Inequality and Job Polarization of the Youth Labor Market in Europe.

Thursday, 2 July 2015: 4:00 PM-5:30 PM
TW2.1.01 (Tower Two)
Kariappa Bheemaiah, Grenoble Ecole de Management, Grenoble, France
Mark Smith, Grenoble Ecole de Management, Grenoble, France
Inequality and Job Polarization of the Youth Labor Market in Europe.

The fall out of the economic and financial crisis has highlighted the risks for those with weakest labor market status – the young and those with the lowest levels of education. These impacts follow on a longer-term trend of increasing inequality with public debates increasingly focused on the earnings of the “Top 1%” in developed countries and the increasing share of national income attributed to this group. Nevertheless, studies show that there continues to be a wage premium associated with higher education and cognitive ability (Autor, 2014). Indeed the better educated are equipped to take advantages of technological changes rather than experience the negative consequences of those displaced by technological developments. As the pace of economic growth and the employment rate for young people in Europe continues to stagnate (V.Constâncio, 2014), the impact of technological change continues to create a polarized job market (Holmes, 2014). Here we study these transitions and highlight the social cost of inequality and technological change. To attain this objective, we analyze the aspects of ‘flexicurity’ of the job market and track the policies implemented under this banner with regards to the youth labor market. We argue that such changes requires public policy makers to play a constructive role in terms of improving labor market outcomes and educational attainment in order to respond to both external shocks and the underlying changes in the job structure resulting from advances in technology.

Flexicurity as a concept has fallen out of favor, but at its heart, the combination of labor market flexibility and security remain relevant for the situation of young people in Europe. This term was initially used to define a shift from job security to employmentsecurity which would be compensated by improving employment opportunities and social security (A.Tangien, 2007). One of the ambitions of the EU prior to the crisis was to expand Flexicurity in the member states on the premise that while increased flexibility in the labor market contributed to economic efficiency, the increased security provided by the state preserved social cohesion (R.Muffles, 2008). A common understanding of Flexicurity suggests that it is an amalgamation of Flexible and Secure Contractual Arrangements, Active Labor Market Policies, Lifelong Learning Systems and Social Security Systems (European Expert Group on Flexicurity, 2007). Thus in order to ensure societal prosperity, a trade-off between the ability of employers to hire and fire and social security was developed, as the evidence suggests  employers prefer increased flexibility allowing them to adapt more easily to the cycles of demand, whilst institutions protect employees (minimum wage, employment protection, social security system etc.) ( Wilthagen, 2013). The employment outcomes of the crisis suggest that at best flexicurity had been weakly implemented and at worst the policy was not capable of dealing with the enormous shock of the economics and financial crisis. 

As income inequality and youth employability are both central to these four pillars of flexicurity, we conduct an analysis that maps the transitionary path of variables with a strong focus on the youth labor market. By tracing the evolution of these youth-specific variables, and for men and women, before and after the crisis, we aim to ascertain the impact of institutional policies on inequality, with a strong focus on income levels, access to the labor market (and which sectors), types of employment (fixed-term or permanent contracts)and employment sub-groups (youth, migrant, education level) , wages, social security benefits, poverty and with special emphasis on policies related to education, apprenticeships and training. However, these changes in labor market outcomes cannot be separated from wider changes in the overall structure of the labor market and the jobs on offer for young people.

Thus at the same time we also aim to analyze the recent advances made in technology and to gauge their impact on the future labor market. As technology continues to evolve, there has also been a growth in high-skill jobs such as managers, professionals, and technicians, and a decline in lesser-skill jobs such as process operatives or clerical and administrative workers. These changes in the occupational structure are not entirely biased towards higher skills – low-skill jobs, particularly service occupations, have also grown (Holmes, 2014). These shifts help explain the  polarized work environment, in which job opportunities are found in sectors that require low skills and jobs requiring high technical skills and cognitive flexibility (Autor, 2014). Thus we link the shifts in flexicurity outcomes to the changing structure of job opportunities for young people in order to explore how the chances of entering the workforce and staying in work are being affected by underlying technological developments.

In the final part of the paper we contextualize the results with the aims and achievements of the Lisbon Strategy (which ended in 2010) and the ambitions outlined in the Europe 2020 strategy. Furthermore we consider what economic, social and labor market policies are required at national and European levels of government in order to prepare the youth labor market to acclimatize to the changing work environment and in the creation of a labor market that fosters a fairer balance of flexibility and security. Based on our findings and the comparison over time we consider the implications of these measures for the future youth labor market.


A.Tangien. (2007). European Flexicurity:concepts, methodology and policies. European Review of Labor and Research

Autor, D. (2014, May 23). Skills,education and the rise of earings inequlaity among the "other 99 percent". Science

European Expert Group on Flexicurity. (2007). Flexicurity Pathways: Turning hurdles into stepping stones:  Europa.

Holmes, C. (2014). Why is the Decline of Routine Jobs Across Europe so Uneven? SKOPE 

Luijkx, R. M.&R.Muffles, R. (2008). Labor market mobility and employment security of male employees in Europe: 'trade-off' or 'flexicurity'. Work Empoyment Society

Vítor Constâncio. (2014, April 10). Growing out of the crisis: Is fixing finance enough?Retrieved 02 03, 2015, European Central Bank

Wilthagen, R. M. (2013). Flexicurity: A New Paradigm for the Analysis of Labor Markets and Policies Challenging the Trade-Off Between Flexibility and Security. Sociology Compass.