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Youth unemployment and youth labour market policies

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Youth unemployment is high on the political agenda in Denmark and many other OECD countries. A new research project at SFI will investigate whether youth unemployment is reduced if unemployed youth is required to participate in activation programmes at an early stage in unemployment periods.

High and persistent youth unemployment is a problem in many OECD countries. Therefore, there is a continuous search for better ways of integrating youth into the labour market. There is general agreement that activation or mutual obligation policies (requiring jobseekers to participate in training, job-search or job-placement activities in return for income support) are important tools for reducing youth unemployment. However, the effect of such policies varies significantly and there is a demand for more knowledge about what works and what does not.

Until recently, Denmark has been among the countries experiencing the lowest youth unemployment rates. The Danish youth unemployment programmes (consisting of activation and reduced unemployment benefit levels) are often highlighted as an important reason for the favourable development in the youth unemployment rate since the mid-1990s. Current debate is on whether the youth unemployment programmes should impose even more requirements on unemployed youth. However, only few studies have investigated the effects of the Danish youth unemployment programmes and the mechanisms through which the programmes work. The purpose of the new research project is to take a closer empirical look at how early activation affects the labour market outcomes for young people.

The project aims at answering the following questions: Do the activation programmes make unemployed youth find a job or start ordinary education more quickly? Does activation primarily work as a stick (motivating unemployed youth to leave unemployment to avoid being activated) or as a carrot (upgrading the qualifications of the unemployed)? Does unemployed youth end up in worse jobs because activation works as a stick to find employment quickly? If activation increases the qualifications of unemployed youth, will increased earnings in the longer run compensate for the income lost because of the reduced unemployment benefits for unemployed youth – i.e. is the youth unemployment programme economically advantageous or disadvantageous for unemployed youth? To answer these questions the project will apply microeconometric methods and high quality administrative register data containing information on all individuals experiencing unemployment from the mid-1990s until today.

The research project is being funded by the Danish Council for Independent Research – Social Sciences and the Danish Ministry of Employment. 

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