Inequality, Technology and Job Polarization of the Youth Labor Market

in Europe.

Kariappa Bheemaiah, Mark SmithGrenoble Ecole de Management.

Policies and LiteratureMarkets have improved since the crisis, but the pace of economic growth and employment for young people has stagnated in Europe (Cedefop, 2010) .

One of the challenges of the Europe 2020 Strategy is to solve the problem of social exclusion

Other factors Globalization + Offshoring + Technology

USA: Autor Levy Murnane (2003), Autor & Acemoglu (2010) EU/OECD: Goos et all (2011(IMF study)) found that ICT was having the biggest effect.

YOUTH INEQUALITY ICT

▲ Opportunities▲ Income Levels▲ Social Security

Systems▲ Economic Mobility

▼ Poverty Levels▼ Inequality-

education, jobs, earnings, policies and other factors.

LIT. ReviewTechnological unemployment - Tinbergen’s canonical education-race model (‘75) SBTC: Berman, Bound and Machin (‘98)Limitation of Tinbergen’s model’s lack of a concrete definition for ‘tasks’

ALM Routinization Hypothesis (2003) & the Polarized work environment (2010) Cognitive non-routine tasks Cognitive routine tasks

Manual routine tasks

Manual non-routine tasks

Low

-S

kil

l

Hig

h-

Skil

l

Med

ium

-S

kill

Low

-S

kil

l

Hig

h-

Skil

l

Med

ium

-S

kill

SKILL-BIASED TECHNOLOGICAL

CHANGE

SKILL-SUBSTITUTING TECHNOLOGICAL

CHANGE

Indicators: 9 ICT related indicators- (Source: Eurostats):

Method: Agglomerative Hierarchical Clustering (Ward’s Method).

Methodology

Centroid method to trace the behavior of the clusters with respect to each variable.

T 1 Gross value added by Information and Communication Industry. T 2 Employment in technology sectors at the national level.T 3 Employment in Information and communication (ICT) industry.T 4 Sales of Goods and Services via InternetT 5 Purchase of Goods and Services via internetT 6 Employment in knowledge-intensive activities.T 7 Total High-tech Imports as % of total trade.T 8 Total high-tech Exports as % of total trade.

T 9GERD in Business Enterprise, Government and Higher Education Sectors.

Low Tech Cluster BG EE EL ES HR IT CY LV LT PL PT RO SI SK

Medium Tech Cluster BE CZ IE FR LU H

UMT AT            

High Tech Cluster DKDENL FI SE UK                

2007

- 2013

Methodology

0

10

20

30

40

50

60

70

5 5 4

17

5349

1515

211

31

8 64 5 3

7

28

43

1821

2T 1 T 2 T 3 T 4 T 5 T 6 T 7 T 8 T 9

Profile plot of Technology variables by Cluster (2007)

Cluster 1 Cluster 2 Cluster3

0

10

20

30

40

50

60

70

80

90

5 5 4

26

70

42

14 15

27

2431

9 86 5 3

18

4437

14 15

2T 1 T 2 T 3 T 4 T 5 T 6 T 7 T 8 T 9

Profile plot of Technology variables by Cluster (2013)

Cluster 1 Cluster 2 Cluster 3

Tota

l

Male

Fem

ale

Tota

l

Male

Fem

ale

Tota

l

Male

Fem

ale

15-24 25-54 55- 64

-10

-5

0

5

10

15

20

-4.09999999999999

-5.2-3

1.5-1.5

4.7

13.510.6

16.2

EU 28: 2014-2002

Overall Employment levels in EU28 have declined =+3.9 PP (2007-2013)

Youth Inequality & Employment.T

ota

l

Male

Fem

ale

To

tal

Male

Fem

ale

To

tal

Male

Fem

ale

15-24 25-54 55- 64

-10

-5

0

5

10

15

20

-4.7 -5.8-3.6 -2 -3.5

-0.299999999999997

6.5 4.28.6

EU 28: 2014-2008

All Clusters: Young adults Level 3-6 Edu. HIGHER NEETs than Level 0-2 peers

ICT replacing analytical tasks of Medium/High

Skilled Workers.

