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Sustainable labour market integration of young

What is the Youth Guarantee and how it is financed?

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The Youth Guarantee, based on experience in Austria and Finland, seeks to ensure that all young people up to age 25 receive a quality offer of a job, continued education, an apprenticeship or a traineeship within four months of leaving formal education or becoming unemployed

A Youth Guarantee has a fiscal cost for Member States, but this cost is much lower than the cost of inaction.

First, the cost depends on national circumstances: it will be lower in Member States where supporting measures are well developed (e.g. well-trained Public Employment Service (PES) staff to address young people’s needs). Second, it depends on the way in which the scheme is set up and implemented. Third, it will be greater in countries with high rates of young people not in employment, education or training (NEETs) or of youth unemployment.

In July 2012, the ILO estimated that the total cost for establishing Youth Guarantee schemes in the eurozone would stand at 0.45% of the eurozone´s GDP, or €21 billion. However, these costs should be compared with the costs of unemployment, inactivity and lost productivity. The costs of benefits paid out to unemployed young people, foregone earnings and taxes are estimated by the European Foundation for the Improvement of Living and Working Conditions (Eurofound) to be the equivalent of 1.21 % of GDP, i.e. an annual loss of €153 billion for the EU. In addition, for young people themselves, being unemployed at a young age can have a long-lasting negative ‘scarring effect’. These young people face not only higher risks of future unemployment, but also higher risks of exclusion, of poverty and of health problems.

The EU can help Member States with financial support from the European Social Fund (ESF). With the Youth Guarantee in mind, the proposal for the ESF Regulation for the next programming period 2014-2020 includes a dedicated ESF investment priority targeting the sustainable labour market integration of young NEETs. Member States facing high youth unemployment rates are thus expected to identify young unemployed persons as well as NEETs as a specific target group for ESF funding.

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