Fighting Youth Unemployment: The Effects of Active Labor Market Policies

Marco Caliendo, Steffen Kuenn, Ricarda Schmidl
IZA, Germany

Recent labor market figures for the European Union 15 show, that about one quarter of all youth unemployment spells last beyond one year. As response to youth long-term unemployment, the majority of European countries have implemented specific active labor market policies (ALMP) to alleviate labor market entry for unemployed youth. These measures include specific vocational training, wage subsidies, short-term training, etc. and hosted on average about 14% of the active youth population in 2007. Despite their popularity among policy makers, many programs have not been investigated with respect to their effectiveness. Germany is a good example where in addition to the standard ALMP programs specific schemes focusing on youth were introduced. Although Germany has long been considered as an exemplary case with a labor market oriented dual apprenticeship system, recent unemployment figures exhibit above average long-term unemployment rates for youth. This suggests that the transition to work process has become more difficult here, too. We therefore claim that an extensive evaluation of various measures implemented may also be beneficial in providing evidence on “what works for whom?” for other European countries. In our analysis, we use administrative data for Germany and apply propensity score weighting to analyze the effects of ALMP for youth. After initial locking-in effects, our results indicate positive employment and income effects for participants in vocational training, wage subsidies and short-term training. However, our results also confirm previous findings for youth, namely the overall ineffectiveness of job creation schemes.

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