We can fix youth unemployment – if we want to

The highest youth unemployment rates in Europe have traditionally been associated with Mediterranean countries, but that is no longer the case. Statistics show this growing issue is now spreading across Europe. Overregulation seems to be the main cause, writes Victoria Esperanza Pazos Álvarez.

The year began with bad news for Sweden. Since January, the highest unemployment rate in Europe. The percentage of youth unemployment remains relatively stable across the European Union at around 15%. However, the data behind this figure reveals an increasing disparity. Countries like Germany have a rate of just 6%, while others, such as Spain, have seen their rates climb to 27%.

The primary differences between these countries stem from bad regulation. While nations like Germany encourage entrepreneurship and support small businesses, Mediterranean countries tend to complicate company growth, largely due to rigid labour laws and high taxes.

Restrictive labour market regulations make it difficult for employers to hire young people. Hiring and firing employees have become so complicated companies often prefer individuals with at least two years of experience. This leads to more young people facing job insecurity or underemployment. Internships and entry-level jobs are increasingly rare due to their lack of profitability.

In countries around the Mediterranean, hiring an employee often entails a range of administrative and financial expenses. These include recruitment costs, substantial social security contributions (30% of the employee's gross salary), and, if the person lacks experience, the additional cost of training and onboarding. Firing an employee is often even more expensive due to severance and indemnity payments required by law. Most Mediterranean countries mandate severance pay based on an employee’s years of service, which can result in significant costs if an employee is laid off or dismissed without cause, or in legal fees in the case of disputes.

In Italy, firing an employee can be particularly costly. If the dismissal is deemed unjust, the employer could face fines or be required to pay compensation. Employees are often entitled to severance pay based on their seniority, and these amounts can be very high, especially if they have been with the company for many years. In Spain, if a company fires an employee without just cause, it may have to pay a severance package equivalent to 33 days' salary for each year worked. Companies must also follow a strict protocol when laying off employees, including offering retraining or alternative positions where applicable. In Greece, employers must provide compensation for wrongful dismissal, and the amounts vary depending on the length of employment. Furthermore, workers who have been employed for over 12 years are entitled to stronger protections against dismissal, requiring the employer to demonstrate economic necessity.

Another significant issue these countries face is the lack of vocational training. Socially, these jobs, which are often governed by strict laws and low salaries, are unattractive to young people. As a result, they are often occupied by recently established immigrants, which contributes to the country’s GDP growth. While production increases, however, this does not lead to an improvement in employment rates.

The consequences of these policies are migration. Young people move to countries with better opportunities, seeking the experience they need to eventually return to their home countries. Meanwhile, the government seems indifferent to this frustrating situation. It is failing to provide any solutions. Until European policymakers embrace a radical deregulation and simplification agenda, economic growth will continue to evade our continent and young Europeans like me will remain blighted by high unemployment rates. 

Victoria Esperanza Pazos Álvarez is a policy fellow with Young Voices Europe. She previously studied international relations in Spain and specialised in disaster risk reduction in the Netherlands. Victoria formerly worked at the Spanish embassy in Buenos Aires, where she worked on trade negotiations.

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