly some sub-groups, often the most vulnerable in the society. Understanding these, and their impact, is critical to the design of effective policies for inclusive growth.

This session will explore the following questions: What is the role of skills in fostering employability among youth? What are the types of skills that are demanded today in the labour market? What other factors can promote employment and education among youth? What are promising interventions in these areas being tried in SEE countries and elsewhere?

Participants in the session will revisit the framework for youth employment, skills and other enablers, review selected evidence of the impact of skills and other enablers on employment and productive activities and identify innovative policy responses.