Committee Reports > List of Committees > Joint > 1978 > Committee on the Secondary Legislation of the European Communities > Report No. 10 - Youth Employment

REPORT

Introduction

1. Following on its meeting on 28th and 29th June, 1977 the European Council asked the Social Affairs Council to consider what common action might be necessary to deal with the problem of structural unemployment in the case of young persons. As a basis for the Council’s discussion of the problem the Commission issued a Communication [R/2480/77 (Soc 262)] on 20th October, 1977 which has been under consideration by the Joint Committee for some time.

2. The Council held a preliminary discussion on the question at its meeting on 28th October, 1977 and invited the Commission to submit detailed proposals. On 10th April, 1978 the Commission, as a first reply to this invitation, submitted formal proposals for (a) a Council Regulation concerning the creation of a new European Social Fund aid in favour of young persons and (b) a Council Decision amending Decision 75/459/EEC, as amended by Decision 77/802/EEC, on action by the European Social Fund for persons affected by employment difficulties.

The Dimension of the Problem in the Community

3. The rise in youth unemployment poses an enormous challenge to the European Community. In each year since 1969 (with one exception) there has been an increase in the Community as a whole both in the number of young people under the age of 25 years who are unemployed and in the proportion of such young people among the total unemployed. The number of young people unemployed has risen in that period from 400,000 to 2 million and the proportion of young people among the unemployed has risen from 24% to 37% although they represent only 17% of the working population. The rate of unemployment of young persons aged under 20 is about three times higher than the overall average and that of persons between 20 and 25 years of age almost double the overall average.

4. The Commission’s analysis of the causes of youth unemployment would indicate that apart from the general problem of recession, increased participation in employment by young women and the numerical size of the new generations coming on to the labour market have aggravated the situation. The Commission’s forecast for the Community as a whole is that the number of young persons reaching the age of 16 will increase regularly up to 1980 and decrease slowly from 1983.

Youth Unemployment in Ireland

5. An EEC labour force sample survey carried out in Ireland in 1975 showed that almost 50% of the total population was under 25. Unemployment among this age group constituted 43-6% of total unemployment even though they represented only 30% of the labour force. This compares unfavourably with the Community average of 37% which is causing such great concern in all Member States. The Joint Committee understands that surveys of school leavers carried out by the Department of Labour since 1975 would seem to show that no great change has taken place since then in the proportion of those unemployed represented by persons under 25 years of age.

6. Ireland therefore is already experiencing substantially worse youth unemployment than the rest of the Community. On present evidence the prognosis here is much less favourable than in other Member States. In such countries as France and Germany the crisis can be traced to the entry to the labour market of those born when the birth rate was high in the post war years at a time when those retiring reflected the abnormally lower birth rates of the First World War. As already indicated the Commission’s forecast is for a decline in the number of persons reaching 16 in the Community as a whole from 1983 onwards. The Committee is advised that underlying demographic factors here point to a much more sustained growth in the active population in Ireland assuming that large scale emigration is not resumed. It is anticipated that on present trends it will be twenty years before the numbers retiring from the labour force balance the numbers entering. Consequently the problem in Ireland is not only more acute but will be of longer duration than in the rest of the Community.

Existing Community Aid

7. Up to now financial assistance from the European Social Fund specifically in aid of the employment of young persons has been confined to grants for vocational training. In its Communication the Commission reveals that since 1975 the Fund has allocated over 280 million U.A. as aid to vocational training programmes for the young unemployed. However in the same period applications for assistance totalling over 600 million U.A. were received. The inadequacy of financial resources has resulted in grants being confined (i) to training programmes for young people seeking their first job and (ii) in 1977 either to programmes of vocational preparation of young people without any educational qualifications or to programmes of training in specific trades in which there is a shortage of workers.

Action by Member States

8. In recent years all the Member States have taken some direct action in various forms and to differing degrees to stimulate the employment of young persons. According to the Commission this action has taken two forms namely:—

(a)recruitment premiums either in the form of direct payments to employers or a reduction in social security contributions, the premium being granted for a limited period (usually six months) for each additional worker recruited.,

(b)subsidies for programmes involving the recruitment of young persons for newly created jobs in the context of activities or services in the public interest.

