Policy Actions for Youth Entrepreneurship
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The aim of this High-Level Capacity Building Seminar is have an international exchange of information on inclusive entrepreneurship actions across the European Union and on how the European Union Structural Funds can be used to support actions that combine entrepreneurship promotion and social inclusion.
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Policy Actions for Youth Entrepreneurship
- 1. POLICY ACTIONS FOR YOUTH ENTREPRENEURSHIP Importance and challenges Dr. Jonathan Potter Senior Economist, Centre for Entrepreneurship, SMEs and Local Development, OECD Jonathan.Potter@oecd.org
- 2. Table of contents 1. Youth unemployment and potential of entrepreneurship 2. Barriers encountered by young entrepreneurs 3. The opportunities to develop policy actions using European Funds 4. Evidence that youth entrepreneurship actions can work 5. Keys to delivering support 6. Conclusions
- 3. Unemployment rates in the EU 0 5 10 15 20 25 30 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % Total Males Females Adults (15 to 64 years old) Youth (15 to 24 years old) โข Unemployment rates for youth are approximately double the rate for adults. โข Gender differences are small: converging for adults but diverging for youth. Source: Eurostat LFS
- 4. Unemployment rates in Member States, 2013 0 10 20 30 40 50 60 70% Adults (15 to 64 years old) Youth (15 to 24 years old) โข Youth unemployment rates are double the rate for adults in most Member States. Source: Eurostat LFS
- 5. Perceptions and feasibility of self- employment in the EU, 2012 โข 45% of youth have a preference for self-employment and 41% believe that it is feasible to be self-employed in the next 5 years. Source: Flash Eurobarometer #354 (2012) 0 10 20 30 40 50 60 Total Youth % Preference for self-employment Feasibility of self-employment in next 5 years
- 6. Self-employment rates in the EU 0 5 10 15 20 25 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % Total Males Females Adults (15 to 64 Youth (15 to 24 years old) โข Self-employment rates have been stable over the last decade. โข Youth self-employment rates are approximately one-third of the adult rates. Source: Eurostat LFS
- 7. Self-employment rates in Member States 0 5 10 15 20 25 30 35% Adults (15 to 64 years old) Youth (15 to 24 years old) โข Youth self-employment rates vary substantially across Member States. Source: Eurostat LFS
- 8. Barriers encountered by young entrepreneurs 0 5 10 15 20 25 30 Not enough capital Current economic climate is not good for start- ups Not enough skills to be self- employed No business idea Difficult to reconcile with family commitments Risk of failures and its legal and social consequences are too big Administrative difficulties % Adults (15-64 years old) Youth (15-24 years old) Source: Flash Eurobarometer #354 โข Youth perceive greater barriers to self-employment than adults, particularly related to financing and skills. Barriers to self-employment, 2012
- 9. The opportunities to develop policy actions using European Funds 1. European Social Fund Under the thematic objective 'promoting sustainable and quality employment and supporting labour mobility': (i) Access to employment for job-seekers and inactive people, including the long-term unemployed and people far from the labour market, also through local employment initiatives and support for labour mobility; (ii) Sustainable integration into the labour market of young people, in particular those not in employment, education or training, including young people at risk of social exclusion and young people from marginalised communities, including through the implementation of the Youth Guarantee; (iii) Self-employment, entrepreneurship and business creation including innovative micro, small and medium sized enterprises; (iv) Equality between men and women in all areas, including in access to employment, career progression, reconciliation of work and private life and promotion of equal pay for equal work; (v) Adaptation of workers, enterprises and entrepreneurs to change; (vi) Active and healthy ageing; (vii) Modernisation of labour market institutions, such as public and private employment services, and improving the matching of labour market needs, including through actions that enhance transnational labour mobility as well as through mobility schemes and better cooperation between institutions and relevant stakeholders
- 10. The opportunities to develop policy actions using European Funds, continued 2. Youth Employment Initiative โ Activities supported include: 1. โEncourage schools and employment services to promote and provide continued guidance on entrepreneurship and self-employment for young people.โ 2. โEnsure greater availability of start-up support services.โ 3. Europe 2020 Strategy โ Recognises entrepreneurship and self-employment as key for achieving smart, sustainable and inclusive growth โ Several flagship initiatives address entrepreneurship: 1. Agenda for new skills and jobs; 2. Youth on the Move โ initiatives on education and employment; 3. European platform against poverty and social exclusion. 4. Entrepreneurship 2020 Action Plan โ Section 4.2.4. Unemployed, in particular young people Given the significant number of unemployed people across Europe, entrepreneurship support schemes should be put in place to encourage business creation as a route out of unemployment. Few business development support schemes target unemployed youth specifically.
