Blog Post

The scarring effect of COVID-19: youth unemployment in Europe

Even before the pandemic, youth unemployment in the European Union was three times higher than among the over-55s. COVID-19 threatens to undo the last decade of progress: policymakers must act to avoid Europe’s youth suffering the scarring effect.

By: and Date: November 28, 2020 Topic: Inclusive growth

Click here to access the full infographic dashboard about the impact of Covid-19 on youth unemployment in Europe.

Youth unemployment increased dramatically in several European Union countries during the Global Financial Crisis. It took several years before youth unemployment rates came down to, or fell below, pre-crisis levels. Even by 2019, this had not been achieved in all EU countries.

The COVID-19 pandemic is now posing the same threat: younger generations are facing a harsher labour market than older generations.

Fig. 1 EU Unemployment rates (%labour force)

source: Bruegel based on Eurostat

Figure 1 shows unemployment in EU countries for workers aged 15-24 and those aged 55-64. Youth unemployment increased during the second quarter of 2020, while unemployment remained almost unchanged compare to the year before for the older cohort (we did not find a significant difference when adjusting youth unemployment for gender; see Fig. 2 in the annex).

A glance at labour market slack data, or the shortfall between the work desired by workers and the volume of work available, does not provide any cause for optimism.

Table 1 shows that young active jobseekers are two or three times less likely than those aged over 55 to be able to find a job. The professional experience of older people plays a crucial role in this disparity, which makes tackling unemployment among young people all the more pressing in times of rising unemployment.

Moreover, Table 2 shows a substantial increase in the proportion of under-25s who are not even seeking work, even though they are available to work (unemployment figures only include those who are actively seeking work: the numbers in Table 2 include discouraged jobseekers and persons prevented from looking for work due to personal or family circumstances).

The scars left by youth unemployment

Youth unemployment should worry policymakers.? Beyond the immediate negative effects of unemployment on individuals and public finances, youth unemployment has been shown to have longer-term effects. The literature on the ‘scarring effect’, the effect of being young and unemployed, shows there are irreversible consequences (see for example Arulampalam, 2001; Darvas and Wolff 2016). For instance, Gianni De Fraja and Sara Lemos found that “an additional month of unemployment between ages 18 and 20 permanently lowers earnings by around 1.2% per year”. Burgess (2003) found that unemployment early in an individual’s career increases the probability of subsequent unemployment.

There is some controversy about the long-term effects of youth unemployment on the employment rate. Barslund and Gros (2017) and Mroz and Savage (2006) suggested limited effects, while Eurofound (2018) data showed higher long-term unemployment numbers. Eurofound (2017) data and Scarpetta et al (2010) highlighted longer-lasting scarring effects from long-term unemployment, including decreasing optimism about the future.

Schwandt (2019) showed that people who enter the labour market during a recession earn less and work more but receive less welfare support. Moreover, they are more likely to divorce, and they experience higher rates of childlessness. Furthermore, Strandh et al (2014) found that youth unemployment is significantly connected with poorer mental health. It is important to underline that periods of unemployment later in life do not appear to have the same long-term negative effects.

In summary, the labour market is much more difficult for younger people than older people. Like the last big recession, the economic fallout from the pandemic will leave many young people in Europe unemployed, with long-lasting social and economic consequences. Yet in the EU, European Commission President Ursula von der Leyen did not identify youth unemployment as a key policy concern in her state of the union address on 16 September 2020. The European Commission and national policymakers must urgently focus on supporting young people in coping with the challenging situation. Beyond supportive macroeconomic policies, they must target funding towards the hiring of young people and training measures.

ANNEX 

fig. 2: Youth employment by gender (19-24, % labour force)

 

This blog was produced within the project “Future of Work and Inclusive Growth in Europe“, with the financial support of the Mastercard Center for Inclusive Growth. 

Recommended citation:

Grzegorczyk, M. and G. Wolff (2020) ‘The scarring effect of COVID-19: youth unemployment in Europe’, Bruegel Blog, 28 November


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

Read article More on this topic More by this author
 

Podcast

Podcast

Job quality is about more than working conditions

What is job quality and why does it matter?

