Recession, young people and the labour market

The effect of the recession on young people in Ireland who are not in employment, education or training (NEET) is examined in a new study. It shows that it has become harder for NEET young people to find work, not simply because unemployment has risen as a result of the recession, but also because there has been a change in the individual attributes that make it more or less likely that a young person will be hired. These include level of education, type of qualification and Irish nationality.

About the research

A new paper, The impact of the recession on the structure and labour market success of NEET youth in Ireland, examines labour market outcomes for young people not in employment, education or training (NEET) in Ireland during the recession using data from the national labour force survey, the Quarterly National Household Survey (QNHS). Researchers examined data from Q2 2006 to Q2 2011.

The research focused on four aspects of the NEET group, asking:

  • what factors contribute to becoming a NEET, and have these factors changed since the recession?
  • how do labour market transition patterns of NEETs before and after the boom differ?
  • to what extent do changes in the composition of the NEET group explain the changes in their labour market transition rates over time?
  • to what degree do adjustments in the labour market value of various attributes account for changes in labour market transition rates for NEETs before and after the recession?

Main findings

Unemployment rates

The study found that the overall youth unemployment rate in Ireland had doubled over the course of the recession, increasing from 5.4% in Q3 of 2007 to 12.8% in Q3 of 2011. The number of NEETs had increased from 15,430 in 2006 to 23,389 in 2011, an increase from 11.8% of all young unemployed people in 2006 to 24% in 2011.

Despite this trend, the authors note that very little is known about NEETs in Ireland, particularly about their profile or whether the general characteristics, background and circumstances of young people who are NEET have changed since the recent recession.

Characteristics of NEET group

The authors identified a number of characteristics that increased a young person’s likelihood of being NEET.

In 2006, these characteristics included:

  • being female;
  • aged 20–24 (when compared to those aged 15–19);
  • having an education level no higher than lower secondary;
  • living in the mid-west and western region of Ireland relative to Dublin.

The research found that by 2011, NEETs were more likely to be male and the authors suggest this is linked to the collapse of the male-dominated construction sector. The impact of educational attainment on the likelihood of becoming NEET became much stronger. Graduates were 35% less likely to be NEET than young people with no higher than lower secondary level education. In 2006, graduates were 15% less likely to become NEET than this group.

The impact of the disadvantage of living outside Dublin had risen substantially by 2011, and it was also found that immigrant youths were statistically more likely to be NEET during both the boom and recession.

Education and employment

Between 2006 and 2011, there was a drop in the percentage of NEETs transitioning to employment. In 2006, 21% of NEETs eventually found jobs. By 2011, after a number of years of recession, just 14% of NEETs were finding work.

The authors draw attention to the connection between education and finding employment.

In 2006, both the higher secondary level qualification (the Leaving Certificate) and the Post Leaving Certificate (PLC) qualification – which, the authors observe, tends to be vocational in nature – had a stronger impact than tertiary education on transition to employment for NEETs. The authors believe this pattern can be connected with the importance of the construction industry and the link between it and PLC qualifications during the pre-recession boom.

In 2011, the authors found that the impact of education on the likelihood of finding employment ‘followed a more standard linear pattern, with higher levels of educational attainment having a bigger marginal impact than lower qualifications on NEET’. They note that ‘the marginal impact of a PLC qualification fell off dramatically by 2011 due, presumably, to a substantial fall in the demand for vocationally qualified labour’.

Between 2006 and 2011, factors that made it increasingly less likely during that time that NEETs would find work included being male, aged 20 to 24 (relative to those aged 15 to 19) and possessing a higher secondary level or vocational type qualification. Having been unemployed for seven to 12 months, compared to those who had been out of work for between one and three months, also had a depreciating effect on NEET individuals’ likelihood of finding a job during the same period.

Factors that, over the same period, increasingly made it more likely that NEETs would find work were having a tertiary-level qualification, being Irish, and having been out of work for either four to six months or 13 or more months.

Conclusions

The authors conclude that the fall in the level of transition to employment of NEETs during the recession is due to ‘external factors that have had an impact on the importance of possessing certain characteristics as the recession has persisted’.

These include a rise in the value of education to the labour market, a higher value placed on Irish nationality and a fall in the scarring impact of periods of unemployment. Therefore, say the authors:

Even though there have been huge changes in the macroeconomic environment between 2006 and 2011 which resulted in a rapid growth of the unemployed and NEET populations, these changes in the underlying populations have not substantially impacted the extent of transitions to employment.

Instead, they say, ‘the period has seen a substantial change in the labour market value of some characteristics’.

Reference

Kelly, E. and McGuinness, S. (2103), ‘The impact of the recession on the structure and labour market success of NEET youth in Ireland’, Intereconomics, Vol. 48, No. 4, available at http://intereconomics.eu/archive/year/2013/4/865/#res4

Roisin Farrelly, IRN Publishing

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