Start-Up Support for Young People in the EU: From Implementation to Evaluation

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1 Corell Uiversity ILR School Iteratioal Publicatios Key Workplace Documets 2016 Start-Up Support for Youg People i the EU: From Implemetatio to Evaluatio Eurofoud Follow this ad additioal works at: Thak you for dowloadig a article from DigitalCommos@ILR. Support this valuable resource today! This Article is brought to you for free ad ope access by the Key Workplace Documets at DigitalCommos@ILR. It has bee accepted for iclusio i Iteratioal Publicatios by a authorized admiistrator of DigitalCommos@ILR. For more iformatio, please cotact hlmdigital@corell.edu.

2 Start-Up Support for Youg People i the EU: From Implemetatio to Evaluatio Abstract [Excerpt] Youg people have bee hit hardest by the Great Recessio. I 2014, the uemploymet rate for those aged was more tha seve percetage poits higher tha the total uemploymet rate. Promotig etrepreeurship has become a icreasigly accepted policy tool for reducig uemploymet ad creatig sustaiable jobs. However, etrepreeurship is ot i itself a solutio to youth uemploymet ad is ot without its ow risks. Although Europea data show that a higher proportio of youg people geerally express a preferece for self-employmet tha older age groups, the self- employmet rate for youg people i the EU is particularly low. This may be dow to specific barriers that they face whe startig a busiess. This report provides a overview of the curret start-up support measures targeted at youg people, as well as other more geeral measures that have relevace for them. It also reviews evaluatios of the impact of selected measures ad the methodologies used. The effectiveess of youth etrepreeurship policies is particularly difficult to assess, ad this report aims to highlight key issues i relatio to the implemetatio as well as the evaluatio of start-up support measures. Keywords Europe, Great Recessio, start-ups, youth employmet, youth etrepreeurship Commets Suggested Citatio Europea Foudatio for the Improvemet of Livig ad Workig Coditios. (2016). Start-up support for youg people i the EU: From implemetatio to evaluatio. Luxembourg: Publicatios Office of the Europea Uio. This article is available at DigitalCommos@ILR:

3 Start-up support for youg people i the EU: From implemetatio to evaluatio Member of the Network of EU Agecies

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5 Start-up support for youg people i the EU: From implemetatio to evaluatio Europea Foudatio for the Improvemet of Livig ad Workig Coditios

6 Whe citig this report, please use the followig wordig: Eurofoud (2016), Start-up support for youg people i the EU: From implemetatio to evaluatio, Publicatios Office of the Europea Uio, Luxembourg. Author: Sara Riso Research maager: Sara Riso Eurofoud project: Start-up support for youg people A assessmet of selected labour market policies Ackowledgemets: Eurofoud would like to thak James Seett ad Vicky Dolevy (Ecorys UK), who cotributed to Chapter 3 (Evaluatio of start-up support measures), ad Lea Jacobs (Eurofoud), who cotributed to Chapter 2 (Mappig start-up support measures for youg people). I additio, this report has beefited from isightful commets from a umber of atioal stakeholders, policy advisors ad exteral experts i the area of policy evaluatios, etrepreeurship ad small busiess policies. I particular, Eurofoud would like to thak Prof. David J. Storey (Uiversity of Sussex), Prof. Magus Klofste (Liköpig Uiversity) ad Adrej Horvath (Ipsos-MORI), Paul Culle (Irish govermet) ad Rossella Beedetti (Uio of Italia Workers, UIL). Luxembourg: Publicatios Office of the Europea Uio, 2016 Prit: doi: / ISBN: TJ EN-C PDF: doi: / ISBN: TJ EN-N The Europea Foudatio for the Improvemet of Livig ad Workig Coditios (Eurofoud) is a tripartite Europea Uio Agecy, whose role is to provide kowledge i the area of social ad work-related policies. Eurofoud was established i 1975 by Coucil Regulatio (EEC) No. 1365/75 to cotribute to the plaig ad desig of better livig ad workig coditios i Europe. For rights of traslatio or reproductio, applicatios should be made to the Director, Europea Foudatio for the Improvemet of Livig ad Workig Coditios, Wyattville Road, Loughlistow, D18 KP65, Irelad. Europea Foudatio for the Improvemet of Livig ad Workig Coditios Telephoe (+353 1) iformatio@eurofoud.europa.eu Web: Europe Direct is a service to help you fid aswers to your questios about the Europea Uio. Freephoe umber (*): (*) Certai mobile telephoe operators do ot allow access to umbers or these calls may be billed. Cover image: Shutterstock

7 Cotets Executive summary Itroductio 1. Policy cotext 2. Mappig start-up support measures for youg people 3. Evaluatio of start-up support measures 4. Coclusios ad policy poiters Bibliography Aex

