House of Lords - Youth unemployment in the EU: a scarred generation?

Youth unemployment in the EU: a scarred generation? - European Union Committee Contents

Chapter 3: EU measures to address youth unemployment

36. In this Chapter we examine whether Member States, civil society organisations, young people and other stakeholders believe that EU action to address youth unemployment is necessary, desirable and effective. In order to assess this we consider the current and proposed initiatives at EU level, which form part of an overall EU youth unemployment strategy.

EU Legal basis

37. The EU Treaties define the extent of the European institutions' competence to act in any given area.[52] In the area of employment, they provide that:

38. The Treaties provide for the EU and Member States to work towards this objective in a number of ways.[54] They enable the EU to promote the coordination of employment policies by adopting yearly conclusions on the employment situation in the Union, making country specific recommendations to Member States and drawing up an annual set of guidelines which Member States are required to take account of in creating their employment policies. The Treaties also allow the EU to adopt "incentive measures" designed to encourage cooperation and the sharing of good practice.[55]

Current and proposed initiatives

39. In 2010, the EU adopted its Europe 2020 strategy, which outlined its goals for Europe in five key areas. In the area of employment, the European Commission's headline target was that 75 per cent of 20-64 year olds in the EU should be in employment by 2020.[56] The current high rates of youth unemployment have led to a greater focus on policies aimed at young people (aged 15-24), with a view to achieving this target.[57] As indicated in paragraph 1, EU action in relation to youth unemployment is not new and makes use of instruments and funds which have been in existence for many years. The current crisis coincides with a change of 'programming period'; a renewal of the main EU spending programmes, which will encompass new priorities and principles for implementation from 2014 onwards. Europe 2020 provides the strategic direction for the new funding period.

40. The key current and proposed EU actions to address youth unemployment are outlined in Boxes 3 and 4 below.

BOX 3

EU funding programmes

The European Social Fund (ESF) was set up in 1957 and is the main financial instrument used by the EU and Member States to create employment opportunities and support measures for young people, NEETs and the socially excluded. ESF programmes run for a seven year period and are allocated a share of the overall EU budget agreed as part of the Multiannual Financial Framework (MFF).[58] The ESF works by distributing funding to Member States and regions to finance operational programmes that have been agreed with the European Commission.

ESF funding to address unemployment for the period 2014-2020 will be worth approximately €72 billion over the seven year period, with around the same amount of 'match funding' provided by Member States. This is less than the €76 billion that was available for the period 2007-2013. All European projects under ESF are jointly funded by both the EU and the Member State in question.[59] 68 per cent of the ESF funding for the period 2007-2013 went towards projects that benefitted young people in some way.[60]

The ESF funds allocated to youth issues will be significantly greater than that from the Youth Employment Initiative (see below) and will apply across the whole of the UK and the EU.

The European Regional Development Fund (ERDF) was established in 1973 and aims to strengthen economic and social cohesion in the EU by correcting imbalances between regions.[61] It focuses its investments on several key priority areas, including support for small and medium-sized enterprises (SMEs) and for innovation. This has ramifications for young people in a number of ways: support for new business start-ups and entrepreneurship, which could be open to young people; support for job creation at different skills levels, thereby increasing employment opportunities for young people; and support for SMEs in taking on apprentices, trainees and placements, increasing the supply of transitional measures into careers.[62]

The Youth Employment Initiative was agreed in February 2013 by the European Council. For the period 2014-20, it will comprise €3 billion from the ESF and €3 billion from a specific budget line dedicated to youth unemployment. It will target regions within the EU that have youth unemployment rates of or in excess of 25 per cent (see regions shaded in red at Figure 3), of which there are five in the UK.[63] The Youth Employment Initiative would allow a Member State, in agreement with the European Commission, to allocate up to 10 per cent of its funds from the initiative to young people residing in sub-regions which experience high youth unemployment, but which are not in an eligible region. In June 2013, EU Heads of States agreed to 'front-load' the €6 billion, enabling the funds to be spent in the first two years of the seven year EU MFF. In July 2013, they pledged to add an extra €2 billion to this source of funding. The European Commission's view, reinforced by László Andor, European Commissioner for Employment, Social Affairs and Inclusion, was that these funds should primarily be used to help and accelerate implementation of the Recommendations within the Youth Employment Package (see Box 4 below), in particular the Youth Guarantee.[64]

Table 1 shows the amount available from each of the different EU funds across the EU28 and in the UK.

