Crisis Response Monitoring Country comparison

Since more than three million Canadians lost their jobs at precisely the same time as the cohort of new graduates and students were formally entering the labour market and beginning their job search, the impact on youth — as seen in Figures 1 and 2 — is not surprising. This has clearly created significant challenges for a group with limited work experience.

Even as employment growth has resumed in many sectors, these new labour market entrants are competing with many highly skilled and qualified people also in search of employment. This can lead to skills erosion and make it more challenging to find work once the recovery is fully underway. In other instances, it can also lead to underemployment as many new labour market entrants seek out “any job.” Indeed, much of the recent increase in employment has been associated with re-employment in lower-skilled occupations.

At the same time, apprenticeships, skilled trades placements and other programs that rely on experiential learning or work-based placements — of which new labour market entrants are primary beneficiaries — have been postponed or outright cancelled. Despite recent efforts to support retraining — for example the Canada Training Benefit — government response to the pandemic has been more focused on supporting those who have lost work than on those entering the labour market for the first time.

We know from past crises that, in the absence of adequate measures to counteract it, employment among youth can take years to recover. Long-term economic and social implications include weak labour force attachment or outright exclusion, poverty, and settling for lower-skilled, lower paid jobs, all of which can impact potential future earnings and the ability to pay back student loans.

As we look ahead, it will be important to consider policy interventions to support youth sooner rather than later. Keeping youth and recent graduates attached to the labour market and providing the means to upskill and reskill is of particular relevance given the pandemic’s acceleration of economic transformation.

The conjunction of the economic activity slowdown and of the large short-time work program which dramatically dampens the reallocation of jobs makes the situation of new labor market entrants particularly difficult. In order to counteract expected drops in the demand for apprentices and in recruitment of youths, the government launched in July 2020, a “youth plan” which has two main components: 1/ Hiring subsidies. (i) All firms get hiring subsidies equal to 4,000 euros for any young person recruited between August 2020 and January 2021. (ii) An exceptional grant of 5,000 euros to recruit a work-study student under 18 years of age (under an apprenticeship or professionalization contract) or 8,000 euros to recruit a work-study student over 18 years of age. 2/ Funding of more than 400,000 seats in various training programs for low-skilled youth.

These generous aids, combined with an apprenticeship reform introduced in 2018, have contributed to increasing the number of apprentices, which increased by 32% between 2019 and 2020.

It is likely that new labor market entrants in Germany will face particular difficulties this year. Firms’ hiring activities are reduced, either because of direct demand effects or general economic uncertainty (Klös and Schäfer 2020). However, given persistent skill shortages and continued demographic change with an ageing population, reduced hiring could only be temporary – at least in the German context. This is particularly the case if product demand recovers relatively quickly or expectations become more optimistic soon. But a scenario of a deep and long-lasting recession could result in persistently weak labor demand and hiring, with long-term disadvantages for current graduates (Kahn 2010; Oreopoulos et al. 2012).

Beyond these average effects, the crisis impacts are likely to be quite heterogeneous across sectors and firms. First, it is possible that some sectors will be more substantially affected and will thus shrink in the medium or long run (e.g., hotels and restaurants, tourism, local retail). This would also result in very limited hiring in these sectors. Second, other sectors could experience a structural and thus permanent increase in labor demand (e.g., health care). Third, firms that entered the crisis in relatively good shape or that follow a longer-term strategic approach might take advantage of the reduced competition for talents. These companies could even increase their hiring activities, especially focusing on younger workers with sought-after skills. To avoid time-consuming and costly staffing in the near future, it could be a rational approach, at least for some firms, to hire employees even when product demand is weak (Sachverständigenrat 2020a). Finally, implementing actual hiring has not proved to be a bottleneck in the current situation. Many firms relatively quickly adapted to new standards, for example, by using digital hiring tools more intensively.

The potential problems of current graduates might be amplified in the German labor market because of the crucial role of the dual apprenticeship system. This core mechanism and structural strength of the German employment model not only effectively provides the labor market with skills and qualifications in demand, but it also acts as an important counterbalance to hiring barriers in school-to-work transitions (Schneider and Rinne 2019). According to recent data, a substantial slowdown of the matching process between applicants and apprenticeship positions can be observed (BA 2020f). Displaying selected statistics for August 2020 (currently the latest available data), Table 2 shows that both supply and demand decreased by about 8 percent compared to August 2019. This ultimately resulted in roughly 11 percent more applicants who had not been placed yet.

