Pay companies to hire youth, OECD suggests

The EU's recovery fund must be used to support significant investments in Education, Employment and Entrepreneurship, also known as Gen-E, write Salvatore Nigro and Andzelika Rusteikienė.  

The plight of youth unemployment in developed economies is so severe it has prompted the OECD to call for more government intervention, possibly including paying companies to hire young people.

The influential economics and trade organisation also said on Tuesday (16 July) that governments should not roll back minimum welfare schemes and should reallocate, where possible, budgets towards programmes designed to get people back to work.

Unveiling its 2013 employment outlook, the Organisation for Economic Co-operation and Development said joblessness was likely to remain high in its 34 developed member states through most of next year.

But speaking to Reuters after the report's release, the group's head of employment policy, Stefano Scarpetta, warned particularly of a growing emergency over youth unemployment.

"We are pushing for bold action to stimulate job creation for young people, even unorthodox measures that you don't necessarily consider in normal times, like some subsidies for hiring at companies," Scarpetta told Reuters.

There are already about 48 million people out of work across the OECD's members. It forecast that the unemployment rate would hit 8.0% this year before easing only slightly to 7.8% next year.

However, the outlook diverged widely with the unemployment rate set to keep rising in Greece to 28.2% next year and Spain seeing its jobless rate rise to 27.8% in 2014, the highest in the OECD.

The report says that unemployment is likely to rise in most eurozone countries, with Germany, where jobs figures are expected to see a slight increase, a notable exception.

With many countries still struggling to recover from the 2008-2009 financial and ensuing economic crisis, the OECD said there were more and more long-term unemployed people who increasingly risked losing their rights to jobless benefits.

Because the youth, defined as 15 to 25 year-olds, often have little or even no benefits to start with, the situation has become particularly dire for them.

Youth unemployment rates in Greece and Spain are near 60% and economists increasingly see the problem as a top risk for the future of Europe along with the weakness of its banks.

EU leaders, who have made the fight against youth unemployment a priority, agreed last month to set aside around €8 billion for jobs and training, even as they admitted that the labour market would only improve substantially once the crisis-hit region returns to growth.

The OECD urged governments to resist resorting to early retirement schemes in hope of reducing youth unemployment, which it said had little benefit but bore heavy costs.

EU heads of states agreed in February to launch a €6 billion Youth Employment Initiative, with the aim of making it fully operational by 1 January 2014.

At a summit on 27 June, they decided to increase the fund to €8 billion, with €6 billion "frontloaded" over the first two years of the next multi-annual financial framework, the EU's long-term budget.

>> Read: Europe's €8bn youth jobless fund meets scepticism

A Youth Guarantee scheme, introduced by each EU country according to its individual needs, will apply to young people who are out of work for more than four months. It aims to give them a real chance to further their education, or get a job, apprenticeship or traineeship.

The EU has a 2020 target of 75% employment for the working-age population (20-64 years).

  • 1 Jan. 2014: Target date for the EU Youth Employment Initiative to become fully operational

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