‘Economists should help policymakers to find solutions to this challenge to provide a forum where young people and adults may clash without resorting to the barricades ’

Researchers from Italy have been working on a joint project with the HSE’s Professor Olga Demidova looking at “The Political Economy of Youth Unemployment”. Professor Enrico Marelli, and Prof. Maria Laura Parisi, Economists at the University of Brescia and Elina De Simone from the University of Naples Parthenope, answered the HSE news portal’s questions about their research into youth unemployment in Russia and Italy.

— The project was supported by the European Commission in 2011. What were the goals? Have they been modified due to the first results?

ENRICO: The project was approved in 2011 and will last until 2015. Youth unemployment has become a major concern in many European countries, with rates twice or three times higher than the adult rates. The situation has significantly worsened since the recent global crisis began.

The main goal of the project is to compare the current dynamics of youth unemployment in different countries, such as Russia, Italy and the United Kingdom. The diverse institutional settings allow us to  identify the specific policies that are more pertinent to deal with the problem and support the employability of young people.

The first results confirm the relevance of the selected issues and the suitability of the chosen methodology.

ELINA: Youth unemployment as a possible source of political instability and social exclusion created an urgent concern on a global level. The European Commission stressed that Member States should secure transitions from mandatory education to work for young people and develop and implement Youth Guarantee schemes in order to prevent young people’s exclusion from the labor market.  Our ongoing project tries to answer questions related to the best policy interventions and related welfare programmes to make sure particularly weak young people don’t fall into long-term unemployment or temporary work experiences.

MARIA: It appears that in some southern European countries, particularly in Italy and Spain, unemployment for young people has never been so high (between 40% and 50%), and the differential between adult and youth unemployment is growing. This spurred a lot of interesting questions on what role the labor market frictions, education systems and institutional differences across countries have played. Prof. Enrico Marelli and Prof. Olga Demidova concentrated on the phenomenon of regional differences of youth unemployment in Italy and Russia. They considered the distance from an urban or industrial agglomerate as one of the main causes of regional unemployment differentials, using spatial analysis.

— Why did you choose youth unemployment as the subject for your research? Why is this so important now?

Elina De Simone

ELINA: The average youth unemployment rate in Europe reached the significant value of 23.5 % in February 2013 (more than twice as high as the adult rate) highlighting the necessity to make strong efforts to reduce youth unemployment as a priority in the political agenda. Economists should help policymakers to find solutions to this challenge because valuable policy solutions provide the forum where young people and adults may clash without resort to the barricades and in which compromise and cooperation may be sought.

MARIA: I started two research papers: the first is conducted with Prof. Enrico Marelli and Prof. Olga Demidova. It is a cross-country analysis of the impact of temporary work on labor productivity. There have been a wave of reforms in the labor market of some countries (i.e. Italy) in the last fifteen years, whose objective was introducing more market flexibility. This translated into new regulation about atypical labour contracts, mostly creating temporary jobs. There is no uniform consensus about the effect of that regulation on increased productivity or unemployment abatement. Our aim is to identify a significant impact of temporary work and education of the labor force on productivity and unemployment, focusing on young people in particular.

The second paper will be conducted with Prof. Enrico Marelli and D. Elena Vakulenko (HSE), and relates to the probability of becoming unemployed when young. This probability is influenced by individual and household characteristics, labor market rigidity, institutional framework, regulation, and the educational system. It will be interesting to understand if the relationship has been modified or strengthened after the latest economic crisis. This research will be implemented with micro-individual level data. The data comes from two surveys: one is the Russian Longitudinal Monitoring Survey, the other is the Survey on Income and Wealth of Households in Italy. These two datasets provide very rich information about the characteristics of individuals as well as their occupational status and preferences. They also provide information on wages and household incomes.

— What do Italy and Russia have in common regarding youth unemployment as the subject of your research?

ENRICO: The two countries are quite different from different points of view: size, geographical characteristics, economic specialization, etc. The employability of young people and the reduction of youth unemployment, however, is a common concern. Nevertheless, the absolute and relative (compared to adult rates) unemployment levels of young people are higher in Italy than in Russia.

Enrico Marelli

Another common feature of youth unemployment is the great differentiation across regions. In Italy the distinction is mainly between the Northern and Central regions, on one side, and the Southern regions, on the other side, where unemployment rates are much higher than elsewhere. In Russia the regional differentiation is mainly between Eastern and Western regions, but also the South and non-South divide is relevant (this is the finding of the latest research paper within this project).

A final similarity between the two countries is that the youth situation is sometimes unsatisfactory also when they are able to find a job. In Russia the “informal” activities are diffused, in many cases with low wages and poor working conditions. In Italy, the dual labour market provides good salaries and working conditions to the adult workers, while young people suffer because of unstable or precarious jobs.

— What's difficult and what's challenging in an international project like this one?

ELINA: As declared in our project, global and European policy makers have been very slow in recognizing youth unemployment and underemployment as a priority challenge requiring decisive policy responses. Hard budget constraints make it difficult for countries to devote a significant portion of public investment to specific welfare schemes as Youth Guarantee schemes which can be of great help in providing opportunities for young people. The main challenge for contemporary governments concerns the trade-off between welfare state retrenchment, and the need to control spending, and the support of social expenditure measures in order to prevent the awful possibility of a "lost generation".

— What's next on your plate in the way of research?

ENRICO: At present three Italian researchers are working at HSE. In 2014 and 2015 many more will come to Moscow. In the meantime, experts from HSE – led by Professor Olga Demidova – have been and will go again to the Italian universities. This interchange will be fruitful not only to finalize the goals of the EU project, but also to reinforce the cooperation and friendship between our two countries.

Anna Chernyakhovskaya, specially for HSE news service