Abstract
The unusually wide age unemployment gap in Greece between youth (15–29) and older individuals (30–64) is investigated and decomposed to an explained and an unexplained component. The sample is drawn from the Labour Force Survey and is divided to two sub-periods: before the crisis (2004–2008) and during the crisis (2009–2016). Individual labour market status a year before the interview indicates a strong path dependence, which is weaker for youth. Other attributes that drive the unemployment gap include years since graduation and educational attainment. Over time, the unemployment gap increased greatly during the crisis, due to the increase in the explained component and the decrease in the unexplained component. These facts imply that the labour market became more rational or, perhaps, that active labour market policies and institutional interventions actually relieved youth unemployment.
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Notes
- 1.
Data are drawn from ELSTAT and refer to current prices (in million €): 2008 = 241,990, 2016 = 175,888.
- 2.
In the winter 2013 forecasts’ report, the European Commission predicted that Greece would grow by 0.6% in 2014 and 2.9% in 2015 along with a decline in debt to GDP ratio. The forecasts’ report is available at: http://ec.europa.eu/economy_finance/eu/forecasts/2013_autumn/el_en.pdf
- 3.
The budget deficit was revised upward to 15.1% in 2009, according to Eurostat. Data available at: http://ec.europa.eu/eurostat/tgm/table.do?tab=table&plugin=1&language=en&pcode=teina200
- 4.
Europe-wide austerity policies that suppressed aggregate demand certainly did not help either.
- 5.
According to the Labour Force Employment Organisation (OAED), in September 2016 approximately 14.4% of the unemployed were entitled to an unemployment benefit. The respective share in 2013, when unemployment reached its maximum rate, was 13.9%. Moreover, the unemployment benefit in Greece is constant at €360 monthly, irrespective of the wage earned when employed.
- 6.
Figures are drawn from ELSTAT’s bulletin for the risk of poverty (Graph 1), which is available at: http://www.statistics.gr/en/statistics/-/publication/SFA10/-. Note that the risk of poverty and social exclusion is calculated based on previous year’s income.
- 7.
Unemployed individuals have the highest probability of being poor or socially excluded after social transfers (44.8%), especially males (50.7%). Figures are drawn from ELSTAT’s bulletin for the risk of poverty (Table 9), which is available at: http://www.statistics.gr/en/statistics/-/publication/SFA10/-
- 8.
Law 4047/2012 decreased the minimum wage for employees over 25 years old by 22% to €586 gross and introduced a sub-minimum for youth up to 25 years old, which equals €511 gross.
- 9.
The phenomenon is well known in the literature as brain drain, and it involves the cost for the country of origin associated with highly educated individuals emigrating. For a discussion see Commander et al. (2004).
- 10.
Typically, the definition for youth involves individuals aged 15–24.
- 11.
Throughout period 2008Q1–2016Q2, the distribution of youth unemployment in Greece exhibits the highest standard deviation, followed by Cyprus, Spain and, then, Italy. Therefore, the crisis has led to increased volatility along with high youth unemployment rates.
- 12.
For example, employers considering youth less reliable than individuals aged 30–64 is a form of discrimination, in a sense that it makes youth less attractive and, thus, less likely to be hired.
- 13.
Choice may not be the best word for it, since in an environment of high unemployment rates and a substandard safety net for the unemployed, staying unemployed is probably far from a choice, but rather an unpleasant consequence of insufficient demand for labour.
- 14.
All econometric estimations were performed using STATA 14.2.
- 15.
This hypothesis can be considered quite bold, if one considers the existence of wide differences across regions. On the other hand, the general institutional framework does not change significantly across Greek regions.
- 16.
See, for example, Tsakloglou et al. (2010).
- 17.
Women in Greece traditionally have higher unemployment rates than men. See Cholezas and Kanellopoulos (2016).
- 18.
Cavounidis and Cholezas (2013) study the different labour market outcomes of natives and immigrants in Greece. Thus, a dummy variable accounting for those differences is considered useful.
- 19.
A household model of labour supply was first introduced by Mincer (1962).
- 20.
Due to space limitations, probit results are omitted, but they are available by the author upon request.
- 21.
See, for example, IOBE (2007).
- 22.
Fully detailed decomposition results, as well as estimation results, are not reported here, but are available in the appendix.
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Acknowledgements
I would like to express my gratitude to my colleague Nikolaos C. Kanellopoulos for his valuable contribution and his useful comments through various stages of this undertaking. I would also like to thank Miguel A. Malo for his comments at the final stage. Special thanks are owed to KEPE for providing me with a peaceful environment to work and the necessary hardware and software. Any mistakes or oversights and all opinions expressed are strictly my own.
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Cholezas, I. (2018). What Makes Greek Youth More Vulnerable to Unemployment?. In: Malo, M., Moreno Mínguez, A. (eds) European Youth Labour Markets. Springer, Cham. https://doi.org/10.1007/978-3-319-68222-8_4
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