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9 Executive summary Itroductio Youg people have bee hit hardest by the Great Recessio. I 2014, the uemploymet rate for those aged was more tha seve percetage poits higher tha the total uemploymet rate. Promotig etrepreeurship has become a icreasigly accepted policy tool for reducig uemploymet ad creatig sustaiable jobs. However, etrepreeurship is ot i itself a solutio to youth uemploymet ad is ot without its ow risks. Although Europea data show that a higher proportio of youg people geerally express a preferece for self-employmet tha older age groups, the selfemploymet rate for youg people i the EU is particularly low. This may be dow to specific barriers that they face whe startig a busiess. This report provides a overview of the curret start-up support measures targeted at youg people, as well as other more geeral measures that have relevace for them. It also reviews evaluatios of the impact of selected measures ad the methodologies used. The effectiveess of youth etrepreeurship policies is particularly difficult to assess, ad this report aims to highlight key issues i relatio to the implemetatio as well as the evaluatio of start-up support measures. Policy cotext At EU level, sice 2008, there has bee a shift from policy promotig small ad medium-sized eterprises towards policy promotig etrepreeurship, partly drive by the steady declie i youth employmet rates i may Member States. This sigifies a shift of priorities from boostig competitiveess ad sustaiable ecoomic growth, i the cotext of the Lisbo Strategy, towards tacklig uemploymet ad promotig job creatio, which are core objectives of the Europe 2020 strategy. Greater emphasis has bee placed o youg people, particularly those ot i employmet, educatio or traiig (NEETs). The promotio of youth etrepreeurship is emphasised i the Youth Employmet Package. This icludes the Youth Guaratee, established i 2013, which aims, amog other thigs, to esure greater availability of start-up support services for youg people. All Member States have preseted their atioal Youth Guaratee Implemetatio Plas (YGIPs), may ecompassig start-up support icetives for youg etrepreeurs. However, these vary betwee Member States, ad there are also differeces i the type of etrepreeurship support measures offered to youg people. Uderstadig the variety of start-up support measures that exist across the EU ad their impact, as well as the value of differet impact evaluatios, is importat i order to better achieve the goals laid out by the Youth Guaratee. Key fidigs Mappig of start-up support measures Nearly all Member States have etrepreeurship policy measures i place. A growig umber are youth-specific, itroduced mostly i respose to the high youth uemploymet rates. May start-up itervetios for youg people are discrete, small-scale, temporary measures with relatively limited fiacial resources, which may reduce their overall potetial impact. Although their effectiveess may be ehaced whe embedded i holistic ad well-coordiated etrepreeurship policies, few start-up support measures are set withi larger policy frameworks or broader youth employmet strategies. Youth etrepreeurship measures typically feature soft support i the form of etrepreeurship traiig, advisory services, metorig ad coachig, or a combiatio of these with fiacial icetives. The approach adopted by 1

10 log-stadig ad successful programmes for youg people such as the ofte-cited Price s Trust Eterprise programme i the UK feature a phased approach, providig all-roud support throughout the differet stages of the etrepreeurial process, from the coceptualisatio of the busiess idea to the actual lauch ad developmet of the busiess. Despite the icreasig umber of youth etrepreeurship iitiatives, may of the available measures are directed at the uemployed as part of active labour market policies (ALMP); this, however, does ot preclude their iclusio i coutries YGIPs. May of these geeral start-up support measures have limited applicability to youg people as striget selectio criteria ofte apply. The most suitable schemes offer help i the pre-start-up phase, because youg people lack prior work experiece ad basic etrepreeurial skills. Review of policy evaluatios The growig iterest i youth etrepreeurship has ot bee matched by soud evaluatios of the impact of specific iitiatives. Oly three of the impact evaluatios aalysed, which used advaced ad robust statistical methods, assess measures directly or specifically targetig youg people (CréaJeues i Frace, the predecessor of the curret Price s Trust Eterprise programme i the UK ad the Juior Achievemet Compay Program i Swede). Other evaluatios carried out o youth-specific schemes are moitorig-type exercises providig iformatio o take-up ad participats opiios o the differece that the assistace made to them. Although these are useful ad iformative, they do ot tell much about the effectiveess of the itervetios. A commo fidig is that the more sophisticated the evaluatio approach, the lower the idetified impact of the programme beig evaluated. Amog the studies reviewed, the evaluatio that applied the most robust ad scietific method used i policy evaluatio (the experimetal method) foud the policy had o impact. I may cases, the evaluatio process was hampered by the measure s iitial lack of clearly defied objectives ad quatifiable targets. To overcome this, may of the evaluatios reviewed adopted a post-ratioalisatio approach to the assessmet of performace agaist objectives, whereby targets were iput afterwards by researchers as part of the evaluatio exercise. I additio, very few evaluatios have explored the magitude of possible deadweight loss (where the outcomes are ot additioal to what would have happeed i the absece of the support) ad displacemet effects (egative cosequeces for competitor eterprises) resultig from ay type of etrepreeurship policy. Whe this is doe, the estimates ted to be based o self-reported data ad vary greatly betwee studies. Policy poiters Cosiderig that expediture o soft forms of support for youg people is likely to grow with the implemetatio of the Youth Guaratee, there is a pressig eed to ivestigate the impact of these itervetios o the labour market outcomes of youg people. Assessig the log-term impact of policy itervetios i terms of ehaced employability of youg people is particularly importat ad should be take ito accout i policy evaluatios to a greater extet tha has bee doe so far. Equally essetial is the exploratio of potetial deadweight loss ad displacemet effects associated with etrepreeurship policies, to esure public resources are used efficietly ad effectively. 2

11 There is a eed to move towards experimetal evaluatios whe assessig youth itervetios. Quasi-experimetal approaches, for example usig propesity score matchig, rely heavily o data o the employmet history of idividuals, ad there is limited potetial to do this for youg people. A comprehesive assessmet of the impact of busiess start-up support schemes should iclude both quatitative ad qualitative elemets. All start-up programmes should have clear objectives ad idicators agaist which success ca be measured. I priciple, elemets of all schemes could be replicated i other EU coutries, but it is essetial to questio first the validity ad effectiveess of the itervetios. Properly implemeted evaluatios are therefore idispesable, ideally desiged as a itegrated part of the policy delivery ad adequately resourced. 3