Against this background, it is increasingly reported that potential young labor market entrants stay longer in education than they would have done otherwise. Either continuing with their school education or enrolling in universities appears to some extent as a rational approach in the current situation, albeit this may result in increased competition after the crisis.

In addition, there is a substantial risk that a low willingness or capacity of firms to hire apprentices (and new workers in general) – given economic uncertainty, lack of business activity and high pressure to cut costs could result in a further decline of apprenticeship training, especially in some sectors and occupations. As the majority of apprenticeship training only commences in August in September, figures for the next months should be closely monitored and will provide the basis for a more detailed assessment.

Stakeholders such as trade unions and employer associations asked for governmental support to firms providing training during the crisis via the highly institutionalized German dual apprenticeship system (e.g., DIHK 2020). In cooperation with some Federal Ministries, a larger number of stakeholders published a joint declaration in which they support needs-based and targeted support measures (Allianz für Aus- und Weiterbildung 2020). This has led to the adoption of a joint federal support initiative to make apprenticeship capacities more resilient in times of crisis. Small- and medium sized firms that provide apprenticeships, despite being currently in economic difficulties, can receive EUR 2,000 per new apprenticeship contract as a subsidy if they keep the number of their apprentices constant, or EUR 3,000 per new apprenticeship contract if the firm raises the overall number of apprentices. The same applies if a current apprentice is taken over from a firm that has gone bankrupt during the crisis. The program also provides for support to avoid short-time work among apprentices, and for training in facilities outside individual firms.

Whether these measures ultimately helped to stabilize the apprenticeship market this year remains to be seen. At least according to preliminary evidence, the negative impacts appear less severe than initially expected (Bellmann et al. 2020).

Graduating in a recession has negative and long-run effects on the wages and employment prospects of workers (Oreopolus et al 2012).

The share of inactive in April 2020 increased by 11.1% relative to April 2019. This is because individuals stopped looking for a job, including new labor market entrants. Further, the demand for labor has shrunk since the beginning of the lockdown as shown by Anastasia et al. (2020). In September 2020, the Italian Social Security Administration presented new figures about labor turnover in the first two quarters of 2020. Relative to 2019, the number of new jobs activated in 2020 decreased by more than 9%, while the number of job separations stayed more or less constant, as shown in Figure 2. The decline in new jobs continued in the second quarter of 2020; at the same time, job separations started decreasing in the second quarter of 2020, as a result of the suspension of layoffs. Relative to the first two quarters of 2019, the Italian labor market experienced a 1.5 million and 988,000 drop in the number of new jobs and job separations, respectively; this resulted into a loss of about 578,000 jobs, mainly fixed term contracts (i.e. 73%).

Some Italian regions provide daily and more detailed information on labor turnover. For instance, in the region of Veneto, the number of new jobs activated in the private sector between February 23 and June 14 2019 was about 204,000; in 2020 the same figure decreased to 100,000 (-51%), while job separations decreased of about 21% (from 145,000 to 107,000).

As young workers have the lowest fatality rate and the lowest risk of needing healthcare, they should be employed to revive the economy (Anelli et al. 2020). However, the employment prospects of new labor market entrants are particularly bleak. Workers between 15-34 years old experienced the largest drop in employment and an increase in both inactivity and unemployment rates. So far, no measures to facilitate the job search have been introduced by the Italian Government. Moreover, the National Agency for Active Labour Market Policies (ANPAL) has not been particularly responsive.

1. https://www.nber.org/digest/nov06/w12159.html
2. https://www.lavoro.gov.it/notizie/Documents/Nota-Trimestrale-Occupazione-II-2020.pdf
3. https://www.venetolavoro.it/documents/10180/1693590/Misure%2095_Covid-19
4. https://voxeu.org/article/transition-steps-stop-covid-19-without-killing-world-economy

Previous research has shown that vocational and academic graduates in the Netherlands did suffer in terms of wages for 6 to 8 years after graduating, and to a lesser extent in the employment probability, when graduating during a recession. Given the social distancing measures and overall decline in labour demand in 2020 (vacancies plummeted after the lockdown), things looked pretty dim for new labour market entrants. To the best of our knowledge there were no (sizeable) policy innovations and initiatives related to hiring of new labour market entrants or the provision of apprenticeships (these were largely postponed for vocational education in sectors that significantly reduced their activities due to the COVID-19 pandemic and the resulting social distancing rules). There was some relaxation of study progress requirements, both in the academic/school years 2019-2020 and 2020-2021, where students in tertiary education did not have to fulfill the requirement to obtain a particular number of study points. However, things look much better for new entrants in the Fall of 2021.

