Combining the Entry of Young People in the Labour Market with the Retention of Older Workers
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DIRECTORATE GENERAL FOR INTERNAL POLICIES POLICY DEPARTMENT A: EMPLOYMENT POLICY Combining the entry of young people in the labour market with the retention of older workers STUDY Abstract This study provides an overview of the employment situation of young and old workers in the EU Member States, setting out the most recent developments during the crisis and dealing with policies implemented to promote the employment of both groups. The evidence collected shows that there is no competition between young and older workers on the labour market. Structural or general policies to enhance the functioning of EU labour markets are crucial to improving the situation of both groups. However, the responsibility for employment policies still predominantly lies within Member States of the European Union, although initiatives taken at the EU level can provide added value, particularly through stimulating the exchange of experiences and facilitating regional and cross-border mobility throughout the EU. IP/A/EMPL/ST/2012-04 April 2013 PE 507.445 EN This document was requested by the European Parliament's Committee on Employment and Social Affairs. AUTHORS Eichhorst, Werner (IZA) Boeri, Tito (frdb) Braga, Michela (fdb) De Coen, An (IDEA Consult) Galasso, Vicenzo (frdb) Gerard, Maarten (IDEA Consult) Kendzia, Michael (IZA) Mayrhuber, Christine (WIFO) Pedersen, Jakob Louis (NIRAS) Schmidl. Ricarda (IZA) Steiber, Nadia (WIFO) RESPONSIBLE ADMINISTRATOR Ms. Laurence Smajda Policy Department A: Economic and Scientific Policy European Parliament B-1047 Brussels E-mail: [email protected] LINGUISTIC VERSIONS Original: EN ABOUT THE EDITOR To contact the Policy Department or to subscribe to its newsletter please write to: [email protected] Manuscript completed in April 2013 © European Union, 2013 This document is available on the Internet at: http://www.europarl.europa.eu/studies DISCLAIMER The opinions expressed in this document are the sole responsibility of the author and do not necessarily represent the official position of the European Parliament. Reproduction and translation for non-commercial purposes are authorised, provided the source is acknowledged and the publisher is given prior notice and sent a copy. Combining the entry of young people in the labour market with the retention of older workers CONTENTS LIST OF ABBREVIATIONS 5 LIST OF TABLES 6 LIST OF FIGURES 6 EXECUTIVE SUMMARY 7 1. CHALLENGES FOR POLICY MAKERS RELATED TO THE EMPLOYMENT LEVELS OF YOUNG AND OLD WORKERS 10 1.1 Demographic shifts 10 1.2 The impact of the crisis 12 1.2.1 Activity rate 12 1.2.2 Employment rates 14 1.2.3 Unemployment rate 19 1.3 Pressures of low employment levels of young and old on social security systems, especially pensions systems 22 2. MEASURES TO INCREASE EMPLOYMENT OF YOUNGER AND OLDER WORKERS 26 2.1 Difficulties for younger and older workers 27 2.1.1 Younger workers 29 2.1.2 Older workers 29 2.2 Overview of measures targeting the entry into the labour market of the youth 31 2.2.1 Launch of various policies to increase youth employment 31 2.2.2 Evaluation results 37 2.3 Overview of measures to prevent the early exit of the labour market of the older workers 40 2.3.1 Policies in place at the European level 40 2.3.2 Theoretical framework 41 2.3.3 Institutional framework 42 2.3.4 Measures taken at the national level 44 2.4 Measures promoting employment of both groups 48 2.4.1 Targeted measures 48 2.4.2 Universal measures 49 3. DO POLICY MAKERS REALLY FACE TWO COMPETING CHALLENGES? 51 3.1 Is there an impact of the retention of older workers on the entry of young workers into the labour market? 52 3.1.1 The lump of labour theory 52 3.1.2 Review of existing evidence on the potential links between the postponement of retirement and the employment chances of youth 53 3.1.3 Economic downturn and recovery 55 PE 507.445 3 Policy Department A: Economic and Scientific Policy 3.1.4 The dual labour market and age-based inequality in job quality 59 3.1.5 The potential impact of recent reforms of EU pension systems 60 3.1.6 The imperfect substitutability between young and older workers 64 3.2 Do these two issues need to be treated independently by policymakers or should they better be linked? 