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13 Itroductio Scope of the research I recet years, youth etrepreeurship has attracted icreasig policy attetio for its potetially importat role i easig the etry of youg people ito the labour market i the face of growig youth uemploymet. Youth etrepreeurship ca tackle youth uemploymet directly by creatig employmet opportuities for youg etrepreeurs ad idirectly by geeratig jobs for other youg people employed by start-ups. I spite of the potetial beefits of youth etrepreeurship, start-up support measures i the EU Member States vary cosiderably i their cotet, delivery mechaisms ad overall ambitios. At EU level, the promotio of youth etrepreeurship has received a reewed impetus with the establishmet of a Europea Youth Guaratee i 2013, whose primary objective has bee to combat growig levels of youth uemploymet. Oe specific aim of the iitiative is to ecourage youth etrepreeurship ad esure greater availability of start-up support services. A umber of Member States have already itroduced start-up support measures for youg job-seekers as part of the implemetatio of the Youth Guaratee. Policy measures helpig youg people to start their ow busiess as a way to itegrate them ito the labour market are by o meas ew. Itervetios of this kid are ofte embedded i existig active labour market policies (ALMP) ad do ot exclusively target youg people. The experiece gaied i desigig, implemetig ad deliverig start-up support measures, whether targetig youg people or ot, may assist policymakers i desigig effective istrumets that could ultimately lead to a successful implemetatio of some Youth Guaratee iitiatives. With this aim i view, the first part of the report maps a umber of start-up support measures for youg people implemeted i EU Member States, as well as geeral start-up support measures (ope to people of all ages) that have relevace for youg people. For the purpose of the research, a broader defiitio of youg people is adopted to iclude those aged up to 29 or those who are categorised by atioal authorities as youg people. Apart from age, the target group for the support measures reviewed i this report are primarily people who are curretly ot employed. This reflects the overall aim to examie schemes that may be used as part of the Youth Guaratee. Outside the scope of this review are broad etrepreeurship policies supportig self-employmet ad busiess creatio as well as educatioal etrepreeurship measures, to the extet that they are ot aimed at creatig actual busiess vetures. The report focuses therefore o publicly supported policy measures directed at idividuals either youg people or, more geerally, the uemployed (icludig youg people) who are cosiderig or may cosider startig a ew busiess, or who have just doe so. It should be oted that this research is ot iteded to comprehesively map all existig start-up support measures that are youth-specific or that have relevace for youg people, but it illustrates the key desig features of such iitiatives ad the breadth of the support offered. I this sese, the itervetios examied should ot be regarded as best practice. Chapter 2 illustrates a broad rage of etrepreeurship measures categorised as hard (fiacial support) or soft (etrepreeurship traiig, advice, metorig ad coachig) or a combiatio of the two. Also featured are selected public iitiatives to improve etrepreeurial awareess, establish liks with the educatio system ad provide a supportive etrepreeurial ifrastructure. Overall, the start-up support measures idetified are very diverse but preset i virtually all Member States. I may cases, youth etrepreeurship itervetios are discrete, small-scale, stadaloe, temporary measures with limited fiacial resources, resultig i relatively few applicats beig grated support. The Youth Guaratee has helped to place may of the existig measures uder a overall youth employmet strategy, but more effort should be made to ehace the complemetarity betwee the available measures, improve coherece i the overall approach, ad highlight the relevace for youg people of pre-existig geeral start-up support measures. 5

14 Chapter 3 reviews evaluatios of the impact of selected start-up support measures. I doig so, it highlights some of the key methodological issues ad limitatios of the evaluatio exercise. A distictio is made betwee moitorig approaches focusig o implemetatio issues (for example, take-up rates) ad more statistically sophisticated evaluatios relyig o multivariate aalysis ad the estimatio of couterfactuals to assess the impact ad value added of each measure uder ivestigatio. This distictio recogises that differet evaluatio methodologies geerate differet evidece of the impact of the itervetios, without discardig at the outset the value of ay form of evaluatio. The use of a variety of data ad methodologies is particularly beeficial, whereby results from moitorig-type exercises ca be used as baselie results o which to build, usig more robust ad scietific methods. The review of the selected evaluatios shows that the specific policy ratioale of the itervetios teds to be uclear or uderspecified. The assessmet of the impact of policy measures is ofte hidered by the iitial lack of clear ad quatifiable objectives ad explicit targets. Also, there is scope for improvemet i the evaluatio techiques used, eve whe a couterfactual desig is employed. I spite of the may limitatios, it is possible to draw key lessos from what has bee doe so far o policy evaluatios, ad this ca cotribute to a rethikig of policy desig i the area of youth etrepreeurship. The coclusios i Chapter 4 based o this assessmet are therefore iteded to iform future policy developmets, i particular the implemetatio of the Youth Guaratee programmes, by providig iformatio o what works i start-up support measures, otably those targetig youg people. Methodology The mappig of curretly operatioal start-up support measures is compiled o the basis of idividual atioal reports from Eurofoud s etwork of Europea correspodets, coverig all 28 EU Member States plus Norway. The review of selected evaluatios of start-up support measures draws from the evaluatio literature i the area of etrepreeurship, as well as i-depth qualitative iterviews with the evaluators who had bee ivolved i the evaluatios or relevat stakeholders i the commissioig bodies, or both. Although moitorig-type exercises are also reviewed, greater emphasis is placed o evaluatios usig more sophisticated approaches based o experimetal ad quasi-experimetal desigs, which eable a clearer idetificatio of the et effect of the policy itervetios. The growig iterest i youth etrepreeurship has ot bee matched by soud evaluatios of the impact of specific iitiatives. Oly three of the selected impact evaluatios cocer measures directly or specifically targetig youg people. The other selected evaluatios focus o geeral start-up support measures for the uemployed. Isight ca be draw, however, from evaluatios o geeral start-up support measures to iform policymakig o youth etrepreeurship ad potetially feed ito the implemetatio of the Youth Guaratee. Due to the limited umber of evaluatios assessig idividual measures, as well as the diversity of the selected evaluatios i terms of both methods used ad performace outcomes, it is difficult to compare the evaluatios agaist each other. 6

