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Why is fighting youth unemployment so important ?

Educational and Labour Impacts of Active Employment Policies for Young People in Germany Steffen Künn ( IZA, Bonn) Co- Author : Marco Caliendo (University of Potsdam) Ricarda Schmidl (IZA, Bonn) June 27, 2013 Barcelona. Why is fighting youth unemployment so important ?.

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Why is fighting youth unemployment so important ?

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  1. Educational and Labour Impacts of Active Employment Policies for Young People in GermanySteffen Künn (IZA, Bonn)Co-Author: Marco Caliendo (University of Potsdam)Ricarda Schmidl (IZA, Bonn)June 27, 2013Barcelona

  2. Whyisfightingyouthunemployment so important? • The experienceofunemploymentatthebeginningofthe professional careerhas negative impactsatthe individual andsocietylevel. • Early unemploymenthas negative pathdependencies: • on employmentprobabilities (Ellwood, 1983; Gregg andTominey, 2005) • on wages (Burgess et al., 2003) • decreasesubjective well-beingandself-esteem (Goldsmith et al., 1997) • High socialcostsoffailedintegrationofyouths: • Directcosts: Transfer payments (e.g. benefits) • Indirectcosts: Increase in teenagecrime, drugabuse, etc.

  3. Isyouthunemployment a problem in Germany?

  4. Youth unemployment: An European comparison in % Note: Averages overtheperiod 2000-2012. Source: Eurostat. • More favorable situationforyouths in Germany: Theyhave a lower prob toenterunemploymentwhichismostlikely due to a smooth transitionfromschooltowork (attributabletothe dual apprenticeshipsystem).

  5. Long-term unemployment: An European comparison in % Note: Averages overtheperiod 2000-2012. Source: Eurostat. • However, thosewhoenterunemployment in Germany areat high risktoremainunemployedfor 12 monthsorlonger. • Youthswithstructuraldifficulties: Male, low/noschool/professional degree, migrationbackground.

  6. Activelabormarketpoliciestofightyouthunemployment in Germany

  7. Activelabormarketpolicy in Germany • Giventhecompositionoftheyouthunemployedworkforce in Germany, activelabormarketpolicies (ALMP) are an integral partoflabormarketintegrationofunemployedyouths • Wide rangeofprogramsthataredesignedtosupportunemployedyouthsat different barriers: • 1st barrier: Transition fromschooltoapprenticeshipsystem • Redoschooldegree, publicapprenticeship … • 2nd barrier: Integration in employment • Wage subsidies, qualification, jobsearchassistance… • High treatment intensity: During the last decade approx. 65% of all youths who entered unemployed also participated in ALMP

  8. Existingevidence on programeffectiveness • International evidence: • Training: Rather negative (Denmark, Sweden, UK) • Wage subsidies: Positive (Belgium, France, UK) • Job creationschemes: Negative (France, UK) • Surprisingly, so farnoevaluationexistsfor Germany!  Limiteddataavailability! • Statistical methodsrequirecertainnumberofobservations. • Survey data: Low numberofobservation, difficulttodisentanglesingleprogramtypes (self-reported, limited reliability). • This studyprovidesfirstquantativelong-term resultswithrespecttoprogrameffectivenessfor Germany. • Governmentprovidedaccessto administrative data!

  9. The settingoftheempiricalanalysis

  10. Data • Toovercomedatalimitations in thefieldofprogramevaluation, wecreated a newdataset: theIZA Evaluation Dataset • Administrative data: Information fromtheSocial Security System andthe Federal Employment Agency (N=900,000) • Survey information: Telephoneinterviews (N=18,000) • Mergeddata: Combinationofadminandsurveydata (N=15,700) • Weuseonlythe administrative part in ordertohave: • sufficientnumberofobservations (subgroupofthelabormarket), • detailedinformation on participation in ALMP and LM outcomes. • Sample restriction: • Inflowsintounemployment in 2002 • Age restriction: < 25 yearsoldatentry in unemployment • N=51,019; Observation period: 6 years after entryintounemployment

  11. Programsunderscrutiny • JCS – Job creationschemes • Max. duration: 12 months (extensionpossible) • Main aim: Generateworkingexperience • VT – Vocationaltraining • Max. duration: 12 months (extensionpossible) • Main aim: Providing jobspecificskills • PT – Preparatorytraining • Max. duration: 12 months • Main aim: Integration in educationandvocationaltraining • WS – Wage subsidy • Max. duration: 12 months (50% subsidyto wage costs) • Main aim: Long-term integration in employment

