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The following section charts the erosion of job security on the youth labor market. We start with the evolution of unemployment for different demographic groups in the United States and selected European countries, which were particularly affected by rising unemployment (Figure 2.1 and Figure 2.2). In the following, we usually define the youth labor market in terms of the age of participants, where youth or young people are 15-29 year olds.⁶

Figure 2.1

We contrast their experience with the group that is normally most strongly attached to the labor market, adult (prime-age) men aged 45-54. shows that young people were disproportionately affected by rising unemployment. While the U.S. had comparatively high unemployment rates in the 1970s, some Western European countries witnessed substantial increases in unemployment.

Youth unemployment rates virtually exploded in some countries, particularly among female youth, whose unemployment rates climbed well beyond 20-30% in a number of countries during the 1980s and again in the early 1990s. Compared to the magnitude of changes among youth, we hardly observe changes among adult men.

6 In most aggregate data analysis, the youth labor market is defined in terms of age. While individuals aged 15-24 are considered to be on the youth labor market, we extend the upper limit to 29 whenever the available data permits this, reflecting that increasing participation in higher education has postponed the age at which

The Changing Labor Market

Figure 2.1 Unemployment 1970-2008, % unemployed in labor force unemployed, by age and gender

Note: Data smoothed using one year moving average⁷ Source: OECD Labor Force Statistics

Comparing the experience of Italy to the experience of the U.S. allows for a very drastic numeric portrayal of the age-gap in unemployment: In 1981, 1.2% of Italian adult men aged 45-54 active on the labor market were unemployed, a decrease of 0.1 percentage points compared to 1970. Adult men's unemployment rate would reach a high of 3.8% in 1998 and recover to 2.8%

by 2008. Over the entire period of observation, 1970 and 2008, it averaged around 1.4 percentage points below the rate of the corresponding demographic group in the U.S. In the meantime, unemployment among young Italians skyrocketed. In 1981, 25.5% of active young women aged 15-29 were unemployed. Female youth unemployment was roughly 21 times as high as the corresponding rate for adult men. Female youth unemployment would continue to rise, rarely dipping beneath 30% in the period from 1984 to 1999. Male youth unemployment followed a similar path, but averaged 8 percentage points below the corresponding female rate over the

7 Each value in this and the following figures in this chapter is calculated as 𝑦𝑖,𝑡= (𝑦𝑖,𝑡−1+ 𝑦𝑖,𝑡+ 𝑦𝑖,𝑡+1)/3 in order to smooth out some cyclical variation and enhance readability.

010203040

1970 1980 1990 2000 2008

Men, ages 45-54

010203040

1970 1980 1990 2000 2008

Men, ages 15-29

010203040

1970 1980 1990 2000 2008

Women, ages 15-29

DE ES FR IT SE US

The Changing Labor Market

period from 1970 to 2008. Over that same period, young Italian women's unemployment exceeded the adult men's unemployment rate on average by a factor of 12 (8 in case of young Italian men). In contrast, unemployment among young Americans of both genders averaged at around 10% exceeding the adult rate roughly by a factor of 3.

While the Italian case is maybe the most dramatic from a distributional perspective, a number of European countries witnessed rapid increases in youth unemployment rates from the 1970s until the mid-1990s. European youth unemployment peaked in the mid-1980s and the mid-1990s.

Thereafter, we have observed some recovery. Average unemployment rates for Western European countries declined after 1995, for youth and adults, men and women alike. Although European youth unemployment is lower in 2008 compared to the mid-1980s or mid-1990s, we see substantial heterogeneity in the underlying country trends. In Italy and Spain, unemployment declined steadily from very high levels since the mid-1990s, but youth unemployment remains stubbornly high in Greece and France. Starting at very low levels in the 1980s, German and Swedish youth unemployment has shown a long-term upward trends. In contrast, Irish, British, but also Dutch and Danish youth unemployment rates have diminished substantially from high levels in the 1980s.

In 2008, we still observe the long shadows of the preceding decades (Table 2.2, Appendix, p.

26). Considering a broad sample of 28 OECD countries, Spain still has the highest unemployment rate among young men, in absolute terms and relative to adult men. Male youth unemployment is similarly high in Turkey and Italy. Sweden has the fourth highest unemployment rate among male youth and, in relative terms it ranks third among 28 OECD countries, surpassing Greece by a narrow margin. Averaging across countries, female youth unemployment is 0.7 percentage points above the male rate, but there exist considerable gender

The Changing Labor Market

Anglo-Saxon countries and higher relative female unemployment in Mediterranean countries. In absolute terms, female youth unemployment is highest in the Mediterranean countries, with Greece taking the lead in terms of both relative and absolute female youth unemployment. Spain, Turkey, Italy and Portugal follow. At the other end of the distribution, among Western European countries the Netherlands is the top performer among both men and women. Youth unemployment is also low in Denmark and Switzerland. Extraordinarily low youth unemployment appears to be a thing of the past in Germany, although in relative to adult men, German youth unemployment is still among the lowest in Western Europe.

In Figure 2.2, we consider the duration of unemployment spells, comparing the percentage of unemployed youth who are out of a job for one year or longer over countries and years. The trends in the share of long-term unemployed reflect the trends in the aggregate youth unemployment rate, but there is evidence of a persistent decline since 1985. While average European youth unemployment rates have approached levels similar to those in the U.S., the incidence of long-term youth unemployment in Europe is still substantially higher compared to the U.S. Long-term unemployment among young people is also remarkably low in Sweden.

Further analyses (data not shown) indicate that in 2006, the modal group of unemployment spells is six months or less in the countries considered here, except for Italy and Greece, where youth unemployment is predominantly long-term, i.e. exceeding 12 months. While still having predominantly short-term unemployment spells, we observe a rise in long-term spells among Austrian and German youth as well as among French and Greek male youth throughout the 1990s and early 2000s.

The Changing Labor Market

Figure 2.2 Long-term unemployment 1985-2008, % unemployed one year or longer among unemployed, by age and gender

Note: The EU14 comprise the pre-2004 EU member states minus Luxembourg, plus Norway. Bars represent 90% robust confidence intervals around the unweighted EU14 mean for a given year.

Source: OECD Labor Force Statistics