9. The latest provisional estimate drawn up by the Commission shows that these national measures correspond to an annual expenditure of about 350 million U.A. assisting the employment of some 220,000 young persons.

Commission’s Suggestions

10. In its communication of 20th October, 1977 the Commission made four specific suggestions for further action by the Community in helping to combat youth unemployment. These are (a) Community financial aid for the creation of new jobs by undertakings in the private sector, (b) financial participation in job creation programmes in the public sector, (c) stepping up of Community aid to post-school training and (d) Community support for the development of labour market institutions. The Commission left open the question of whether the aid should be financed by the Social Fund or otherwise. However in its initial consideration of the matter the Council concluded that it would be advisable to create a new form of aid within the framework of the Social Fund.

Commission’s Legislative Proposals

11. The proposals made by the Commission in April, 1978 involve extending assistance from the European Social Fund to expenditure (i) on employment subsidies in respect of young persons under 25 newly recruited by undertakings in the production sector and (ii) in respect of wage costs for young persons under 25 in connection with newly established programmes in the public interest. The expenditure eligible for assistance would be limited to the following maxima:—

Recruitment premiums—30 EUA (£20-25) per person per week for 26 weeks.

Employment programmes—60 EUA (£40-50) per person per week for 52 weeks.

The maximum contribution from the Fund towards this expenditure would be 55% in the case of Ireland, Northern Ireland, Greenland, French Overseas Department and the Mezzogiorno and 50% in the case of the rest of the Community. At the current value of the EUA the maximum aid that would be available for Ireland from the Fund would be

Recruitment premiums—£11 approximately per person per week for a maximum of 26 weeks.

Employment programmes—£22 approximately per person per week for a maximum of 52 weeks.

12. In the Appendix to this report the rules which govern aid from the European Social Fund are set out. The Commission proposes that the new aid for job creation may be made under either Article 4 or Article 5 of Decision 71/66/EEC, as amended by Decision 77/801/EEC. The Commission intends to ensure, in co-operation with the Member States, that projects are divided between two areas of intervention with due regard to budgetary considerations.

13. The Commission envisages that aid would be granted only in respect of regions where youth unemployment is higher than the Community average and regions where the rate of youth unemployment is appreciably higher than the national average. Accordingly it estimates that while roughly half of the 1 million unemployed young persons in the Community could be regarded as eligible for the aid, only about ten per cent would actually benefit.

Cost

14. The Commission estimates that budget commitments in 1979, 1980 and 1981 would amount respectively to 110, 165 and 225 million EUA. It calculates that payments would amount to 40, 100, 170 and 190 million EUA in 1979, 1980, 1981 and 1982 and subsequent years respectively. Budget appropriations would be divided equally between the two categories covered by Articles 4 and 5 of Decision 71/66/EEC.

Views of the Joint Committee

15. Its request for detailed proposals would seem to indicate the Council’s acceptance of the principle of aid along the lines outlined in the Commission’s communication of 20th October, 1977. The Joint Committee regards the Community’s commitment to the principle of aid for wage subsidies to promote employment as a most important development which it warmly welcomes. However, it considers that the inital budgetary appropriations proposed are inadequate. When it is recalled that Member States are already spending 350 million EUA annually the proposed Community contribution, welcome though it may be, is hardly likely to solve the problem.

16. The Joint Committee would have preferred if the proposed aid were provided under a special heading in the European Social Fund and not be regarded as governed by either Articles 4 or 5 of Decision 71/66, as amended. However, if this cannot be accepted, the Joint Committee trusts that existing aids and particularly those in the Article 5 category will not be curtailed.

17. The Joint Committee believes that the cause of increased youth employment could be advanced if the mobility of labour could be improved among technically and professionally qualified and experienced persons in the under 35 age group. There should be incentives available to induce such persons to leave their secure employment and set up new enterprises. The posts thus vacated would be available for suitably trained young people coming on to the labour market. In addition these people would themselves create additional employment in their new ventures. The object of the Joint Committee’s proposal is to increase employment by encouraging initiative, enterprise and innovation among this highly qualified group. In the Joint Committee’s opinion assistance for such new enterprises should be made available by the Community through the Regional Fund and there should be aid from the Social Fund to compensate for any loss of pension rights which such movement of labour might entail.