15 Policy cotext 1 Youth etrepreeurship i Europe at a glace I the Europea Uio, the youth uemploymet rate (those aged 15 29) stood at 17.5% i 2014, agaist a total uemploymet rate of 10.2% i the same year. There are, however, large variatios betwee Member States, with the highest youth uemploymet rates i the souther ad peripheral EU coutries whose labour markets were most affected by the Great Recessio (Figure 1). Figure 1: Youth uemploymet rate (15 29-year-olds), EU ad Norway, % Source: Eurostat, EU-LFS The growig pool of jobless youg people is a sigificat waste of huma capital that could otherwise cotribute to ecoomic growth. The ecoomic loss due to the disegagemet of youg people who are ot i employmet, educatio or traiig (NEETs) has bee estimated to be approximately 162 billio, correspodig to roughly 1.25% of Europea gross domestic product (GDP) (Eurofoud, 2014). Beig uemployed at a youg age ca also have log-term scarrig effects i terms of, for example, subsequet lower pay, reduced employmet prospects ad lower levels of well-beig (see Bell ad Blachflower, 2011; Stradh et al, 2014). Agaist this backgroud, youth etrepreeurship has bee icreasigly regarded by policymakers as a viable meas of tacklig youth uemploymet, promotig job creatio ad helpig youg people ulock their etrepreeurial potetial ad talets. Youth etrepreeurship is ot oly see as a possible route out of uemploymet, but also as a alterative to traditioal forms of employmet that are becomig rarer i the curret ecoomic climate. It is also a potetial source of ecoomic dyamism ad of positive secodary employmet effects if sustaiable busiesses are created. Startig a ew busiess is, however, ot a free-risk choice for youg etrepreeurs or i itself a solutio to the youth uemploymet problem. Previous research has shed light o the similarities ad differeces betwee etrepreeurship amog youg people ad geerally. Accordig to research for the Iteratioal Labour Orgaizatio (ILO), youg people face uique costraits ad greater challeges to etrepreeurship compared with older age groups, due to limited resources ad experiece. The report emphasises that the rage of barriers as well as the variety of potetial methods ad measures to couter them is more extesive tha of older etrepreeurs (Schoof, 2006, p. xii). Amog the most promiet impedimets are lack of capital ad isufficiet start-up fiacig, lack of busiess experiece ad skills 7

16 related to busiess maagemet, limited experiece with admiistrative complexity ad procedures, absece of busiess coectios, ad limited kowledge of available busiess-support services. Negative societal ad cultural attitudes toward youth etrepreeurship, which vary betwee coutries, may also act as strog disicetives by geeratig a fear of failure ad potetially stop youg people from makig the leap ad startig a ew busiess. Perceptios of self-employmet A special report focusig o youth etrepreeurship, which draws o 2013 Global Etrepreeurship Moitor (GEM) data, shows that the EU (compared with other broad world regios) has the highest perceptio amog both youger people (aged 18 34) ad older people (aged 35 64) that fear of failure would prevet them from startig a busiess 46.7% expressed this view (Kew et al, 2013). Joit research by the Orgaisatio for Ecoomic Co-operatio ad Developmet (OECD) ad the Europea Commissio has also highlighted the differet barriers ad facilitators likely to affect the rate of youth etrepreeurship, icludig role models ad attitudes, etrepreeurial skills ad experiece, fiacial resources ad market barriers (OECD ad the Europea Commissio, 2014b). The most recet Flash Eurobarometer o etrepreeurship shows that youg people (aged 15 24) are the most likely to poit to a lack of relevat skills as the mai reaso for ot viewig self-employmet as feasible, while those i the age group are the most likely to cite the lack of capital ad fiacial resources for seeig self-employmet as ufeasible (Table 1) (Europea Commissio, 2012a). Table 1: Perceived barriers to self-employmet by age group, years % years % years % 55+ years % Not eough capital Curret ecoomic climate is ot good for a start-up Not eough skills to be self-employed No busiess idea Difficult to recocile with family commitmets Risk of failure ad legal ad social cosequeces are too big Note: Resposes to questio Why would it ot be feasible for you to be self-employed withi the ext 5 years? (multiple resposes possible). Source: Europea Commissio, 2012a I spite of the may barriers to etrepreeurship, there is evidece that perceptios of etrepreeurship are particularly positive amog youg people. Eurobarometer data report a higher propesity to egage i etrepreeurial activities amog youg people (Europea Commissio, 2012a). Youger respodets aged (45%) i the EU are more iclied to express a preferece for self-employmet tha older age groups (ragig from 37% to 35%). The youger age cohorts (15 24 ad years old) also express a higher level of belief that self-employmet would be feasible for them (41% ad 44% respectively) withi the ext five years. Figures were lower amog older respodets aged (33%) ad over 55 (16%). 8