15-24 Employment rate NEETS

Low Tech Cluster 

 

High Tech Cluster    

ICT replacing Medium/High Skilled WorkersYouth more adversely effected than Older Population

Profe

ssio

nals

Tech

nic

ian

&

asso.

profe

ssio

nal

Cle

ric

al

su

pp

ort

Servic

e a

nd

sale

s

Skil

led

ag

ric

ul

-

tural,

forestr

y &

fish

ery

Craft

an

d r

ela

ted

trad

e

Pla

nt

& m

ach

ine

op

erato

r

High Skill Jobs Mid- Level Skill Jobs Low-Skill Jobs

-40%

-20%

0%

20%

40%27%

-21%-31%

-7%

-21%-33% -33%

15- 24 yr. olds : % change in sectorial employment - EU 27

Profe

ssio

nals

Tech

nic

ian

& a

sso.

profe

ssio

nal

Cle

ric

al

su

pp

ort

Servic

e a

nd

sale

s

Skil

led

ag

ric

ult

ural,

forestr

y &

fish

ery

Craft

an

d r

ela

ted

trad

e

Pla

nt

& m

ach

ine

op

erato

r

Mid- Level Skill Jobs Low-Skill Jobs

-40%-30%-20%-10%

0%10%20%30%40% 31%

-4%-8%

27%

-8%-15% -15%

25 - 64 yr. olds: % change in sectorial employment - EU 27

Growth in Know. Based Services: Optimistic Figures for High Tech Cluster (especially FI &

NL) But not so in Low Tech Cluster (especially EL, ES, RO)

Cuts and freezes of minimum wage in 21 EU Countries (mostly Low Tech Cluster)

Real hourly minimum wages have reduced

Minimum wages closely linked to economic development

18 to 24 years 25 to 54 years 55 to 64 years 65 years and above

-1

0

1

2

3

4

5 4.6

2.9

0.00.8

EU 27 - Average Change in risk of poverty rate according to age (2007-2013)

Youth Inequality & Earnings.

End 2013- Average In-Work-At-risk-of-poverty-rate 18-24 years= 11.4%

25-54 years = 8.8% 55-64 years = 8.5%

EU

27

BE

BG

CZ

DK

DE

EE IE EL

ES

FR IT CY

LV

LT

LU

HU

MT

NL

AT

PL

PT

RO SI

SK FI

SE

UK

-10

0

10

20

30

40

50

17.7

10.1

30.2

9.35.6

16.1

11.18.5

27.8

16.315.517.6

15.318.1

27.8

22.623.6

10.67.1

13.8

27.7

14.8

44.9

12.816.5

6

1312.8

PP change from 2007 to 2013 for In-Work-at-risk-of-poverty, based on level of education

(0-2) (3 & 4)

(5 & 6) (0-2) PP change since 2008

Youth Inequality & Education+Skills.

Lower educated face greater inequality risks, especially in Low & Medium Tech Countries.

Young People & Young Adults - 1.1 PP increase of NEET rates for low skilled

7 PP for the medium/high skilled.

Youth Inequality & Education+Skills.

EU

27

EU

Male

s

EU

Fem

ale

s

BE

BG

CZ

DK

DE

EE IE ES

FR

HR IT CY

LV

LT

HU

MT

NL

AT

PL

PT

RO SI

SK FI

SE

UK

10

15

20

25

30

35

40

45Level 5-6 Students enrolled in STEM as % of all

students

2007 Moving average (2007) 2012

More young adults ( especially in Low Tech Cluster ) participating in Edu. Levels 5 to 8.

But this is not reflected in employment figures.

….Impact of Education in reducing inequality for the youth?

NRI : Exploring ICT +(employment, entrepreneurship & education).

2013 NRI Clusters = 71% Commonality with 2013 Tech Cluster Grouping

Youth Inequality, ICT & NRIP

oli

tical

an

d

Reg

ula

tory

Bu

sin

ess

an

d

Inn

ova

tion

9 9

Infr

ast

ruct

ure

4A

fford

ab

ili

ty3

Skil

ls

4

Ind

ivid

ual

7

Bu

sin

ess

6

Gove

rnm

en

t

3

Econ

om

ic

Imp

acts

4

Environment

Socia

lIm

pacts

3

Econ

om

ic

Imp

acts

UsageReadiness

Socia

lIm

pacts

Impact

Low Tech Cluster

Low NRI Scores. Higher youth unemployment, lower earnings (stagnant min.wages), reduced spending on ALMPs (except PL, SI & SK), qualified NEETs

Med. Tech Cluster

Competitive NRI scores.Adversely impacted by policies - ALMPs (entrepreneurship) vs PLMPs.

High Tech Cluster

High NRI scores.Growth of Emp. in Know. Services, Low unemployment levels Apprenticeships Skills development, flow of knowhow and tacit knowledge.

Conclusions: Better ICT Better Information Growth

Greater Flow of Information Increases employment, reactivity of policies, adapt to new tech, more entrepreneurship, greater mobility, spread of education…gives youth a better chance to reduce the inequality.

Growth of Economies Growth of Flow of Information & ICT

Next Steps: Youth Focused Entrepreneurship & Innovation policies that

allows Information to Grow (leveraging ICT).

Development of diverse skills in employment to complement formal schooling (apprenticeship programs).

More granular research in measuring the impact of ICT at micro-levels

ICT and Social Infrastructure development as a priority.

Conclusions, Next steps