Boom and Bust Effects on Youth Unemployment in Estonia

Young people’s labour market entry opportunities are disproportionately affected by changes in overall labour market conditions. Young people’ employment opportunities shrink during crises and young people also benefit more from economic booms (European Commission 2010). Recently, after the global economic crisis, young people’s labour market vulnerability has been high on the social agenda as more than 5 million young people were unemployed in the European Union at the end of 2011. Faced with rising levels of unemployment, it is becoming harder for young people to find work and many may decide to prolong their studies (European Commission 2011). This could be an investment for the future provided that they will have opportunities to make use of their skills. In parallel, there is a growing share of young people who are neither in work nor in education or training. The share of such people increased from 10.8 per cent in 2008 to 12.8 per cent in 2010 for the EU as a whole. In Estonia, together with Bulgaria, Greece, Ireland, Italy, Latvia, Romania, Slovakia and Spain, over 14 per cent of the young generation is not in studies and not in employment. Thus, there are more than 7.5 million young unemployed and inactive people aged 15-24 in the EU. This generation, entering adulthood during an economic crisis, is sometimes called "the lost generation" (European Commission 2011), as previous research has demonstrated that unemployment at the beginning of a work career has a scarring effect with regard to both future unemployment and future earnings (Bell and Blanchflower 2010). The European Commission has also launched several initiatives since 2008 to combat youth unemployment and precarious employment (European Commission 2011). Estonia could serve as an excellent case study for analysing the boom and bust effects on youth labour market outcomes. Estonia experienced an exceptional economic boom in 2000-2007 and was then hit by the deep recession in Europe amplified by the global economic crisis in 2008. In this report, the Estonian context is presented in Section 1. In Section 2, the main indicators of youth employment - unemployment and inactivity - are analysed in relation to the labour force. In Section 3, some insight is provided into youth status after leaving school during periods of economic boom and bust. The report ends with a discussion of possible policy responses to youth unemployment and a summary table presenting the main points of the report.