TABLE 1

The 2014-2020 allocation of EU funds (in Euros, millions)[65]

	EU28	UK (percentage share of EU total)
European Social Fund (ESF)	72,349	4,385 (six per cent)
European Regional Development Fund (ERDF)	183,435	5,927 (three per cent)
Youth Employment Initiative	6,000[66]	193 (three per cent)
Total in Euros	258,784	10,505 (four per cent)

Source: Regulation (EU) No 1303/2013

BOX 4

EU Legislative and non-legislative proposals

The Youth Employment Package

The Youth Employment Package was proposed by the European Commission in 2012 and adopted by the Council in the same year. It is made up of a number of legislative and non-legislative policy initiatives that the European Commission strongly believes should be adopted by Member States. However, the package is not legally binding on Member States. The most significant section of the Package is the Recommendation for a Youth Guarantee.[67]

The Youth Guarantee seeks to address youth unemployment by ensuring that all young people under 25 receive a good-quality, concrete offer of employment, continued education, apprenticeship, or training, within four months of them leaving formal education or becoming unemployed. The offer should be adapted to each individual's need and situation. Member States with regions expected to benefit from the Youth Employment Initiative were asked to submit a Youth Guarantee Implementation plan by the end of December 2013, linked to their plans for spending the Youth Employment Initiative funds described in Box 3. The Youth Employment Package also called for the creation of a Quality Framework for Apprenticeships[68] and a European Alliance for Apprenticeships[69] (see Chapter 6, Box 7).

Other Initiatives

Youth on the Move is a comprehensive package of policy initiatives on the education and employment of young people, with a focus on mobility within Europe. It includes the Youth Opportunities Initiative,[70] which encourages national governments to make increased use of the ESF to set up apprenticeship schemes. Youth on the Move also established EURES, an online portal that aims to match young people to job vacancies throughout the EU.

Erasmus+ is the EU's programme for the mobility of EU citizens for the purposes of education and training at all levels, including school education, higher education, international higher education, vocational education and training and adult learning. It also focuses on youth, particularly in the context of non-formal learning; and sport, in particular grassroots sport. The programme aims to provide opportunities for over four million EU citizens during the period from 1 January 2014 to 31 December 2020. The budget for the seven year programme is €14.7 billion; a 40 per cent increase on the previous programme.

Action Teams were set up in February 2012 for the eight Member States with the highest level of youth unemployment at the time[71] to mobilise funding still available within the 2007-2013 ESF and ERDF. The EU has reallocated nearly €600 million to specific actions for the most vulnerable groups in those countries, which include the young unemployed.

Is EU action appropriate?

41. The preponderance of evidence received suggested that action at EU level to reduce youth unemployment was necessary because of both the scale and the EU-wide nature of the problem.[72] The Belgian House of Representatives said that youth unemployment in one country has a negative impact on the rest of the EU, threatening social cohesion, growth and market demand.[73] Professor Maguire and Derek Vaughan MEP said that, in many Member States, welfare cuts had resulted in less funding for initiatives targeted at reducing youth unemployment, meaning that EU funding was needed to fill the gaps.[74]

42. A small number of witnesses were less enthusiastic about the value of EU action in this area. Esther McVey MP, the UK Minister of State for Employment, said that "the primary responsibility for tackling youth unemployment rests with the Member States".[75] Lord Heseltine argued that the problems of youth unemployment "should be addressed by people who live in an area, know it and understand it", a view with which Derek Vaughan MEP agreed.[76] While Emma McClarkin MEP supported EU programmes that helped entrepreneurs to grow, she pointed out that most of the EU funding allocated to address youth unemployment would be allocated to countries with a much higher youth unemployment rate than the UK.[77]

43. We acknowledge that responsibility for dealing with youth unemployment rests primarily with Member States, and the key measures to address the issue should be introduced at national level. However, we believe it is both important and appropriate that the EU continues to have a role in providing funding and other forms of support to reduce youth unemployment. There are benefits from Member States coordinating responses to the youth unemployment situation, through the sharing of good practice (see Chapter 7) and the use of EU funds for specific tasks which complement action at national level, such as kick-starting structural changes.

