THE IMPACT OF WELFARE AND LABOUR MARKET INSTITUTIONS ON INFORMAL RECRUITMENT IN EUROPEAN YOUTH LABOUR MARKETS

ABSTRACT

Youth labour markets where informal recruitment practices predominate are likely to amplify existing inequalities among young job seekers. Whereas most literature on informal recruitment focuses on characteristics of individual job seekers and the nature of the jobs they obtain, this article suggests to relate this important issue to overarching dynamics of welfare and labour market institutions. Analyses of survey data among young people with a history of longer-term unemployment in eight European countries suggest that comprehensive welfare state arrangements may substitute for the importance of personal network resources in the job search process. Thus the welfare state may intervene by providing active measures to facilitate the job-matching process and by providing economic means to make young people less dependent on their social network. The level of youth unemployment also seems to be related to the extent of informal recruitment, which is found to be more widespread in the countries with high rates of youth unemployment.

Keywords:

• active labour market policies
• employment protection legislation
• informal recruitment
• social capital
• unemployment compensation for young people
• youth unemployment

The author wishes to thank Torild Hammer, Axel West Pedersen, Kirsti Valset (Norwegian Social Research), Einar Øverbye (Oslo University College), Lars Mj⊘set (University of Oslo), and three anonymous reviewers for comments on earlier drafts of this paper.

Notes

¹Iceland and France were also included in the data but are excluded from the present study: Iceland because comparable macro institutional variables are not available and France because the French study did not include information necessary to create the ISCO 88 occupational category variable pertaining to the reference job.

²Indeed, in some countries the pooling of family resources works both ways. In Spanish households with the head of the household out of work, employed youth residing with parents are found often to prevent overall household poverty by sharing their income with the rest of the family (Cantó-Sánchez and Mercader-Prats 2001).

³The time difference between the different national surveys means that the surveys were fielded in different countries under different circumstances in terms of international economic fluctuations. However, as the macro-institutional variables, being most sensitive to such international trends – the youth unemployment rate and the youth activation rate – pertain to the specific years of the national surveys, this issue is deemed not to be a matter of concern for the present study.

⁴The Danish sample was exclusively drawn from young people who were members of an unemployment insurance fund. This bias is accounted for in the multivariate analyses by the control variables on education, occupation and on whether the respondent has received unemployment insurance.

⁵Having ‘Minority background’ was defined as being born in another country or having parents both of whom were born in another country. In Germany and Spain only respondents being themselves born in another country are categorised as belonging to an ethnic minority as there are no information on parents’ background.

⁶The variables for education, including father's education have three substantial categories: ‘Primary education + lower secondary’ = CASMIN code 1a + 1b + 1c + 2a; ‘ Upper secondary education’ = 2b + 2c; ‘Tertiary education’ = 3a + 3b. A fourth category was included to accommodate those answering ‘other type of education’ and the group of ‘missings’.

⁷For those who were unemployed at the time of the survey, no information is available on the type of contract they had while occupying the reference job. This group is assigned to a third category encompassing those unemployed at the time of the interview.

⁸Those respondents reporting that they have ever participated in a union meeting probably only constitute a subsection of those organised in unions. Still, in order to account for variance related to the reference job, it was considered relevant to adjust for this variable.

⁹A test of co-linearity revealed one Tolerance value of 0.176 when all macro variables were included in the same model, a level which according to Menard (2002) should be a cause for concern. Therefore, no inferences are based on models including all macro variables in a full model.

¹⁰In the case of Scotland, some of the figures presented cover the rest of the UK as well, as they were not exclusive to Scotland. However, according to Mooney and Poole (2004), social policy in Scotland up to the late 1990s has been very much in line with policies in England and Wales, following a trend of increasing social policy convergence during the Thatcherite period. Cash benefits are being provided on a uniform basis in Britain (English 1998).

¹¹The OECD public expenditure data base includes an entry on ‘Youth measures’. This, however, is inadequate for our purpose as it only covers special programmes, and not young people's participation in programmes open to all age groups (Martin and Grubb 2001: 13).

¹²83 percent of the respondents from Campania (a region in the Southern part of Italy) against 77 percent of the respondents in Veneto (in the Northern part), report being recruited by informal means, a difference significant on a 5-percent level. Regarding Germany, respondents from the Eastern counties (61 percent) report having used informal channels to a significantly higher extent than their Western counterparts (55 percent).

¹³American research has found that childrearing affects the social relations of men and women in quite different ways. The male's social network tends to be enhanced in the sense that they are drawn into greater contact with other family members. The network of females, on the other hand, tends to be disrupted – their network size and contact volume has been found to be reduced (Munch et al. 1997).