BRUSSELS – Italy’s new prime minister, Matteo Renzi, wants to attack high youth unemployment by cutting taxes on labor. There is much to be said for that approach – not only in Italy, but throughout Europe, where direct and indirect taxation on employers and jobs accounts for half of the total tax take, while taxes on capital comprise only a fifth. But tax reform will be a long and difficult slog, and there are much faster ways of getting young people into the workforce.
Thirty years ago, I took a long, hard look at the unemployment scourge then hitting Europe in a book called World Out of Work. The scourge is back, and it seems more intractable than ever. Yet there are three shortcuts to ending the jobs crisis in Europe, even if few EU governments seem interested in them.
The first shortcut is obvious: underwrite young entrepreneurs with unprecedentedly generous bank guarantees and tax holidays. The second is the much less obvious policy of raising female employment through cheap or even free childcare arrangements. And the third is the wholly counter-intuitive idea of making youth unemployment a great deal more manageable simply by re-calculating the statistics (that sounds phony, I know, but bear with me).
Even with respect to the obvious proposition of encouraging more people, and especially the young, to start their own business, governments have adopted the wrong approach. Yes, there are myriad schemes for subsidizing start-up companies and supplying centralized services and expertise in special business parks. But the first obstacle entrepreneurs usually encounter is the banks.