1. See: Van den Berge (2018).
2. By the end of March 2020, vacancies had dropped by 21% (CBS Netherlands, https://www.cbs.nl/nl-nl/nieuws/2020/20/aantal-vacatures-daalt-met-60-duizend-in-eerste-kwartaal).
3. Information for students is available here (https://www.rijksoverheid.nl/onderwerpen/coronavirus-covid-19/ouders-scholieren-en-studenten-kinderopvang-en-onderwijs).
4. See e.g. here (https://www.nu.nl/coronavirus/6089771/hogescholen-geven-eerstejaars-ook-dit-jaar-geen-bindend-studieadvies.html).

Nationwide, there has not been much discussion of this topic, which is a bit worrying. After the Recent Great Recession, the EU used structural funds to tackle youth unemployment. But nothing, as yet, has been presented as a policy envisaging the integration of young people in the labour market (both at the EU and the national level). We do sense some concerns in public opinion about young workers in their 30s who are now experiencing the second recession. For labour market entrants, however, discussions are mostly focused on how and/or when they will finish their degrees (national exams, university admissions, university graduations). It seems that uncertainty on the type of recession/recovery (L, U, V, W, Nike Swoosh) helps confusion and fosters the lack of action. For the optimistic, who foresee a V shape recession, the problem is only temporary – therefore the market will pick up quickly. However, we know that for recent graduates it is urgent to enter the market shortly after graduation, otherwise they will be competing with the class of 2021, and compared to these the 2020 graduates will be a rotten apple. Overall, the issue with new labour market entrants is similar to that of job-seekers: the government and social partners are mostly focussed on preventing the economy from collapsing during/after the lockdown. We can also guess that it is difficult to design any policy that fosters employment while the economy is shut-down, time stands still and everyone is asked to be at home waiting for better days. Applications for a job by employed job-seekers decreased during this period. Applications for a job by employed job seekers represented 7% of the total requests for a job in May 2020, which contrasts with 7.6% (8.2%) in April (March) 2020 and 9.7% in May 2019. Overall, the number of employed job seekers decreased by 14.4% between May 2019 and May 2020. In September 2020, however, the number of employed job seekers increased by 8.4% (see Table 1) when compared to September 2019. This increase may be due to emerging fears of job-loss in the near future by workers (who may be, e.g., in layoff).

1. http://www.bollettinoadapt.it/old/files/document/19711youth_action_tea.pdf

• The number of vacancies declined sharply and the labor market will offer only limited opportunities during the COVID-19 crisis. Even if the market improved mid-2020, the second wave that hit Slovakia and most of its key trade partners in the autumn will severely limit labor market opportunities for new entrants. The Economic Crisis Council proposed internship schemes for graduates to support their school-to-job transition; however, no progress has been done on this measure as of October 2020.
• Besides the proposed internship support Slovakia is running program to support young people in their first employment since 2015 through the program of youth guarantee and support the idea on the right on the first job. Nevertheless, some of the programs to support vulnerable groups on the labour market were stopped in May 2020 and are now reconsidered by the COLSAF.

The situation for new labor market entrants has been very difficult, particularly during the summer time when youth are usually offered internships that could be converted into temporary contracts when they end facilitating the transition from school-to-work. Figure 11 shows the ratio between the youth unemployment rate (under 25 years old) compared to the total unemployment rate. As we can see, before the pandemics this ratio was around 2.3 (a value that is well in line with that found in the literature, see for instance Pastore, 2018), but during the pandemics it jumped to 2.6 and it only started to decrease in summer 2021. However, although the situation has improved since then, there are still difficulties related also to the uncertainties that are still in place. In fact, during the pandemics, the focus of the policies has not considered the specific situation of this group that is characterized by high unemployment rates and a high level of precariousness during the early stages of their work career due to the extreme duality of the Spanish labour market.

