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The unemployment rate among young people has reached painfully high levels, in particular among those young people with low levels of education. There are two crucial policy priorities to improve employment prospects for youth in Spain. First, in the very short term, there is need for quick action to target well-designed active labour market programs to the most disadvantaged youth and provide more job-search assistance and guidance for all youth experiencing difficulties in finding a job in the current labour market. Second, the current crisis is an opportunity to tackle some of the structural weaknesses in the Spanish youth labour market. This implies in particular reforms to prevent youth from dropping out of education at a very early stage and to improve the school to work transition of young people. Key issues are to better match skills acquired in education to those asked for by businesses, as well as to establish an effective system of vocational education, and to reduce remaining demand side barriers, notably labour market duality and a rigid collective bargaining system, which both have prevented an efficient allocation of labour resources in the past and a flexible adjustment during the crisis.

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With sound framework conditions, fine universities, good infrastructure and policies friendly towards foreign direct investment, Ireland scores high in international innovation scoreboards. Overall, policies to boost innovation and entrepreneurship are on the right track, but investment in knowledge-based capital could be made a more dynamic source of growth and jobs. While Ireland has made good progress towards building up its scientific capabilities, innovation capacity remains weaker than in other small advanced OECD countries, such as Austria, Denmark, Sweden and Switzerland.

To become more effective, the innovation strategy should be simplified, with a drastic reduction in the number of government agencies involved in funding innovation, so as to better focus on strengthening the linkages between the business and academic communities. While attracting high-tech multinationals should remain central, there is potential to better develop spillovers between these firms and domestic [small and medium-sized enterprises] SMEs, notably by establishing applied research centres. Entrepreneurship should be fostered by improving the business environment, including access to non-bank finance, streamlining the insolvency regime and transfer of intellectual property rights, and upgrading the broadband network.

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The economic situation of young people is unsatisfactory. Educational inequalities have been widening for over a decade, due to a sharp decline in the results of the most highly disadvantaged students. The unemployment rate for the 20-24 age bracket has not dropped below 16 per cent for nearly 30 years. French youth are highly pessimistic about the future and express great distrust of institutions. The social safety net sits uneasily between autonomy and family solidarity and is unfair because young people who are unemployed and have no solid financial backing from their families find themselves in precarious situations. Positive discrimination in education policies should be given a real priority and education spending rationalised to draw more resources to primary schooling. The autonomy of universities would be increased, as should the financial independence of young people. The workings of the labour market, some features of which penalise new entrants, need to be reformed and youth employment services enhanced.

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Australia's productivity growth has decelerated markedly around the turn of the century. Part of the decline is probably temporary, but raising multifactor productivity is key to ensure that living standards continue to grow strongly, especially if the currently strong terms of trade weaken over time. Recent efforts by the government are welcome. Ensuring responsive, high quality, vocational and higher education systems is indispensable to long-term growth. Raising the completion rate of vocational students, and enhancing the level of collaboration among the key innovation players are priorities. The productivity-enhancing effects of infrastructure could be boosted by more effective and strategic planning, new sources of funding, and better use of existing capacity. Efficient pricing for infrastructure services and rapid progress towards harmonisation of regulations across states would boost competition and productivity.

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Labour market reform to improve growth prospects and reduce inequality is a top priority in the face of rapid population ageing and a dualistic labour market. Sustaining output growth requires policies to mitigate the impact of rapid population ageing by increasing labour inputs from under-employed segments of the population. In particular, female labour participation should be encouraged by better work-life balance and increasing the availability of high-quality, affordable childcare. More flexible employment and wage systems would increase the age at which older workers leave firms. For young people, improved vocational education at the secondary and tertiary levels would help overcome the labour mismatch and the overemphasis on tertiary education. Labour market dualism creates serious equity concerns, as non-regular workers face significantly lower wages, precarious jobs, less coverage by social security and less training. A comprehensive approach is required to break down dualism, including reduced employment protection for regular workers, alongside improved social insurance coverage and expanded training for non-regular workers.