Effectiveness of EU funds to address youth unemployment

44. The European Youth Forum, the UK-based Trade Union Congress (TUC) and the EU-based European Trade Union Confederation (ETUC) agreed that the €6-8 billion available through the Youth Employment Initiative was not enough to address youth unemployment in the EU, given the scale of the problem.[78] The European Youth Forum and the ETUC[79] referred to the 2012 report by the ILO's International Institute for Labour Studies which estimated that around €21 billion would be needed to implement the Youth Guarantee effectively.[80] The Institute of Employment Studies said that the proposed funding should be judged against the high cost of NEETs across the EU Member States, which had been estimated at around 1.51 per cent of the EU's Gross Domestic Product (GDP).[81]

45. The European Commission said that because of cuts to the ESF budget there was less money available to address youth unemployment in 2014-2020 than there had been in the 2007-2013 period, even taking into account the additional funding from the Youth Employment Initiative.[82] Max Uebe, Head of Unit, Directorate-General, Employment and Social Affairs, European Commission, made clear that "EU funding alone will not suffice" for the implementation of a Youth Guarantee and that national investment would be required.[83] His view, however, was that an early injection of EU funds had the potential to kick-start actions at Member State level, providing immediate investment resources and a spur to Member State action.

46. A number of witnesses emphasised that the funding should be spent in a way that added value to initiatives at national level. Business Europe, an organisation that represents businesses at an EU level, said that EU money "should be targeted on seed funding and initial establishment and development rather than [used] over a long-term period."[84] The Greek Ambassador to the UK said that, in Greece, EU funding and expertise had acted as a catalyst to initiatives at national level.[85] The Greater London Authority and Heart of the South West, the Local Enterprise Partnership (LEP) for Devon, Plymouth, Somerset and Torbay, appreciated the capacity for EU funds to add value to domestic funds, by targeting different groups and trying different strategies.[86]

REGIONAL FOCUS

47. Derek Vaughan MEP and the Department for Employment and Learning in Northern Ireland (DELNI) expressed concern that the Youth Employment Initiative would only be available to regions with an unemployment rate of more than 25 per cent.[87] The Greater London Authority said that there was a particular difficulty in London because the funds would only apply to Inner London, where the unemployment rate was 25.7 per cent, despite youth unemployment in Outer London being at 23.3 per cent.[88] It said that greater flexibility with respect to the threshold could benefit those regions that fall slightly under the 25 per cent threshold, of which there were a number in the UK. It suggested that the UK Government should use the flexibility it had to allocate up to 10 per cent of the Youth Employment Initiative to regions that did not meet the 25 per cent mark, for Outer London.[89] On the other hand, Phil Bennion MEP said that the 25 per cent threshold would provide a clear focus for the small amount of funding, allowing it to be directed to those regions that needed it most in order to implement the necessary programmes to address youth unemployment. He agreed that it was important that regions with an unemployment rate of less than 25 per cent were not ignored and proposed that the ESF could be used to support these regions.[90]

48. EU funds are limited in comparison with the scale of the crisis and with the amount that Member States have already pledged to address youth unemployment. EU funding should not be used to subsidise national approaches, but should be put towards establishing new initiatives and trying new methods, including those that have been successfully pioneered in other countries or regions worldwide. Where useful, it should be used to facilitate longer-term project cycles.