1. https://wol.iza.org/articles/why-is-youth-unemployment-so-high-and-different-across-countries/long

The cohorts about to enter the Swedish labor market face particularly challenging circumstances due to the Covid-19 outbreak. It is well-established that labor market entrants are more adversely affected by downturns compared to workers established on the labor market, which has long-lasting effects on job finding and earnings as shown by Oreopoulos et al. (2012) and by Engdahl et al. (2019) for Sweden. As shown by Aslund and Rooth (2007), labor market conditions upon entry also have lasting negative effects on refugee immigrants. Adding to this general picture is the fact that the current crisis so far has been particularly damaging to the hotel, restaurant and retail sectors, all of which provide many entry-level jobs. The crisis is therefore likely to affect both young workers and immigrants particularly hard. This is very different from the Swedish experience during the financial crisis when the main effects were felt in industries that employ much fewer labor market entrants. Table 3, Panel A shows that the early impact on the inflow into unemployment during the first few week of the current crisis. The adverse effects appear to be strongest among workers aged 25-29 and this pattern remains if we look at the current situation (in Panel B).

Figure 5 shows that the number of posted summer-job vacancies has decreased by 18 percent after the onset of the crisis. This is another cause for concern given the major role played by summer job contacts in the school-to-work transition for high school graduates in Sweden. Hensvik et al. (2017) show that as many as 1/3 of vocational high school students in Sweden find their first stable job in establishments where they had a summer/extra job during high school, a share that is notably higher during recessions. Müller (2020) shows that closures of such stepping-stones establishments before graduation have lasting negative effects on the affected youths, in particular if parents also lose their jobs at the same point in time.

So far, there are no major specific policies or initiatives targeting the labor market entrants, although the number of slots at Universities for the fall has been increased. Universities have also been given incentives to offer summer courses, a measure that has been used during previous Swedish recessions as well.

1. The financial crisis primarily affected exporting firms in manufacturing and their domestic suppliers in Sweden, see Olsson (2020).
2. The drop is substantially higher – 30 percent – in Stockholm (the region hit hardest by the outbreak).
3. Concerns have also been raised that the physical closings of high schools since March will be particularly harmful to student from low SES households and students with disabilities, potentially further widening the SES-gap in high school achievement and early labor market outcomes.

The challenge to find a job or an apprenticeship after school or university is and will clearly be bigger than under normal conditions. The uncertainty among firms has led large amounts of hiring processes to be temporarily suspended during the lock-down period and the first wave, with no clear expectation at that time on when (and if) they will be relaunched. This difficult situation particularly affected – and still affects – new labor market entrants who are not yet much experienced in job search and who often have a less clearly defined profile than older job seekers. These challenges are reflected in the mentioned rising youth unemployment rate (see section “Labor market impact of COVID-19”). The issue of less defined profiles among young job seekers is aggravated by the fact that some (parts of) final exams were not held. In vocational education (apprenticeship plus part-time school), where the majority of new labor market entrants is enrolled in Switzerland, only the practical exams were held where possible but not the theoretical ones. Whether high school (Gymnasium) final exams were held or not was heterogenous, as it was decided regionally (by Canton). In both cases the partially missing exam outcomes did potentially weaken the signal and profiling information about new labor market (or university) entrants, which may affect the hiring chances and the choice options negatively.

How severe this issue is, depends crucially on the firms’ reactions in adjusting their hiring procedures and decisions to the post-lock-down situation. This needs to be further monitored through the upcoming months of crisis and recovery. On the side of the young individuals who had to decide on which way to choose for their professional education, about 19% indicated that the current Covid crisis impeded their choice, as a survey on behalf of the responsible ministry (SBFI) revealed in August [Nahtstellenbarometer 2020b]. Among them however, three quarters received sufficient support to make their choice, and a stable 84% could finally find their preferred educational choice, in spite of the impediments.

A positive sign of stability in the apprenticeship market is that traditionally the majority of all offered apprenticeship positions are already filled in spring (particularly in the German-speaking area of the country). This has been the case as well for the current hiring round, 66% (or 58K) of all the available apprenticeship positions have been filled already by March/April [Nahtstellenbarometer 2020a]. By end of August, 90% of all the offered apprenticeship positions could be filled – a result at the levels of previous years [Nahtstellenbarometer 2020b]. By end of September, the Cantons reported that 76.5K apprenticeship contracts have been signed. This is even slightly more than in the previous year [SBFI 2020b]. In general, the Cantons report “stable conditions” on the apprenticeship market. The lock-down had more impact in the Latin areas of the country because there traditionally the recruitment of apprentices is done later and has this year been substantially delayed due to the situation. However, finally these areas have caught up to a large degree by end of September, as the figures above show. This catch-up could be further completed due to the extension of the deadline for concluding apprenticeship contracts to end of October. Luckily, only very few cancellations of new apprenticeship contracts have been reported across Switzerland. [SBFI 2020a, b]