- 11. Start-up support as part of ALMPs, 2012 โข Start-up support measures are not widely used in active labour market policies 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0% Source: Eurostat, LMP expenditure by type of action
- 12. Evidence that youth entrepreneurship actions can work Programme Country Target Type of support Impact estimate .garage Hamburg (ongoing) Germany Unemployed youth under the aged of 35 Training, finance, incubator 83% of participants in 2000- 2002 carried on in self- employment and 10% were in employment or apprenticeships. First business year baskets for youth (2011-2013) Lithuania Youth under the age of 29 Vouchers for BDS Improved survival rates: 98.9% for 1 year vs. 63.3% (2012) Programme for NEETs to move into self-employment (2007-2010) Slovenia Unemployed youth under the age of 25 Grants; training Improved survival rates: 85% for first 2 years The Princeโs Trust Youth Business Scotland (ongoing) United Kingdom โUnbankableโ youth who are 18- 25 years old Finance; coaching and mentoring; training Generated 155 additional start-ups in 2004/05 and 416 start-ups started sooner, on a larger scale, or higher quality.
- 13. Keys to success โข Support and build sustainable self-employment projects: 1. Use strong selection criteria to identify ideas with the greatest chances of success; 2. Use staged-selection where participants receive increasing levels of support after demonstrating capabilities; 3. Provide complementary supports to ensure that youth develop potentially sustainable projects (e.g. training and mentoring).
- 14. Keys to success, continued โข Avoid common pitfalls when designing and implementing entrepreneurship support for youth: 1. Supporting projects in excess supply industries; 2. Financing projects with little chance of success; 3. Providing insufficient financial supports that cannot lead to the creation of sustainable businesses; 4. Providing temporary, one-shot supports.
- 15. Conclusions 1. Start-up support programmes are under-utilised in response to youth unemployment. 2. Start-up support programmes need to respond to market failures in accessing finance and developing entrepreneurship skills. 3. Well-designed youth entrepreneurship programmes can work well and have demonstrated success in the EU. 4. The keys to success are: 1. Select ideas with the greatest chances of success; 2. Use staged-selection that based on a demonstration of capabilities; 3. Use complementary supports to ensure that youth develop potentially sustainable projects (e.g. training and mentoring).
- 16. More information on youth entrepreneurship http://www.oecd.org/cfe/leed/inclusive-entrepreneurship.htm
Editor's Notes
- The unemployment rate in the EU in 2013 was 10.9%. It was more than double for youth: 23.4%. It is important to note that the unemployment rate for youth is approximately double the rate for adults. This has been consistent over the last few decades. This did not change during and after the crisis. A second point to note is that there are small gender differences. For adults, the unemployment rates for men and women converged during the crisis. For youth the unemployment rates for men and women diverged since the crisis.
- Unemployment rates for youth and adults vary substantially across Member States. In 2013, these ranges from 5.4% and 7.9% for adults and youth in Germany to 27.7% and 58.3% in Greece. With the exception of a few countries where unemployment rates are low, the observation that we made about youth unemployment rates being double the adult rates holds.