49. It is right that the Youth Employment Initiative targets EU regions that are experiencing the highest levels of unemployment. Given the finite resources available and the importance of the resources attaining maximum impact, we recommend that the UK Government focus the funding available from the Youth Employment Initiative wholly on the five areas identified in the UK. The Government should use the European Social Fund and government spending to target those areas, such as Outer London, that are experiencing high unemployment but are not eligible to receive funding from the Youth Employment Initiative.

Evaluating the use of the EU funding

50. We received evidence from witnesses suggesting that there should be a better evaluation of the success of EU funds. Professor Simms and the Higher Education Careers Service Unit (HECSU) said that labour market initiatives were rarely evaluated systematically and longitudinally (on a long-term basis) by the EU and Member States,[91] to assess "deadweight costs" or surplus spending.[92] The Institute for Employment Studies said that, despite the growing evidence base of research and evaluation studies of EU funded projects aimed at tackling youth unemployment, there were some issues that warranted immediate attention. It said, "many evaluations do not provide even the most basic information on the results (achieving sustainable job entry) and the cost of achieving these results".[93] It proposed that evaluation could be improved in three key ways. First, qualitative rather than quantitative results needed to be considered—whether a programme had genuinely improved the labour market situation of the particular group, rather than the cost of the programmes measured against the number of participants. Secondly, efforts should be made to understand the effects of the programmes beyond participants. Thirdly, there should be more research into the long-term costs and benefits of a programme and how this related to the initial spending of programmes. The Institute for Employment Studies also pointed out that the European Commission itself, as well as its appointed Expert Evaluation Network, had found problems with the evaluation of the ESF.[94]

51. In the 2010 report, Making it work: the European Social Fund, we found that there was substantial room for improvement how the ESF is evaluated. We consider that these conclusions are still valid and that further work in this area is necessary.[95]

52. We recommend that there should be a move away from evaluating European Social Fund schemes based on the cost and number of participants. The European Commission should instead move towards an evaluation of programmes that looks at their impact on the youth job market in real terms, over a long period of time and prioritises understanding how and why actions are successful, not just whether they are. The European Commission should report to Member States on these evaluations at least every five years.

Youth Guarantee

53. Many witnesses viewed the principle of a Youth Guarantee in a positive light. Eurofound said that the Youth Guarantee structure necessitated intervention "before disengagement sets in, and thus prevented long-term unemployment".[96] It described the Nordic countries[97] as "pioneers" of Youth Guarantee schemes and said that the EU's proposal for a Youth Guarantee was based on the success of similar schemes, such as that of Finland. It said that Finland's Youth Guarantee was the reason for its very low rate of long-term unemployment among young people. Eurofound also said that one of the important benefits of this type of Youth Guarantee was that it addressed the different needs of unemployed young people by using an individualised assessment to determine whether a job, apprenticeship or further education was appropriate for them.[98]

54. Other witnesses expressed support for early intervention to address youth unemployment. Mike Thompson, Head of Employability and Early Career Programmes, Barclays, said that ideally, young people should be guaranteed a place in further education, training or employment "from day one of leaving education", although he accepted this might not be practical.[99] The UK Government said that they had reservations about the "cost-effectiveness" of the EU's blanket provision that support should be provided after four months. This was based on the UK's experience that most young people were able to find work without support shortly after that period.[100] The UK Government said that, although they did not have evidence on the average period for finding work in other Member States, the differences in the structure of unemployment benefits meant that it was unclear what would be the "right" length of time for a Youth Guarantee.[101] They also said that "it is more useful to find an appropriate opportunity for the individual at a time that is right for them, depending on their specific situation and needs rather than offering a blanket guarantee at a fixed point in time".[102] The UK Government's views on the interaction of the Youth Guarantee with UK measures to address youth unemployment are addressed in Chapter 4.

