ࡱ> 7 bjbjUU D7|7|ĕ l$$$"Fbbbv)))8)$*vd|+(+"+++.". .ccccccc$9f Yhvcb.K.^...c+7bb++Mwd+7+7+7.b+b+c+7.c+7 +7A6Xbb~[++ @4,vB&)1Y[,d0dYh{4h~[+7vvbbbbTHE ROLE OF EDUCATION IN REDUCING YOUTH UNEMPLOYMENT IN THE GLOBALIZED WORLD AND CROATIA Vinko BARI, PhD., Full Professor Alka OBADI, PhD., Assistant Graduate School of Economics & Business, Zagreb University of Zagreb Sq. J.F. Kennedy 6 10000 Zagreb Croatia E-mail:  HYPERLINK mailto:alka@efzg.hr aobadic@efzg.hr Abstract: Currently, one of the most pressing issues facing developed and developing economies' labour markets is a problem of the youth unemployment. In a few countries there is quite large proportion of youths neither employed nor studying. Prolonged spells of unemployment at the beginning of a young person's "working" life can lead to serious long-term problems. Being unemployed on early stage of life have been shown to increase the probability of future joblessness. By emphasising the fundamental characteristics of youth unemployment problem, the key objective of this paper is to analyse the influence of education system on reducing the youth unemployment, especially coordination between the educational and employment policies. It should be noted that there is no clear distinction between the education and training systems and ALMP for young people. Key words: youth unemployment, employment policy, education system, EU, OECD, Croatia Introduction One of the most pressing problems of the labour markets of the developed and developing economies' is a problem of combating youth unemployment. This article concentrates at the issue of youth unemployment and examines the policy responses. Most examples concentrate on OECD, EU and transition countries. The first and the second part of this article concentrates on the contemporary youth unemployment problem. More and more young people are having trouble when first looking for work, and youth unemployment levels are clearly serious in many countries. The difference between youth labour market and adult labour market is tested in 26 selected countries. Opportunities for young and older workers to replace each other are limited. The intention is not to provide a plan for solving this particular global problem. Namely, national and regional circumstances vary widely across the world and policies that work well in one country may not be feasible in other, because of institutional, social, cultural and economic differences. Therefore, the main goal of the third and the fourth part in this article is to put forward a number of employment and education policy recommendations. The policy recommendations in this article are of sufficiently general nature so as to be applicable to industrialized, transition and developing countries. In the context of the youth unemployment and education policy, attention in this article is mainly restricted to the education and training system as a preparation for the world of work. The fifth part also gives a comparative analysis of education system in EU and Croatia, and points out future trends in education policy. Youth unemployment as a global concern In nearly all countries of the world youth unemployment rate is twice as high as the unemployment rate of older persons. It is also obvious that the participation rate of young people in the labour force is decreasing in most countries, despite widespread efforts to improve access of young workers to the job market. Direct intervention, including preferential hiring policies targeting younger persons, has been relatively unsuccessful in improving the job prospects of job seekers in the 15-24 age group in rigid markets. The data suggests that the gap between youth and adult unemployment rates in developing countries is wider than in industrialized nations (ILO, 1999). In developing countries, open youth unemployment is compounded by substantial levels of underemployment and poor-quality jobs in the informal sector. Both these phenomena are widespread, which suggests that the problem of integrating young people into labour market in developing countries is even more serious. The unemployment rates for workers between the ages of 16 and 24 in the OECD countries are typically the highest among all demographic groups and twice as high as the overall average. The situation is particularly dramatic in Greece, Italy, and France (see figure 1). In many transition economies, youth unemployment levels show a similar pattern. Given the massive reductions in output in many of countries moving towards a market economy, the problem is undoubtedly more serious than in most industrialized nations. Also, many countries in Central and Eastern Europe (CEE) still have substantial levels of hidden unemployment, with workers nominally being engaged by firms but not fulfilling any productive task or collecting any wages. On average, youth unemployment in the CEE countries is more than twice higher than that of the prime working age population (between 25-54) (see further in Obadi, 2003). Youth unemployment represents an obvious waste of human capital with long-term negative consequences for the individuals concerned and for those around them. It is often associated with rising crime and suicide and the emergence of an underclass with its own subculture and rules. However, in spite of these widely shared concerns, it is clear that in all countries, proportionally more young people are without a job today than two decades ago. This high unemployment rate of youth can be partly attributed to the limited relevance of education and skills development to the needs of the labour market; to the virtual absence of effective systems of public and private employment agencies; to the lack of programmes aimed specifically at the employment of youth; in addition to the slow down in economic activities during the 1990s. For a worker of any age, the longer an unemployment spell, the more difficult it is to find work because of the loss of skills, morale, psychological damage, but young one face additional risks (ILO, 2000): Early unemployment in person's career may permanently weaken