17 Box 1: Methodological challege i measurig etrepreeurship Although self-employmet is ofte used as a proxy for etrepreeurship i empirical studies, the two cocepts are ot iterchageable. A potetially useful distictio is foud i the Europea Uio Labour Force Survey (EU-LFS), which distiguishes betwee the self-employed workig for themselves ad those employig other people. These two categories of self-employmet are ot ecessarily o a cotiuum; ot all those who start off as sole traders ed up expadig their busiess ad employig other people. I some cases, sole traders opt for this form of self-employmet out of ecessity or preferece or because it is the orm i the sector or occupatio i which they operate (as is the case with farmers or costructio workers). Both categories are etrepreeurs, but oe could make the case that those who are self-employed with employees are more etrepreeurial they assume the additioal risk of employig others ad therefore this category could be regarded as a more useful measure idicatig the potetial of etrepreeurial activity. Accordig to the framework developed by the OECD ad Eurostat i the cotext of the Etrepreeurship Idicators Programme, oe of the measures of etrepreeurial activity is the chage i the umber of etrepreeurs who are employers (i other words, self-employed persos who are ot workig aloe ad who are ot family workers) (Eurostat, 2012, p. 10). A differet subcategory of etrepreeurial activity is used by the GEM so-called total early-stage etrepreeurial activity (TEA) which icludes idividuals (of all ages) i the process of startig a veture ad those ruig a ew busiess for less tha three years. Self-employmet ad age Although youg people idicate a higher propesity to egage i etrepreeurial activities, the reality is somethig else. As show by EU-LFS data, youg people are less likely to be self-employed tha older cohorts. From a geder perspective, wome are less likely to be self-employed tha their male couterparts across all age groups (Figure 2). Recet research suggests that the lower percetages reflect etreched labour market geder stereotypes (OECD ad Europea Commissio, 2015). Age remais, however, the mai determiat of beig self-employed. I 2014, oly 1% of the total EU youg populatio aged betwee 15 ad 29 were self-employed with employees, while a higher percetage (5.5%) were sole traders self-employed without employees. The percetages for both forms of self-employmet i the ad 50+ age cohorts are higher (Figure 2). 9

18 Figure 2: Percetage of self-employed i total employmet, by age ad geder, EU, % years years years years years years Me Wome Self-employed with employees Self-employed without employees Source: Eurostat, EU-LFS This patter of employmet is ot surprisig as it takes time, experiece ad resources to develop a busiess (ad become a employer), ad youg people are less likely to be i that positio tha their older couterparts due to their recet etrace ito the labour market ad more limited fiacial ad huma resources. Apart from these cosideratios, ad the fact that may of them study util their mid-20s, the low level of youth self-employmet may also be idicative of key barriers youg people face i settig up a busiess. The fact that youg people, compared with the older populatio, are more likely to report a preferece for self-employmet but less likely to be self-employed may stem from a combiatio of factors such as lack of opportuities or specific impedimets to becomig self-employed. It may also reflect a mismatch betwee what youg people thik it is like to start ad ru a busiess, ad what it actually ivolves. Self-employmet (maily without employees) teds to be cocetrated i the primary sector (icludig agriculture) ad costructio across all age groups (Figure 3). This form of employmet is commo i these sectors, ad it is geerally ot associated with etrepreeurship. I cotrast, the higher-tha-average rate of youth self-employmet i kowledge-itesive sectors might be more suggestive of etrepreeurial activities or idicate some etrepreeurial potetial. But the pricipal observatio is that, across all broad sector categories, the share of etrepreeurial employmet rises sharply with age; youger workers are especially uder-represeted i the raks of the self-employed. 10

19 Figure 3: Share of self-employmet i total employmet, by sector ad age group, EU, % Primary sector Costruc o Kowledge-itesive sectors Less kowledge-itesive sectors Low-tech idustry High-tech idustry years years years 65+ years Source: Eurostat, EU-LFS, Q2 data, 2014 Usig a differet measure of etrepreeurial activity, the 2014 GEM foud that the EU has lower rates of TEA (7.8%), particularly compared with North America but also other developig coutries. Across all world regios, TEA is more proouced i the age group, beig approximately 11% i the EU ad 17% i North America (the latter has the most balaced distributio of TEA across all age groups) (Siger et al, 2015). Educatio I terms of huma capital variables, Eurofoud research shows that educatioal attaimet is positively correlated with youth self-employmet (Eurofoud, 2015). However, there is evidece from the etrepreeurship literature that the relatioship with educatio is ot that straightforward ad, i some cases, it may have the opposite effect, decreasig the probability of eterig self-employmet (Johasso, 1998). Previous research foud that the stregth of the relatioship varies cosiderably across coutries (Cowlig, 2000), ad the effects differ depedig o the types of etrepreeurship (Ardaga ad Lusardi, 2010). Research also shows that i the USA higher educatioal attaimet is correlated with a higher probability of beig self-employed (Blachflower, 2004). Other empirical studies have cosidered the ifluece of paretal backgroud i self-employmet o the choice of self-employmet (Du ad Holtz-Eaki, 2000; Sørese, 2007; Colombier ad Masclet, 2008; Adersso ad Hammarstedt, 2010, 2011; Lidquist et al, 2015) ad the ability to create jobs for others, ad this work foud some positive correlatios (Heley, 1999, 2005). This suggests relevat skills are ot acquired oly through educatio but also by example. 11

20 Variatios by coutry Aggregate youth self-employmet data from the EU-LFS hide large variatios betwee EU coutries (Figure 4). Due to the margial share of youg people i self-employmet with employees, coutry-level data that distiguish betwee selfemploymet with ad without employees are ot particularly iformative. Lookig at the geeral youth self-employmet rate by coutry, it becomes apparet that it teds to be higher i EU coutries with lower youth employmet rates. I 2014, Italy ad Greece recorded the highest self-employmet rates amog year-olds (15.2% ad 14.5% respectively). These high percetages may be iflated by the umber of people i bogus or false self-employmet, a pheomeo particularly commo amog youg people who, i the absece of better employmet alteratives, are registered as if they were self-employed but actually work for a sigle employer or cliet ad perform tasks as if they were employees. This practice, which ca reduce labour costs for some employers, is ofte associated with low-quality employmet, a high level of isecurity ad poorer workig coditios (Eurofoud, 2009). Figure 4: Employmet ad self-employmet rates amog year-olds, EU, 2014 EU28 Italy Greece Romaia Slovakia Czech Republic Polad Spai Belgium Cyprus UK Netherlads Latvia Sloveia Malta Bulgaria Filad Lithuaia Portugal Frace Luxembourg Hugary Croa a Irelad Estoia Swede Austria Germay Demark % Self-employmet rate Employmet rate Notes: The employmet rate is employmet divided by populatio for a give age group; the self-employmet rate is the umber of self-employed workers as share of total employed persos for a give age group. Source: Eurostat, EU-LFS 12

