At the 8th annual European Students For Liberty Conference, held in Prague, Czech Republic, I asked students which policies make it more difficult for them to succeed in their home countries. Though I heard a diverse array of answers, one response repeatedly came up. They told me that inflexible labor markets are the main way many European governments decrease economic opportunity for their youngest residents. This inflexibility leads to high youth unemployment and leaves young people with a disproportionate share of temporary work.
The students’ complaints centered on their inability to secure long-term employment. Labor laws across the European Union do not recognize the U.S. concept of employment at-will. In the United States, if they are not discriminating, companies can fire workers for no reason at all. But employment contracts in Europe are indefinite unless the contracts are specifically set for a short period of time.
Parting ways with a worker in Europe requires lengthy, costly legal proceedings and severance pay. This may seem to benefit workers, but for young people who are trying to gain experience and establish themselves professionally, the lack of employment at-will policies places them at a disadvantage.
The students’ complaints are backed up by data. According to Eurostat, the European Union’s statistical office, the average youth unemployment rate (ages 15 to 24) for the 28 EU member states is 21 percent. Croatia, Greece, and Spain all have youth unemployment rates that are over 44 percent. These numbers make the stubbornly high U.S. combined teen (16 to 19 years old) and youth (20 to 24 years old) unemployment rate of 11 percent seem manageable.
These elevated youth unemployment rates are not the result of millennials choosing not to work. Unemployment rates only capture those who are looking for jobs, but cannot find one. However, a lack of participation in the labor force by young people is also a problem. While some of this is caused by young people spending more time in school, many become discouraged by low employment prospects and give up looking for work altogether.
Austria, Denmark, Iceland, the Netherlands, Norway, and Switzerland all have youth employment-population ratios that reach at least 50 percent, as does the United States. But throughout the whole European Union, less than one-third of young people ages 15 to 25 are employed. In Croatia, Greece, Italy, Macedonia, and Spain, less than one in five young people work.
European employment contracts are comprehensive and cannot be changed without the employee’s consent. In today’s economy, when workers and their employers need to remain flexible and mobile to succeed, stringent employment contract requirements lead to less-dynamic economies and fewer job openings for new workers.
Few employers would take chances on unproven young workers when they are not able to let them go if the employment arrangement does not work out. Businesses are also more hesitant to expand when payroll costs cannot be scaled back during hard times. Indefinite employment contracts also lead to older, less-effective workers being kept on while young workers are shut out of the job market.
The clearest indicator of the negative results of indefinite employment contracts is seen in the percentage of young workers who are given temporary employment contracts. In European Organisation for Economic Co-operation and Development countries, 41 percent of employed 15- to 24-year olds have temporary contracts. Rates in France (57 percent), Poland (71 percent), Portugal (63 percent), Slovenia (73 percent), and Sweden (56 percent) are particularly high.
The overall OECD temporary employment average for this age group is much lower, at 24 percent. The temporary work rate is also substantially lower for older European workers. Among European OECD countries, only 12 percent of employees ages 25 to 54 work temporary jobs. These numbers show that young people have a disproportionate share of temporary work contracts in Europe, and youth temporary work rates are higher in Europe than in the rest of the developed world.
Even though millennials are the most educated generation in history, failing to get jobs and secure lasting work can have lasting negative effects on their careers. Young Europeans told me in Prague that they do not need nor want more government handouts. Instead, their future success relies on the adoption of open, flexible labor markets.
Jared Meyer is a fellow at the Manhattan Institute for Policy Research. Follow him on Twitter here.
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