The Cantons addressed the complex situation on the apprenticeship market by reinforcing existing sets of support activities: additional marketing for apprenticeships, intensified occupational counselling, “bridging” offers (e.g., additional year of school) and individual coaching of young labor market entrants. Some Cantons offered “last minute apprenticeship markets” in cooperation with the local economy to improve the matching on the market, or they allowed for an extension of the apprenticeship contract conclusion deadline into autumn. Beyond these activities, a new funding mechanism for innovative projects to support the apprenticeship market has been introduced by the responsible ministry (SBFI) by end of May. First projects have been approved by the SBFI. They focus on measures like coaching and training in occupation and apprenticeship choice as well as in application skills, or the launch of virtual apprenticeship market platforms operated by local stakeholders. [SBFI 2020a] Furthermore, the short-time work (STW) scheme has been complemented in March by some supportive measures: firms claiming STW are allowed to hire new apprentices (and to fully continue existing apprenticeship loads); vocational educators who are short of work but should still support apprentices are eligible for STW [SBFI 2020b].

Thus, all in all, it turns out that the apprenticeship market and hiring could largely be stabilized in spite of the crisis, reaching similar levels to the previous years. Flexibility on the side of the firms and the regulators as well as initiatives to support the functioning of the market seem to have helped handle the crisis-related uncertainties. However, the rising youth unemployment is not only related to the finding of apprenticeship positions. Increased difficulties for young labor market entrants to find a first job, as discussed above, are salient as well beyond the apprenticeship market. So far, I have not seen specific policy innovations to cope with these additional challenges in other parts of the labor market for entrants. One way to take this up is however the use of existing instruments within the set of active labor market policies in unemployment insurance: particularly intensified use of mentoring as well as professional practical training.

Considering the recent figures on the performance of the UK labour market and the likely scenario for coming months, it is expected that school leavers and graduates will be facing remarkable difficulties in entering the market and potentially severe scarring effects. In general, sectors that usually absorb part of the downturn employment shocks of recent crisis are precisely the most affected in the current situation, this worsens considerably the outlook for new labour market entrants. Furthermore, these sectors seem more likely to be labelled as “non-viable” and hence not the target of the new support policies. Despite particular extensions of the CRJS to the hospitality sector, the accumulated strain on the liquidity of the businesses in this sector coupled with the re-imposition of social distancing measures push several in the sector to insolvency. The most recent extension of the CRJS scheme to meet the demands of the new 3 tier lockdown system will provide some support to the sectors affected albeit limited considering that most of businesses will only be forced to close if at the highest tier of lockdown and hence benefit from this extension. While at tier 1 or 2, businesses in the hospitality sectors are not mandated to close and hence not eligible to the CJRS extension and hence left with the less generous schemes such as the Job Retention Bonus (JRB) and Job Support Scheme (JSS).

A natural response from school and university graduates will be to stay on in education longer, such will imply the need for additional funding on an emergency basis aimed at both students and educators. For those choosing to leave education and try to enter the labour market, targeted job guarantee schemes such as the announced Job Retention and Kickstart Schemes and prioritising of apprenticeships for younger people will be sensible policies to reduce the detrimental impacts of crisis for new labour market entrants. On September 28 Boris Johnson PM announced the initiatives Right to Retrain and National Skills Fund aimed at investing in training and retraining through investments focusing in adult further education sector, however these initiatives will only start to be implemented in mid-2021 at best which may be far too late to attenuate the scarring effects of the crisis.

Several key higher education institutions, including University of Cambridge and University of Manchester, have started their teaching online for at least the next academic term. Other major universities, such as Oxford University and London School of Economics, decided for a “blended” approach mixing online and face-to-face tuition next year. The recent several outbreaks at university campus across the UK forced institutions to lockdown students in university accommodation is an effort to control the spread of infections. The recent developments jeopardize the possible feasibility of the “blended” approach, having forced universities to pay compensations to the students affected adding to the already considerable financial effort by higher education institutions in offering online teaching and adapt their campus to the health and social distancing guidelines in place.

1. For a comprehensive analysis of the economic consequences of the crisis on education leavers and policy recommendations to tackle it see Henekan (2020).