21 It may be the case that, i these coutries, youg people become self-employed because of limited paid employmet opportuities; self-employmet may be see as a alterative to uemploymet rather tha a highly desirable ad deliberate choice to pursue a career as a etrepreeur, thus potetially leadig to ustable ad precarious employmet. O balace, the data suggest that the youg self-employed populatio is ot a homogeeous group. This is partly dow to cultural differeces across coutries that ca either ecourage or discourage idividuals to take the etrepreeurship route. For this reaso, cultural differeces as well as associated cultural factors should be take ito accout whe desigig start-up schemes as a solutio to uemploymet. Youth etrepreeurship o the EU policy ageda At EU level, promotig youth etrepreeurship is part of a strategy to reduce youth uemploymet ad social exclusio, ad to stimulate job creatio. The focus o youth etrepreeurship is, however, relatively recet ad was prompted by the disproportioate impact of the post-2008 ecoomic crisis o youth employmet prospects. Prior to the recessio, EU policy iitiatives o etrepreeurship were more drive by the eed to boost competitiveess ad achieve sustaiable ecoomic growth. This was oe of the key priorities i the cotext of the Lisbo Strategy, lauched i March I the same year, the Europea Commissio approved the Europea Charter for Small Eterprises, which outlied actios to help small eterprises to grow ad become drivers of iovatio, employmet ad cohesio i Europe (Europea Commissio, 2002). The importace of etrepreeurship for growth was also highlighted i the Gree Paper o etrepreeurship i Europe published by the Europea Commissio i 2003, while at the same time ackowledgig the low level of etrepreeurship i Europe compared with coutries outside the EU (Europea Commissio, 2003). As a follow-up to the Gree Paper, the Commissio preseted the Actio Pla for Etrepreeurship (adopted i 2004), which established a framework revolvig aroud five strategic priority areas: fuellig etrepreeurial midsets; ecouragig more people to become etrepreeurs; gearig etrepreeurs for growth ad competitiveess; improvig the flow of fiace; creatig a friedlier regulatory ad admiistrative framework for small ad medium-sized eterprises (SMEs). I recogitio of the may impedimets to etrepreeurship, the Commissio also adopted the Small Busiess Act i 2008, which outlied some key priciples to guide the desig ad implemetatio of policies aimed at helpig start-ups by both youg etrepreeurs ad etrepreeurs i geeral. I recet years, there has bee a shift from SME-drive policies towards etrepreeurship policies. The steady declie i youth employmet rates i may Member States sice 2008 was oe of the drivers of a reshapig of EU policies o etrepreeurship, shiftig the focus particularly to youg people ad with special emphasis o those furthest away from the labour market (NEETs). Followig the Europea Commissio s commuicatio A EU strategy for youth Ivestig ad empowerig (Europea Commissio, 2009), the Coucil of Youth Miisters adopted, i November 2009, a resolutio o a reewed framework for Europea cooperatio i the youth field ( ), kow as the EU Youth Strategy (Coucil of the Europea Uio, 2009). Employmet ad etrepreeurship feature as oe field of actio for supportig the itegratio of youg people ito the labour market, either as employees or etrepreeurs. Member States were called to take actio to promote youth etrepreeurship through differet meas, icludig targeted educatio, access to fuds, metorig ad support etworks. 13

22 Lauched i 2010, the Europe 2020 strategy also focuses strogly o youg people ad promotes youth etrepreeurship as oe of its core objectives. Furthermore, its flagship iitiative Youth o the move proposes a package of educatio ad employmet measures specifically targetig youg people. Liks betwee the EU Youth Strategy ad Europe 2020 are beig developed ad are expected to be further stregtheed (Europea Commissio, 2012b). Natioal Reform Programmes All Member State govermets submit ad update o a yearly basis their Natioal Reform Programmes (NRPs), which illustrate how Europe 2020 targets are to be achieved ad how obstacles to growth will be overcome. Busiess start-up grats ad etrepreeurship icetives are ewer measures that have bee itroduced as part of the NRPs, particularly i Member States with high youth uemploymet, as well as those that joied the EU betwee 2004 ad 2007 (Besamusca et al, 2013). Box 2: Start-up support i the cotext of the NRPs A umber of Member States i their NRPs have committed themselves to improvig the busiess eviromet through better ad easier access to fiace ad simplificatio of admiistrative procedures ad regulatios for busiess startups. Some NRPs explicitly metio youth etrepreeurship programmes. For example, the promotio of youth etrepreeurship is a key priority of govermet policy i Cyprus, ad the Youth Etrepreeurship Scheme ad the Social Eterprises Programme are specially desiged to ecourage youg people (aged 20 35) to develop their ow busiesses. However, measures specifically addressig the eeds of youg etrepreeurs are geerally less emphasised i the NRPs. The focus is o support for iovative etrepreeurship ad start-ups. Typically, the overall aim of policy measures supportig iovative etrepreeurship is to icrease the umber of techology-orieted start-ups that are more likely to lead to higher value-added jobs ad wealth creatio. Such measures target primarily the pool of highly educated potetial etrepreeurs (such as graduate studets, researchers or techologists), thus possibly sideliig other segmets of the populatio who may also beefit from etrepreeurial support. The most recet Italia NRP exteded the existig Smart & Start scheme co-fuded by the Europea Regioal Developmet Fud (ERDF) to support iovative start-ups across all Italia regios by providig zero-iterest loas to cover ivestmet ad maagemet costs for startig a busiess (Miisterial Decree of 24 September 2014). As part of its NRP, the Belgia federal govermet has committed itself to support youg SMEs ad microcompaies, particularly those operatig i iovative ad potetially high-growth sectors, by reducig start-up costs ad providig easier access to fiace. I the UK, the Techology Seed Fud was lauched i 2014 to provide early-stage risk equity capital for techology start-ups ad uiversity spi-offs. The approach take by the Maltese govermet to support iovative start-ups is through the ewly established MITA Iovatio Hub, which is iteded to ourish the iovatio of youg local etrepreeurs. Support for iovative start-ups is provided i Germay through well-established schemes such as the EXIST programme targetig techology-itesive start-ups at uiversities ad scietific cetres. The programme is also part of the Youth Guaratee. I additio, the Germa Accelerator Programme cotiues to support Germa high-tech start-ups i spedig three to six moths abroad i order to validate their busiess model ad, where ecessary, adapt 14

