The Great Recession and the youth labour market in European countries: the demographic versus the labour market effect

Abstract

The goal of this chapter is to provide a simple labour supply explanation for the changes that took place in the youth labour market after the financial crisis. An extensive literature has examined the effects of the education system, of the economic situation and of employment protection legislation on youth labour force participation and its variability across countries and regions. By contrast, only very few studies address demographic changes and their consequences for youth labour markets (Bloom et al., 1987; Bloom and McKenna, 2015; Roth and Moffat, 2014). Until now researchers have not studied the effects of absolute and relative changes in the size of the youth population in the context of the recent economic and financial crisis. Although they have attempted to document the changes in the youth labour market (Bell and Blanchflower, 2011; O’Higgins, 2012), they have not considered the demographic aspects. Indirectly, researchers have assumed that changes in population size occur slowly and gradually. Thus, the assumption is that one needs to account for demographic changes when analysing long-term trends, whereas one may disregard such changes in short-run analyses of the labour market. This contribution argues that neglecting demographic shifts has important consequences, both practically (for policymakers) and methodologically (for cross-country comparative analysis, in particular). The chapter aims to assess the impact of demographic shifts on the position of young people in the labour markets of European countries following the financial crisis (2008–09). The intention is to contribute to a broadening of social and labour market policy questions by providing evidence of the extent to