Nova workboard

a blog from young economists at Nova SBE

The Challenge to Reduce Youth Unemployment

For many European countries including Portugal, the International Financial Crisis had disastrous consequences in regards to economic growth, public debt and unemployment rates. The mounting budget deficit combined with recession saw a rapid increase in the European sovereign debt to the point where countries including Portugal, Greece and Ireland had to seek emergency funds from the European Union and IMF in order to persist.

In the early 2000s, Portugal had unemployment rates below the European area average of around 6%.  The impact of the Global Financial Crisis with the Austerity Reforms resulted in further increase of unemployment and decrease in the total GDP growth. Unemployment rate had climbed to 10.5% in 2009 and reached a peak of 15.5% in the second quarter of 2012.

Youth unemployment seemed to follow the same trend but was far more sensitive than adult unemployment. In 2000, youth unemployment was around 10%, reaching 20% in 2008 and a peak of 37.4% by 2012. In fact, Portugal had the highest ratio of youth to adult unemployment in the Eurozone of 2.6. Unemployment rocketed for all educational groups such that it was high for graduates but even worse for youths with low/moderate levels of education. There were minimal jobs for young people with limited work experience and job losses were extremely heavy for youths with low education.

During the recession years, there was a huge increase in youth participation towards education and industrial training, with a decrease in the amount of early school leavers. This appeared to be a strategy implemented by young people to avoid or postpone unemployment. However, in May 2011, the Portuguese Government implemented Austerity Policies which were responsible for further increase in unemployment. These reforms in summary reduced wages, social benefits and increased taxes. Moreover, the educational budget was cut down to 3.8% of GDP, the lowest rate across all the European countries. As a result, it was difficult for young people to receive suitable education and workplace training, emphasized by the growing youth unemployment.

Development in Portugal suggest that Austerity should be substituted with reforms leading to better growth strategies and job creations to help improve conditions for the youth.  In order to achieve this objective, it is significant that there are additional improvements in the educational sector. The American Enterprise studies the concept of unemployment with differing educational backgrounds. The results are illustrated in the graph below.  The trend demonstrated that an enhanced educational scheme would lead to less unemployment.


The replacement strategy cannot be based on relegations to labor cost and workplace rights. In countries with lower unemployment rates such as Australia, there are many policies regarding the satisfactory work and living conditions for the labor force. Australia’s unemployment was not heavily affected by the Global Financial Crisis and maintained an unemployment rate of approximately 6%. This target was achieved by the introduction of the Fair Work At in 2009, which reformed industrial relations. The policy implemented previous workplace authority as well as the Australian Fair Pay Commission but placed emphasize on setting modern awards, achieving minimum wage fixation and disputing resolutions and unfair dismissals.

Youth unemployment is still a heavy focused problem in Portugal and it is essential that suitable government reforms and interventions can overcome this. Austerity must be replaced with strategies that creates more jobs, and improve education and work and living conditions. This will ensure that young people receive a decent standard of living and unemployment protection.

Daniel Chow



Author: studentnovasbe

Master student in Nova Sbe

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