23 it to local eeds. Aside from the support to iovative start-ups, the advisory programme for etrepreeurs Start-up Coachig Germay (Grüdercoachig Deutschlad, GCD) cotiues to feature i the Germa NRP ad provides assistace ad coachig services to etrepreeurs, regardless of age. All Member States NRPs for 2015 are available at I the cotext of Europe 2020, the Commissio also lauched, i 2010, the Europea Progress Microfiace Facility, which, with the support of the Europea Social Fud (ESF) ad the Europea Ivestmet Bak (EIB), eables microcredit providers i the EU to icrease ledig for the establishmet or developmet of a busiess (Europea Commissio, udated). I may Member States, the microfiace facility also provides guidace ad coachig to youg micro-etrepreeurs. A more recet fiacig istrumet at EU level, promotig self-employmet through access to microfiace ad supportig the creatio of microeterprises, is the third axis of the Employmet ad Social Iovatio (EaSI) programme (Europea Parliamet ad Coucil of the Europea Uio, 2013). Youth Guaratee Further impetus for promotig ad supportig youth etrepreeurship came i 2012 from the Youth Employmet Package (as part of the wider Employmet Package), which icludes, amog other iitiatives, the Youth Guaratee. The latter was adopted by the EU s Coucil of Miisters i April 2013 ad was edorsed by the Europea Coucil i Jue of that year. As stated i the official memo published by the Europea Commissio: Uder the Youth Guaratee Member States should esure that, withi four moths of leavig school or losig a job, youg people uder 25 ca either fid a good-quality job suited to their educatio, skills ad experiece or acquire the educatio, skills ad experiece required to fid a job i the future through a appreticeship, a traieeship or cotiued educatio. (Europea Commissio, 2014a) Europea fudig is also available from the ESF, with a additioal 6 billio from the Youth Employmet Iitiative (YEI). Oe specific aim of the iitiative is to esure greater availability of start-up support services. I its Recommedatio of April 2013 o establishig a Youth Guaratee, the Coucil of the Europea Uio stated: makig start-up support services ad microfiace more available, ad establishig schemes for covertig uemploymet beefits ito start-up grats would play a importat role. (Coucil of the Europea Uio, 2013) All Member States have take ito accout the Coucil s Recommedatio ad preseted their atioal Youth Guaratee Implemetatio Plas (YGIPs), which, i some istaces, ecompass start-up support measures ad icetives for youg etrepreeurs. There are, however, differeces i the type of youth etrepreeurship support measures itroduced i the differet Member States as part of the atioal Youth Guaratee. These rage from access to fiace through loas ad grats, capitalisatio of uemploymet beefits, ad reductios i cotributios for the self-employed to soft support icludig advice, coachig ad skill developmet, or a mix of support measures. I a umber of Member States, startup support measures itroduced i the cotext of the atioal YGIPs are pre-existig measures that have bee modified or exteded to youg job-seekers (particularly NEETs) i the cotext of the Youth Guaratee. However, some Member States (for example, Greece, Malta, Luxembourg ad Slovakia) are i the process of desigig specific etrepreeurship programmes for youg people as part of the Youth Guaratee. It should be oted that the focus o start-up support i the 15

24 cotext of the Youth Guaratee varies betwee coutries. Some 14 atioal YGIPs provide specific iformatio about the ature of start-up support for youg people or explicitly ackowledge youth etrepreeurship support (Austria, Belgium, Germay, Filad, Frace, Greece, Irelad, Italy, Luxembourg, Latvia, Polad, Romaia, Sloveia ad Spai). The commo poit of departure of may start-up support measures placed uder the baer of the Youth Guaratee is that etrepreeurship is a viable ad effective way to tackle the pressig problem of youth uemploymet. This policy ratioale, however, has potetial dowsides that require reflectio. To date, there is o clear evidece that selfemploymet amog youg people leads to better youth labour market performace, ad the associatio betwee etrepreeurship ad uemploymet is ot that straightforward (Joes et al, 2015). Etrepreeurship may be a viable route to employmet ad offer opportuities for some youg people, but it is ot suitable for all uemployed youg people. Previous research, drawig o data collected by a UK bak, shows that the age of the busiess proprietor is the primary sigle determiat of busiess survival, with busiess vetures started by older etrepreeurs survivig for loger (Cressy, 1994, p. 30; Cressy, 1996). This fidig is corroborated by further empirical evidece showig that busiess vetures started by youger people have lower survival probabilities tha those fouded by older idividuals (va Praag, 2003) ad that, overall, youger people (aged 15 34) are substatially more likely to exit self-employmet tha their older couterparts (Li et al, 2000). O the other had, aalysis from Eurostat shows that busiesses started by youg people (aged uder 30) i 2002 had higher average growth rates whe surveyed agai i 2004 (Figure 5). Figure 5: Eterprise growth (umber of employees hired) betwee 2002 ad 2004, by age group of fouder < 30 years years 40+ years Source: Eurostat, 2006 The picture that emerges so far is rather uaced, ad the available evidece is far from suggestig that etrepreeurship is the best way of reducig youth uemploymet. It may be the case that youg people acquire relevat skills through etrepreeurship experiece ( etrepreeurial learig ) that may lead to better busiess performace i terms of survival. Yet, agai, there is o or limited empirical evidece of etrepreeurial experiece ifluecig subsequet startup performace (Coad, 2014). Youg people istead ca be scarred by busiess failure, especially i coutries where the stigma attached to bakruptcy makes re-eterig busiess difficult. There is evidece suggestig that etrepreeurs who fail have poorer subsequet busiess performace if they re-start (Metzger, 2006). Aother risk of public start-up support measures is that they may distort occupatioal choice by pushig o-skilled idividuals ito self-employmet, who are likely to retur to uemploymet whe the icetives are exhausted or ecoomic coditios chage (Millá et al, 2012). 16

