Still the Same Patterns of Cross National Variation in Youth Unemployment? Revisiting Breen.

Many industrialized countries have been heavily affected by the great recession of the recent years. Most vulnerable to macroeconomic downturn are young people entering the labor market. However, there exist enormous cross-national differences in the level of youth unemployment and the intensity of response of youth unemployment to the economic downturn. In 2012 this variation in youth unemployment reached according to Eurostat-data an anew maximum with values ranging between 8 to 10 percent for Germany, Switzerland, Austria, the Netherlands, and Norway and more than 50 percent for Spain and Greece.

In this paper we examine the variation of youth unemployment rates across OECD countries on the basis of institutional and economic differences between countries. Following Breen (2005) economic differences are reflected by the rate of adult unemployment. Two major institutional factors are of great importance explaining the different labor market opportunities of youth across OECD countries: (1) The protection of permanent workers against individual dismissal, specific requirements on collective dismissal and regulations on temporary forms of employment. (2) The educational system’s role in signaling the suitability of a job seeker for a particular job.

Our study is an update of Breen’s attempt, who described the situation in the 1990. Our main findings – valid for the period from 2000 till 2012 – are  that youth unemployment is relatively high in regulated labor markets in which employers have rather vague signals from vocational certificates. In contrast, if vocational degrees contain clear signals about the expected productivity graduates it will help to overcome the obstacles of high regulation. Compared to Breen’s results labor market regulation seems to have lost its explanatory power after 2000 whereas educational signaling still strongly goes along with low youth unemployment.

Breen, Richard (2005): Explaining Cross-national Variation in Youth Unemployment: Market and Institutional Factors. European Sociological Review, 21(2): 125-134.