69 3.3 Converting employment challenges into opportunities for new sectors 70 3.3.1 The need to identify employment opportunities 70 3.3.2 Employment opportunities in developing sectors 70 3.3.3 Requiring the necessary skills 73 4. CASE STUDIES ON THE MEASURES TAKEN 76 4.1 Denmark 76 4.2 Germany 78 4.3 Belgium 82 4.4 Italy 84 4.5 Austria 88 5. CONCLUSION AND POLICY RECOMMENDATIONS 91 5.1 Concluding remarks: Young and old workers on the labour market 91 5.2 Policy recommendations 93 REFERENCES 97 ANNEX 111 4 PE 507.445 Combining the entry of young people in the labour market with the retention of older workers LIST OF ABBREVIATIONS ALMP Active Labour Market Policies AR Ageing Report CEDEFOP European Centre for the Development of Vocational Training DG ECFIN Directorate General for Economic and Financial Affairs EC European Commission ECB European Central Bank ECJ European Court of Justice eDR Economic Dependency Ratio EEO European Employment Observatory EPC Economic Policy Committee EPL Employment Protection Legislation EREC European Renewable Energy Council ESDE Report on Employment and Social Developments in Europe ESF European Social Fund EU European Union EU LFS European Union Labour Force Survey GDP Gross Domestic Product ICT Information and Communication Technology ILO International Labour Organisation IMF International Monetary Fund ISCO International Standard Classification of Occupations IT Intelligent Technology NUTS Nomenclature of territorial units for statistics OECD Organisation for Economic Co-operation and Development SHARE Survey on Health, Ageing and Retirement in Europe STEM Science, tech, engineering, and maths UB Unemployment Benefits UNEP United Nations Environmental Programme VET Vocational Education and Training WB World Bank WHP Workplace Health Promotion PE 507.445 5 Policy Department A: Economic and Scientific Policy LIST OF TABLES Table 1: Distribution of the 15-24 population according to their educational and employment status, EU-27, 2001-2011 17 Table 2: Youth/older workers unemployment ratios, 2008-2011 58 LIST OF FIGURES Figure 1: Projected change of the population of working age and the elderly (in % change over the period 2011-2060 11 Figure 2: Total dependency ratio (in percentage) 12 Figure 3: Evolution of EU-27 activity rate (%) 13 Figure 4: Changes in activity rate of younger workers (15-24), 2000-2008 and 2008- 2011 13 Figure 5: Changes in activity rate of older workers (55-64), 2001-2008 and 2008- 2011 14 Figure 6: Evolution of EU-27 employment rate (%) 15 Figure 7: Changes in employment rates of younger workers (15-24), 2001-2008 and 2008-2011 15 Figure 8: Changes in employment rates of older workers (55-64), 2001-2008 and 2008-2011 16 Figure 9: Duration of working life at age 50 (number of years) 18 Figure 10: Evolution of EU-27 unemployment rate (%) 19 Figure 11: Changes in unemployment rate of younger workers (15-24), 2001-2008 and 2008-2011 21 Figure 12: Changes in unemployment rate of older workers (55-64), 2001-2008 and 2008-2011 21 Figure 13: Demographic dependency ratio and total economic dependency ratio in comparison, 2010 24 Figure 14: ‘Inactive dependency ratio’ and ‘effective old age dependency ratio' in comparison 2010 25 Figure 15: Conceptual model for career mobility 27 Figure 16: Employment average annual growth needed 2011-2020 to meet the Europe 2020 employment target (employment rate 75% in 2020) 41 Figure 17: Increase in total employment rate and employment rate 55-64 between 2000-2011 47 Figure 18: External conditions and the employment of older and younger workers 54 Figure 19: Change in unemployment rates, 2008-2011, two age groups 55 Figure 20: Activity rates age 55-64 and youth unemployment, 2011 57 Figure 21: Changes in activity rates (55-64) and youth unemployment, 2008-2011 57 Figure 22: Effective Retirement Age in OECD countries 1970-2011 60 Figure 23: Trends in employment rates for young and elderly individuals in European Countries 63 Figure 24: Employment rates by age groups in Denmark, 2000-2011 77 Figure 25: Employment rates by age groups in Germany, 2000-2011 79 Figure 26: Employment rates by age groups in Belgium, 2000-2011 82 Figure 27: Employment rates by age groups in Italy, 2000-2011 84 Figure 28: Employment rates by age groups in Austria, 2000-2011 88 6 PE 507.445 Combining the entry of young people in the labour market with the retention of older workers EXECUTIVE SUMMARY This study provides an overview of the employment situation of young and old workers in EU Member States, adopting a specific focus on: (i) the most recent developments during the crisis and medium-term demographic developments; (ii) policies implemented to promote the employment of both groups; (iii) evidence on the alleged tension between the employment prospects of young and older workers; and (iv) offering policy recommendations for EU Member States and European institutions. Young workers represent the more fragile group In terms of the recent situation for young and old workers in European labour markets, it is evident that young people have suffered most from the recent crisis through rising unemployment and declining employment, particularly in those countries where entry into employment, and typically into permanent jobs, was quite difficult even before the crisis. At the same time, the employment rates of older workers have been more resilient and less responsive to the crisis, owing to the withdrawal of early retirement incentives and a more stable employment position compared to younger labour market entrants.