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In this paper we include measures of school quality in regressions determining the labour market premiums to education level. We use the matric exemption score and the pupil/teacher ratio of the respondents’ closest school during childhood as proxies for education quality. We find that the employment and earnings premiums to education level are robust to the inclusion of these quality measures. Moreover, there is a significant direct relationship between our quality measures and earnings, controlling for education level. Increasing the matric exemption score by 10 percentage points increases earnings, on average, by eight per cent and decreasing the pupil/teacher ratio by one learner is associated with a one per cent increase in earnings. No significant relationship is found between the school quality measures and employment.

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Sweden is a very egalitarian country but inequalities have risen and some groups are poorly integrated into the labour market. For growth to become more inclusive, the gap between the cost of labour and productivity for some groups needs to be reduced, transitions from education to work should be facilitated, incentives to take a job ought to be strengthened and the non-employed need to be protected against the risk of falling into unemployment or inactivity traps. This calls for lowering minimum wages relative to the average wage for groups at risk of becoming unemployed, improving vocational education and training, and extending the coverage of the unemployment insurance while strengthening obligations for the unemployed. To address labour market duality risks, the gap in job protection between temporary and permanent contracts needs to be reduced. Women's employment is high but the gender wage gap could be narrowed further by enhancing their employment opportunities.

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In Slovakia, educational outcomes are below the OECD average and are too dependent on the socioeconomic background of students. Unemployment is high and the school-to-job transition process does not work well. Spending on education and active labour market policies are very low by international standards. While reforms are under way in both areas, further efforts are needed to support the domestic drivers of growth. At a time of fiscal consolidation, these two policy areas should at the least be protected from budgetary cuts while every opportunity for efficiency gains should be seized. Not least because of the high level of long-term unemployment, more emphasis should be placed on activation policies, particularly on placement services, which are currently underfinanced but also insufficiently evaluated. Educational achievements and thus future labour market outcomes could be improved by re-allocating resources to teaching activities, in particular for disadvantaged pupils. Developing work-based vocational education would also facilitate the transition from school to work.

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The [New Zealand] NZ labour market is among the most flexible in the OECD, and outcomes for its young people have been among the best. However, labour market opportunities are heavily determined by initial education, where New Zealand's system is also successful and innovative in many ways. Average [Programme for International Student Assessment] PISA results are among the OECD's highest, but the dispersion of performance is also high, indicating a sizable group of underachievers. Those in disadvantaged groups tend to have poor scholastic outcomes. These initial educational handicaps show up in higher drop-out rates and youth joblessness, greatly limiting these youths' future life chances. Indeed, intergenerational persistence in educational and employment outcomes appears very high. From both a social and economic point of view, it will be essential to develop more fully the human capital of the fast growing demographic group of ethnic minorities. Better teaching quality is needed, with more attention devoted to diversity of student needs and learning approaches to keep children in school. A related problem is the apparently large divergence between the nature of skills supplied by the education sector and the skills demanded by employers. A greater role for youth apprenticeships could help to raise skill levels while aligning them better to the economy's needs. All this has an important bearing on the government's ambition to secure strong and sustainable growth with rising living standards and equal opportunities for all.

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Although job creation has improved since the end of the 2007-08 recession, the effects of the recession on the labour market remain severe. Unemployment duration is still extremely high, and many have withdrawn from the labour market altogether. Because the weakness is largely cyclical in nature, policy makers should place a high priority on supporting aggregate demand in the short term. Even so, policies are needed to help individuals return to work, as there is a risk that high long-term unemployment and weak labour market participation could evolve into structural problems. Greater emphasis should be put on activation measures that help individuals search for jobs more effectively or find adequate training programs. In the longer run, education and training are key to raising the skills and wages of the workforce. In this regard, educational reforms are needed to increase student achievement at all levels. High-quality vocational training can also be used to advance the skills of high school graduates. College completion rates could be improved by reducing financial and other barriers to education, and enhancing the community college system would be a cost-effective way to provide more individuals with an affordable way to obtain tertiary education. Disability insurance reforms are needed to reduce dependency on these programs and encourage participation in the workforce.

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