55. The NUS disagreed with the Government's view that early intervention was not cost effective and was of the opinion that in the UK, where there was no Youth Guarantee, young people were forced to "languish in unemployment … before help is available to them".[103] Witnesses from the business sector expressed similar views when considering the efficacy of early intervention via a Youth Guarantee. Terry Morgan, Chairman of Crossrail, said that "there is no doubt in my mind that youngsters leaving school without having an opportunity to work will leave a scar on their life and we have a responsibility to try to deal with that".[104] Tanith Dodge, Director of Human Resources at Marks and Spencer, a pan-EU employer, said: "I think the principle [of the Youth Guarantee] has to be right. It is how we make it work … it is the 'what next?'"[105]

56. The cost of the Youth Guarantee was also an issue (see paragraph 44). The Institute of Employment Studies said that although the Youth Guarantee had proved to be an effective way of integrating young people into the labour market, it bore significant financial costs to governments, which could make its implementation challenging in several Member States.[106] Similarly, Eurofound said that countries with a high rate of youth unemployment and poorly developed employment services would face particularly high costs in implementing the Youth Guarantee. It said that the Youth Guarantee would not be a universal remedy, in that it was dependent on Member States removing structural problems in the labour market and ensuring the availability of opportunities for young people.[107]

57. The majority of the evidence we received suggests that the Youth Guarantee is a very useful initiative, which responds to the need for early intervention with young people to prevent them becoming unemployed in the long-term, which can have scarring effects. Implementation of the Youth Guarantee would help to address the current particularly high levels of youth unemployment, but should be accompanied by other measures that seek to remove the underlying structural problems related to the youth labour market in Member States such as the UK.

58. Having regard to the success of Youth Guarantees in other Member States, we believe that the successful implementation of a Youth Guarantee could provide Member States with a clear benchmark to work towards in terms of avoiding long-term youth unemployment.

Flexibility of EU measures

59. The UK Government said that proposals such as the Youth Guarantee and the Quality Framework for Traineeships (see Chapter 6, Box 7) were over-prescriptive.[108] However, Commissioner Andor said that the European Commission used non-legally binding Recommendations rather than legislation in order to provide Member States with enough flexibility to take into account national circumstances.[109] Max Uebe, European Commission, said that "Member States are committed to ensure that all young people up to 25 [are in employment, education or training] within four months. How they achieve it, honestly we do not care at all."[110] Indeed, the TUC said that the Recommendation for a Youth Guarantee was too flexible and that implementation of a Youth Guarantee should be a requirement for Member States to access the funding available under the Youth Employment Initiative.[111]

60. EU proposals to address youth unemployment strike a good balance between setting out an EU strategy to reduce unemployment (based on the good practice of different Member States) and allowing individual Member States to tailor EU funding and proposals to specific national circumstances.

52 Articles 2-6, Treaty on the Functioning of the European Union. Back

53 Article 5(2), Treaty on the Functioning of the European Union. The Treaty on the Functioning of the European Union (TFEU) came into force on 1 December 2009 following the ratification of the Treaty of Lisbon, which made amendments to the Treaty on European Union (TEC) and the Treaty establishing the European Community. The TFEU is an amended and renamed version of the TEC. Back

54 Title IX, Treaty on the Functioning of the European Union. Back

55 Article 149, Treaty on the Functioning of the European Union. Back

56 European Commission , 'Europe 2020',
http://ec.europa.eu/europe2020/europe-2020-in-a-nutshell/targets/index_en.htm Back

57 European Commission , 'youth unemployment', available at:
http://ec.europa.eu/social/main.jsp?langId=en&catId=1036 Back

58 The Multiannual Financial Framework is a spending plan that translates the EU priorities into financial terms. It is not a seven year budget, but the basis for the annual budgetary exercise. Back

59 Regulation (EU) No 1303/2013 and Regulation (EU) No 1304/2013 Back

60 European Commission (2013), EU measures to tackle youth unemployment. Back

61 Regulation (EU) No 1303/2013; Regulation (EU) No 1301/2013 Back

62 Regulation (EC) No. 1080/2006 Back

63 Eurostat figures have been used to allocate the €6bn Youth Employment Initiative funds to areas with a youth unemployment rate greater than 25 per cent. The five areas in the UK are: Merseyside; West Midlands; Tees Valley and Durham; South West Scotland; and Inner London. Back