Youth unemployment and policy in Sweden ”The Nordic Welfare Model: What’s in it for Latvia?” Oskar Nordström Skans IFAU and Uppsala Center for Labor Studies

Youth unemployment is high in Sweden

But relatively few long-term unemployed

Further facts 1) Long-term unemployment is confined to a subset of the young (OECD, 2008): Poor formal education (drop outs/bad grades) Immigrant youths (in particular if arriving late) 2) School-to-work transition chritical phase: Inactivity and inflow into unemployment peak at age 19 Suggest inefficient transitions from high school to work. 3) High fraction of youths on temporary contracts

Policy tools 1: Benefits Unemployment insurance benefits  Require a continous work history  few are entitled Program participation benefits  At par with study grants (i.e. low), after 3 months. Means tested social assistance  If other means are exhausted, strongly reduces incentives to accept low intensive jobs.

Policy tools 2: Programs and subsidies ”Mandatory” programs after 3 months of registered unemployment  Job search assistance, employment subsidies, practice programs, and labor market training…  Evidence suggest that youths benefit from the mix, at least in the short run. Generous grants for continued schooling among high school drop-outs Lower pay-roll taxes when hiring young workers

Possible explanations for the pattern: Dual employment protection  Rigid for permanent employment  Flexible for temporary jobs. High minimunm wages  Set through collective agreements Education  ”Academic style” vocational high schools  Slow transitions into higher education

Tentative conclusions I: The formal education system is key Poor education may indicate other individual problems unrelated to education But evaluations suggest that raised thresholds in the education system have contributed to slower transition to work among the low skilled young In addition, more resources in primary schools leads to better labor market outcomes

Tentative conclusions II: Contacts with employers is key Evaluations of labor market programs and job search assistance, as well as direct evidence on job search and employment patterns, suggest that a key element for a succesful transition to work is a direct contact with an employer. Suggest that programs and education should seek direct involvement of employers to ease the transition.

Some references Björklund et al (2010) IFAU Rapport 2010:13 ( Långtidsutredningen 2011, SOU 2011:11 Various appendices (1, 2, 6 and 11) [in SOU 2010:88; 2010:93; 2011:2] OECD (2008) Country Survey Sweden, OECD, Paris. Fredriksson, Öckert and Oosterbeck (2012) IFAU Working paper, 2012:5 (