Long Term Youth Unemployment or Disposable Workforce?

This paper is about very long term unemployment (a more appropriate denomination could be "out-of-official-employment") in Italy, its concentration and the process of young worker disposal, an important, yet unexplored, determinant. “Very long” is not just “long”: we are dealing with 10-20 years of absence from the official labor market of male workers who were young at the beginning of these spells, and are in their thirties, forties or early fifties when we observe them. Young workforce disposal (YWD) reflects the fact that young people are observed at the beginning of their career as dependent employees, their services are "used" for few years (sometimes only few months) as if it were a disposable commodity, after which they disappear from the official labor market. The magnitude of YWD is dramatic: out of 100 new young entries - aged 19-30 at the start of their working career -, between 79 and 86 % are still at regular work (“survive”) after 10 years, and only 78 to 83% by 2009, after 17-22 years, depending on the timing of their initial employment. Many of these people may have joined the irregular economy, but there is no way to estimate their numbers other than by a gross comparison with the estimates of hidden employment provided by ISTAT. These developments imply out-of-official-employment durations four times longer than the unemployment durations provided by official statistics and econometric estimates based on LFS-type microdata. A simple model of the medium run development of the YWD process explains the medium run impact of several demand-side factors: labor cost dynamics, flexibility, age, initial entry conditions.