25 A recet aalysis of the implemetatio of the Youth Guaratee at local level suggests that to be successful Youth Guaratee schemes should ecompass a wide rage of optios icludig idividual cousellig, career advice, traiig ad job subsidies, with the possibility of combiig differet measures (OECD ad Europea Commissio, 2014a). This holistic approach, as opposed to stadaloe itervetios, requires the coordiatio of may actors o the groud (such as traiig istitutios, public employmet services ad employers) to esure that services are aliged ad youg people are accompaied throughout the process ad provided with follow-up support. Other well-established EU mechaisms to support etrepreeurship are the structural fuds, maily the ESF ad the ERDF through their operatioal programmes. I particular, the ESF promotes etrepreeurship through fiacial ad busiess-support services. Targeted support is provided to uder-represeted ad disadvataged groups, icludig wome etrepreeurs ad people with disabilities. However, to date, there is o comprehesive mappig of structural fud itervetios supportig youth etrepreeurship ad its outcomes. The importace of further supportig youth etrepreeurship ad removig existig impedimets to busiess egagemet was recetly emphasised by the Europea Commissio s Etrepreeurship 2020 Actio Pla (Europea Commissio, 2013a). Agai, i 2014, the Coucil coclusio o promotig youth etrepreeurship to foster social iclusio of youg people uderlied the eed to promote ad support busiess start-ups ad social eterprises i overcomig the may barriers that youg etrepreeurs face, particularly access to fiace, support services ad metorig opportuities (Coucil of the Europea Uio, 2014). Furthermore, the Europea Commissio has lauched acillary iitiatives ad programmes aimed at icreasig kowledge about etrepreeurship, raisig awareess ad facilitatig the acquisitio of etrepreeurial skills. A case i poit is the ew busiess exchage programme, Erasmus for Youg Etrepreeurs, which was set up i 2009 as a pilot project. The programme targets etrepreeurs who ited to start a busiess or have started oe ad eables them to get practical coachig from a experieced etrepreeur from aother EU Member State by workig with them for up to six moths. Betwee 2009 ad 2014, over 6,500 etrepreeurs had participated i exchages uder the scheme. A prelimiary assessmet of the programme five years after its iceptio shows promisig results (Eurochambres, 2015). Over a third of the aspirig etrepreeurs participatig i the programme (36%) have created their ow busiess (Erasmus for Youg Etrepreeurs, 2015). The growig umber of iitiatives o youth etrepreeurship at EU ad atioal levels are idicative of the much greater emphasis give to youth etrepreeurship policies over recet years i a effort to reduce youth uemploymet ad social exclusio. I Member States, policy itervetios o youth etrepreeurship vary cosiderably i their cotet, delivery mechaisms ad aims. It should, however, be oted that start-up support measures are ot particularly used as part of ALMP; recet Eurostat data show that public expediture o start-up support icetives as a share of total ALMP expediture is limited ad margial (less tha 1%) i all but a hadful of easter Europea Member States. 17

26 Figure 6: Start-up support icetives as share of total ALMP expediture, selected EU Member States ad Norway, % Note: No data available for Cyprus, Demark, Frace, Greece, Irelad, Lithuaia, Malta, Netherlads, Romaia, Spai ad Uited Kigdom. Source: Eurostat, Labour Market Policy database, 2013 A assessmet of the impact of the available policy itervetios o etrepreeurship i geeral ad o youth etrepreeurship i particular would, evertheless, be timely ad ecessary with a view to desigig better ad more sustaiable policies addressig the very specific eeds of youg people i order to implemet the Youth Guaratee successfully. Existig evaluatios could explai success factors ad critical bottleecks for future itervetios supportig youth etrepreeurship ad start-ups by youg people. Accordig to the OECD ad Europea Commissio (2012), there is a eed to gather robust evidece o approaches that work. Oe of their key recommedatios is: To maximise effectiveess ad efficiecy, policy should target resources o youg people with the best chace of success, provide sufficiet support to allow them to start busiesses outside of low etry barrier but high competitio sectors, ad provide itegrated packages of complemetary support rather tha oe-shot istrumets. (OECD ad Europea Commissio, 2012, p. 3) They also emphasise that measures o youth etrepreeurship should be geared towards: developig etrepreeurship skills; providig iformatio, advice, coachig ad metorig; providig fiacial support; ad developig the ecessary ifrastructure for etrepreeurship. 18