- One possible way to address youth unemployment is to support young people in creating their own businesses. They have the interest and potential to become self-employed. This figure shows responses to two questions: โIf you could choose between different kinds of jobs, would you prefer to be self-employed?โ โRegardless of whether or not you want to become self-employed, would it be feasible for you to be self-employed within the next 5 years?โ Youth are more likely to have a preference for self-employment than adults. 45% of youth prefer self-employment to employment, whereas 37% of adults prefer self-employment. Youth are also more likely to believe that self-employment is feasible. 41% of youth think that they could be self-employed within the next 5 years and 30% of adults think that it is feasible.
- Despite having a preference for self-employment, few youth are able to sustain themselves in self-employment. Nearly 15% of people working in the EU are self-employed. This proportion has been constant over the past decade. The self-employment rate for youth in the EU is just over 4%. Similar to adults, the self-employment rate has been quite constant. These data only cover youth in the labour force, i.e. those in school full-time are not counted.
- Youth self-employment rates vary greatly across Member States, ranging from 1.1% in Denmark to 12.5% in Italy.
- Lack of awareness of potential for entrepreneurship among role models results in a lack of encouragement or even negative social attitudes. Education and training programmes generally do not do enough to nurture entrepreneurial attitudes and skills. Lack of prior work and entrepreneurship experience is a major determinant to business start-up and entrepreneurship performance. Fewer financial resources and difficulty obtaining external finance, including debt finance, hampers business start-up. Limited business networks and business-related social capital have consequences for business start-up and obtaining legitimacy. Market barriers, including a bias in financial markets away from supporting youth-owned businesses and โdiscriminationโ in product markets.
- Under the thematic objectives set out in points (8), (9), (10) and (11) of the first paragraph of Article 9 of Regulation (EU) No 1303/2013, which correspond to points (a), (b), (c) and (d) of this paragraph, and in accordance with its missions, the ESF shall support the following investment priorities: For the thematic objective 'promoting sustainable and quality employment and supporting labour mobility': (i) Access to employment for job-seekers and inactive people, including the long-term unemployed and people far from the labour market, also through local employment initiatives and support for labour mobility; (ii) Sustainable integration into the labour market of young people, in particular those not in employment, education or training, including young people at risk of social exclusion and young people from marginalised communities, including through the implementation of the Youth Guarantee; (iii) Self-employment, entrepreneurship and business creation including innovative micro, small and medium sized enterprises; (iv) Equality between men and women in all areas, including in access to employment, career progression, reconciliation of work and private life and promotion of equal pay for equal work; (v) Adaptation of workers, enterprises and entrepreneurs to change; (vi) Active and healthy ageing; (vii) Modernisation of labour market institutions, such as public and private employment services, and improving the matching of labour market needs, including through actions that enhance transnational labour mobility as well as through mobility schemes and better cooperation between institutions and relevant stakeholders;
- Despite the potential for business creation and self-employment to address the unemployment challenge, entrepreneurship support measures are not widely used in active labour market measures across the EU. In most EU countries, expenditures on start-up support incentives account for less than 2% of expenditures on active labour market policies.
- In developing programmes in these areas, a smart scaling up process is needed, which places a premium on learning from past experience. Policy makers need to recognise that there will be a high rate of failures and need to accept that. But the objective is to minimise this failure rate, and at the same time minimise any displacement effects and deadweight loss. The evidence to date suggests that when designing and delivering youth entrepreneurship programmes, policymakers should pay particular attention to three considerations. 1. Use strong selection criteria to select ideas and projects with the greatest chances of success. Focus selection on the project rather than the individual so that skilled youth as well as disadvantaged youth can receive support. 2. Build support in stages, making more intensive support available when participants demonstrate capabilities. 3. Offer complementary supports to help youth develop sustainable projects. This means providing training to provide basic skills, along with more individual support such as coaching/mentoring to support individual projects. This also means providing financing with skills development so that the support offerings reinforce each other.
- Some pitfalls to avoid when designing support for youth entrepreneurship include: Supporting projects in excess supply industries Supporting projects with little chance of success Providing insufficient financial supports that cannot lead to the creation of sustainable businesses Providing one-shot supports that are temporary