Thursday, 3 March 2011

Deolinda's sad song

Youth unemployment in Portugal is 23%. Firms tend to reduce their hirings considerably during slumps. Germany demands more reforms including, presumably, some labour market deregulation. But the Portuguese government now decides to impose a minimum wage and several other contractual constraints on traineeships (e.g., a minimum duration of 12 months).

Traineeships are a form of investment in one's human capital - even if trainees are not paid, they may be better off given the gains in experience, networks, signaling/screening, etc. Why make it more costly for employers to take on trainees? Why risk pricing out many more youngsters from the labour market?


  1. Dear Pedro: being your field of study labour economics i wish to ask you a simple question about the portuguese labour market. Why is it so hard for the average young portuguese to enter the labour market? If, as we are told, the younger generations are, on average, more educated than the previous generations, why don't they succeed in the labour market, have higher wages and more stable work relationships?

  2. I think things are actually not so bad as the media tend to put it: more educated people are still less likely to be unemployed than the less educated; and many temporary jobs can be a stepping stone towards a permanent position.

    But it is also clear that the labour laws segment the labour market: younger, in some cases more skilled people cannot compete away the rents earned by those on permanent jobs in "safe" industries. The inequity of this status quo is becoming more and more obvious and eventually it will reach a tipping point.

    To make things worse, the Portuguese economy hasn't been able to benefit much from globalisation. Emigration will probably continue for many more years.

  3. @Pedro
    "more educated people are still less likely to be unemployed than the less educated"
    This is exactly the problem about youth employment. This is only reality because the market is hiring more educated people, paying them less educated people's salaries.
    I completely agree with you on the last paragraph - Emigration is the way to go, I just don't understand what are (more educated) people still doing in Portugal!