  12. Doesprogramparticipationincreaseemployment/educationchances?

  13. Remarkswithrespecttotheempiricalstrategy • Comparisonofparticipantsand non-participants (otherunemployedyouthswithoutprogramparticipation) wrtintegration in: • unsubsidizedemploymentsubjectto SSC, • unsubsidizededucationor professional training. • Weuse a statisticalmatchingapproachtoaccountforselectionintotheprograms, i.e., participants will becomparedwith „comparable“ non-participantsonly. • Selectionbased on observedcharacteristicsonly! • Wetakethetimingofentryintounemploymentandprogramsintoaccount (seasonalityandunemploymentduration).

  14. Resultswrtemploymentoutcomes!

  15. Job creationschemes • Participationdoes NOT improvelabormarketprospectsofparticipantsduringtheobservationwindow!

  16. Vocationaltraining • Positive andstableeffectat 8% (East) to 11% (West) on average after initiallocking-in phase (approx. 12 months)!

  17. Wage subsidy • Strong positive effectat 18% (East) to 10% (West) on average after initiallocking-in phase (approx. 6-12 months)!

  18. Effectheterogeneity • Gender • Minor differences in programeffectiveness. • Pre-treatment schoollevel • Programsaremoresuccessfulforindividualswithhigherschoolinglevels! • Findingsarehighly relevant for German policymakersastheyhavetorethinkprogram design/allocation.

  19. Resultswrttoeducationoutcomes!

  20. Preparatorytraining • Positive andstableeffectofapprox. 10%, 12-48 months after programentry Indicatessuccessfulintegration in German apprenticeshipsystemwhichlasts on averagethreeyears.

  21. Effectheterogeneity • Gender • Nogenderdifferences. • Pre-treatment schoollevel • Again: Programsaremoresuccessfulforindividualswithhigherschoolinglevels! • Apparently, themostneedyare not properlytreated!

  22. Conclusion • Due toaccesstoreliableand informative data, thisstudydeliversthefirstempiricalevidence on theeffectivenessof ALMP forunemployedyouths in Germany. • Main result: • Programsincreaseemploymentandeducationprobability – exceptJCS. • Most interestingforpolicymakers: • Programsseemtobelesseffectiveforindividualswithlowschoolinglevels! • Regional-specificeffectiveness: WS mosteffective in East and VT in West Germany (due tothecompositionoftheunemployedworkforceandlocallabormarketcondition).

  23. Dr. Steffen Künn Research Associate IZA, P.O. Box 7240, 53072 Bonn, Germany Phone: +49 (0) 228 - 38 94 -533 Fax: +49 (0) 228 - 38 94 - 180 E-mail: kuenn@iza.org http://www.iza.org

  24. Appendix

  25. References • Presentationisbased on: • Caliendo, M., S. Künnand R. Schmidl (2011): Fighting Youth Unemployment: The Effects of Active Labor Market Policies. IZA Discussion Paper 6222, Bonn • Citedstudies: • Burgess, S., C. Propper, H. Rees and A. Shearer (2003): The Class of 1981: The Effectsof Early CareerUnemployment on Subsequent UnemploymentExperiences“. Labour Economics, 10(3), 291-309 • Ellwood, D.T. (1983): TeenageUnemployment: Permanent ScarsorTemporaryBlemishes?. NBER Working Paper 0399 • Goldsmith, A., J. Veumand W. Darity (1997): Unemployment, Joblessness, Psychological Well-BeingandSelf-Esteem: TheoryandEvidence. The Journal ofSocio-Economics, 26, 133-158 • Gregg, P. and E. Tominey (2005): The Wage Scarfrom Male Youth Unemployment. Labour Economics, 12(4), 487-509

  26. Descriptivestatistics Note: Measuredatentryintounemployment.

  27. Descriptivestatistics I Note: Measuredatentryintounemployment. • More male!

  28. DescriptivestatisticsII Note: Measuredatentryintounemployment. • East-West differenceswrtmigrationandeducationbackground!

  29. DescriptivestatisticsIII Note: Measuredatentryintounemployment. • Programdifferences: PT: youngerandwithouteducationalattainment. JCS: youthswithstructuralproblems.

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