Training Programme

18. The Commission’s communication also contains a proposal to strengthen Community aid for programmes of post-school training for young people. This type of aid is already made available under existing Social Fund Regulations and would not require any legislative action by the Community to increase it. The Commission’s idea is that a special priority should be given for post-school training, involving periods of practical work experience, in the allocation of Social Fund resources and that additional resources should be made available to the Fund for such training. The Council has accepted the principle of the Commission’s proposal and has invited it to work out measures, within the framework of the European Social Fund, for strengthening the link between the post-school training and the employment of young people. It did not, however, commit itself to the provision of additional resources for those measures.

19. The Joint Committee fully accepts the importance of programmes of post-school training to prepare young people for employment and supports the idea of increased Community assistance for such programmes. However, it considers that it would not serve much purpose if assistance for these programmes was at the expense of assistance for other programmes in favour of young persons and it feels that substantial additional resources must be made available to the Social Fund.

Development of Labour Market Institutions

20. The Joint Committee notes that the Commission proposes that Member States should be encouraged to strengthen their institutions responsible for labour market management e.g. training and placement services. The Council has encouraged the Commission to take any action possible in that direction and to promote co-operation between the labour market institutions in the Member States.

21. The Joint Committee would favour the expansion of the training and placement services in order to improve the capacity to deal with the problem of youth employment and would welcome greater co-operation between these institutions in the Member States. It understands that there has, in fact, been a continuous and significant expansion of the training function, in particular, in Ireland, and that it is planned to expand still further its direct training capacity in the present year by about 20% over 1977. There is a commitment in the recent White Paper to continue expansion of the training facilities up to 1980.

22. The Joint Committee understands that development of the placement function which is operated by the National Manpower Service was delayed by the embargo on the creation of new posts in the public service over the last few years. It is informed that this constraint was lifted in the middle of 1977 and that steps have been taken for the recruitment of additional staff. Moreover it is advised that plans for the expansion of this Service over the period up to 1980 have also been drawn up.

23. Regarding co-operation between the labour market institutions in the Member States the Joint Committee is informed that discussions have been going on for some time between representatives of the placement services of the Member States and the Commission with a view to bringing about improvements. The Commission has indicated that within the framework of SEDOC (European system of the international clearing of vacancies and applications for employment) a registry of occupational activities and occupations has been completed for the use of the national placement services. The Commission has started putting the SEDOC system into action with the assistance of the national placement systems in order to facilitate the geographical mobility of labour within the Community.

Debates in the Houses

24. The Joint Committee believes that the Commission’s proposals for Community aid to subsidise wages are of particular importance to Ireland where the problem of youth employment is not merely more acute but also likely to be more enduring than in the rest of the Community. In its view it would be appropriate for the Houses to review in the light of the Commission proposals the various measures being taken in this country at present to increase employment opportunities. Accordingly it recommends that both Houses be given an early opportunity of debating the matter and of expressing their views on the Commission proposals.

Acknowledgements

25. In considering the Commission’s communication on youth employment the Joint Committee received considerable assistance from the Irish Transport and General Workers’ Union and the Confederation of Irish Industry and it wishes to express its sincere thanks to both bodies.

26. Members of the Joint Committee also discussed the Commission’s proposals with Dr. Brendan M. Walsh of the Economic and Social Research Institute. The Committee wishes to acknowledge with gratitude the debt it owes to Dr. Walsh for making the fruits of his research so readily available.

27. Finally, members of the Joint Committee who visited Brussels on the Commission’s invitation from 19th to 21st March, 1978, availed themselves of the opportunity to discuss the matter with an official of the Commission. The Joint Committee wishes to thank the Commission for a most informative briefing

(Signed) MARK CLINTON,

Chairman of the Joint Committee.

3rd May, 1978.