Breaking the Vicious Circle of Youth Unemployment in the OECD Countries: The Role of Labour Market Policies

Since the economic downturn the degree and development of youth unemployment have varied substantially among the OECD member countries. While youth unemployment rose rapidly in countries such as Spain or Greece, in others – like Germany or Poland – youth unemployment remained low. This paper analyses the role of labour market policies in this process and addresses two main questions. First, which labour market policies were necessary and / or sufficient to prevent the rise of youth unemployment between 2008 and 2015? Second, does the combination of a massive economic crisis and the rapid growth of public debt and a lack of investment in labour market policies led to very high levels of youth unemployment in a set of OECD countries? The effects of labour market policies to combat youth unemployment in the OECD countries – including Eastern European OECD members – are the first purpose of this paper. Using the variation in labour market policy reactions to the crisis, we urge to explain which of these policy reactions to the economic crisis were better-suited to fight youth unemployment. More specifically, we analyse how the implementation of different active and passive labour market policies affected youth unemployment. On the other hand, besides labour market policies, this analysis also includes a set of other economic dimensions, namely GDP growth and the level of public debt. By controlling these factors, we seek to analyse if there is a combination of negative factors that leads to growing youth unemployment rates in some countries. More specifically, if those countries more affected by the economic crisis and the rise of public debt did not have the financial resources to invest in labour market policies and therefore to address the rise of youth unemployment. To clarify this process constitutes the second objective of this paper. To address our research questions we use fuzzy-set Qualitative Comparative Analysis (fsQCA). In our view, this method is particularly useful to carry out this study for two reasons. It will allow us to address the second question because it is a configurational method. Second, because this method is case-oriented, we will be able to explain why some countries have been more affected by the rise of youth unemployment.