By: The Sound of Economics Topic: Inclusive growth Date: May 19, 2022
Read about event More on this topic
 

Upcoming Event

May
25
14:30

How can we support and restructure firms hit by the COVID-19 crisis?

What are the vulnerabilities and risks in the enterprise sector and how prepared are countries to handle a large-scale restructuring of businesses?

Speakers: Ceyla Pazarbasioglu and Guntram B. Wolff Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic
 

Upcoming Event

Jun
7
10:30

Future of Work and Inclusive Growth Annual Conference

Annual Conference of the Future of Work and Inclusive Growth project

Speakers: Erik Brynjolfsson, Francis Green, Francis Hintermann, Ivailo Kalfin, Laura Nurski, J. Scott Marcus, Anoush Margaryan, Julia Nania, Poon King Wang and Fabian Stephany Topic: Digital economy and innovation Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article Download PDF More on this topic
 

Working Paper

Inclusive growth

Is the workforce ready for the jobs of the future? Data-informed skills and training foresight

For many newly emerging jobs, labour-market mismatches prevail as workers and firms are unable to apply precise occupation taxonomies and training lags behind workforce needs. We report on how data can enable useful foresight about skill requirements and training needs, even when that data has not been collected for this express purpose.

By: Fabian Stephany and Rosemary Luckin Topic: Inclusive growth Date: May 11, 2022
Read article More on this topic More by this author
 

Podcast

Podcast

The cost of China's dynamic zero-COVID policy

What does zero-COVID mean for both China and the global economy?

By: The Sound of Economics Topic: Global economy and trade Date: May 11, 2022
Read article Download PDF More on this topic
 

Policy Contribution

Inclusive growth

Beating burnout: identifying bad jobs and improving job quality

To improve wellbeing at work, job quality policy should pay more attention to imbalances in job content – like high workloads and low autonomy – and not just working conditions. Outcomes of low-quality jobs, such as burnout, need to be monitored at the European level.

By: Mia Hoffmann and Laura Nurski Topic: Inclusive growth Date: May 5, 2022
Read about event More on this topic
 

Past Event

Past Event

COVID-19 and the shift to working from home: differences between the US and the EU

What changes has working from home brought on for workers and societies, and how can policy catch up?

Speakers: Jose Maria Barrero, Mamta Kapur, J. Scott Marcus and Laura Nurski Topic: Inclusive growth Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: April 28, 2022
Read about event More on this topic
 

Past Event

Past Event

From viruses to wars: recent disruptions to global trade and value chains

How have events in recent years impacted global trade and value chains and how can we strengthen these against future disruptions?

Speakers: Dalia Marin, Adil Mohommad and André Sapir Topic: Global economy and trade Date: April 27, 2022
Read article More on this topic More by this author
 

Opinion

China’s Covid policy to be year’s largest economic shock

Beijing’s ‘dynamic zero-Covid’ policy could devastate the domestic economy, but the effects will also be felt globally.

By: Alicia García-Herrero Topic: Global economy and trade Date: April 26, 2022
Read article More on this topic More by this author
 

Podcast

Podcast

Making remote work, work

How do we address the challenges of remote work? Lessons from both sides of the Atlantic.

By: The Sound of Economics Topic: Inclusive growth Date: April 13, 2022
Read article Download PDF More on this topic
 

Policy Contribution

Inclusive growth

Better pensions for the European Union’s self-employed

What is the current state of pensions policy in Europe and how are independent workers treated compared with their traditionally employed counterparts?

By: Rebecca Christie, Monika Grzegorczyk and Diane Mulcahy Topic: Inclusive growth Date: March 24, 2022
Read article More on this topic More by this author
 

Podcast

Podcast

Online labour: Can we all just move to Tahiti?

How is online labour different from remote work?

By: The Sound of Economics Topic: Digital economy and innovation Date: March 23, 2022
Load more posts