his or her future productive capacity; Barriers to employment can hinder young people in the passage from adolescence to adulthood, which involves setting up a household and forming a family; High levels of youth unemployment may lead to alienation from society and democratic political processes, giving rise to social unrest. Having all that in mind it is obvious that consequences of youth unemployment are particularly serious and therefore youth unemployment can be considered as a universal problem. The youth unemployment rate by age group is the most common measure available for describing the labour market status of young people. Characteristics of youth unemployment Considering level of unemployment, unemployment is always higher among women and young people. The nature of youth unemployment varies from country to country, although numbers of features are remarkably constant. First key feature of youth unemployment is that youth unemployment is higher than adult unemployment in almost every country for which figures are available (EU countries and 11 transition countries), and this is the case whether aggregate unemployment in a country is high or low. Next analysis confirms earlier statement. When unemployment rates are compared by age, the 2002 youth unemployment rate in the EU and in some transition countries was still twice, or more, the rate of those aged 25 and over, except in Germany (see figure 1). In Belgium, Greece, Italy, and Luxembourg and the United Kingdom, the youth unemployment rate was more than three times the rate of those aged 25 and over. The large difference between the youth unemployment rate and the rate of those aged 25 and over is partly due to a low labour participation. The youth unemployment rate is particularly high in Greece and Italy; where more than 30% of young people of the labour force are unemployed (European Commission, 2002). Figure 1.  Source: European Commission (2003); OECD (2003a); CSO (1998-2000). The youth unemployment rates in CEE are on average twice as high as the adult unemployment rates. The high rate varying between 37% and 41% in Slovakia, Bulgaria and Poland, and 28% in Lithuania indicate a quite critical situation of young people on the labour market of the respective countries. The lowest values can be found in Hungary (around 10%), in the Czech Republic, Romania and in Slovenia (about 16-18%). Generally, in majority of the countries, there is no distinct pattern between male and female unemployment rates, but employment opportunities are generally more limited for young women than for young men. Regional variations in the youth unemployment rate correlate highly with regional variations in the adult rate. A second key feature of youth unemployment is that it is closely linked to adult unemployment, but also a fact that reacts differently on economic shocks. A simple linear regression where youth unemployment rate is dependent variable in selected group of 26 countries (15 EU countries and 11 transition countries from the figure 1) confirms that statement. Table 1. Linear regression of the youth unemployment rate on the adult unemployment rate ModelConstantAdult unemployment rateseF-statisticsDWR2 EMBED Equation.3 No. of observationsEstimated parameters*EU countries0.83 (0.3)2.5 (5.3)4.527.42.4150.670.6515Transition countries3.6 (1.3)2.1 (7.7)4.360.51.0680.870.8511Note: Dependent variable=Youth unemployment rate. Shaded coefficients are significant on the significance level of 5%. According to two-sided autocorrelation test empirical value d is greater than dU and less than (4-dU). Therefore, null hypothesis is accepted, in other words there is no autocorrelation in both models. Model is also tested only for Croatia, but according to Labour Force Survey data are available only from 2nd quarter in 1996, so the results for seven years could be interpreted only conditionally. Coefficient on adult unemployment is 2.49 and model is significant. * Figures in parenthesis are t-values for respective estimate coefficient. The results of linear regression of the youth unemployment rate on adult rate in the EU countries gives a coefficient on adult unemployment 2,5. For transition countries the corresponding coefficient on adult unemployment is 2,1. Thus, a one-percentage point rise in the adult unemployment rate is associated with an increase of two-and-a-half percentage points in the youth unemployment rate in the EU countries and around two percentage points increase in transition economies. In other words the model shows that the youth unemployment appears to be more affected by shocks hitting the aggregate labour market than the adult unemployment. The youth unemployment tends to vary with the educational attainment levels of individuals. Namely, unemployment rates fall with the higher level of education. It shows the importance of further education and training in a period of employment growth, job vacancies and decreasing unemployment. Besides, educated workers enjoy at least three basic advantages over less educated workers in the labour market: higher wages, greater upward mobility in income and occupation, and greater employment stability. The fact is that educated workers are more flexible and more successful on-the-job search. Therefore, the shorter duration of unemployment coupled with large wage gains from search is due to the dominating effect of greater efficiency and intensity of search in the market for educated labour (Mincer, 1991). The analysis of educational attainment in the EU shows that in Belgium, Germany, Ireland, Austria and the United Kingdom, the 2001 unemployment rate for people with third level education (higher education) was less than one third of those with at most lower secondary education (see table 2). Table 2. Adult unemployment rates (25-64 years) by educational attainment, 2001 (as a % of the labour force of the same age and level of education), LFS. Third levelUpper secondaryLess than upper secondaryBelgium2.74.39.1Denmark3.23.35.0Germany4.28.212.9Greece6.69.87.6Spain8.41.412.7France4.66.611.5Ireland1.52.45.6Italy5.36.69.2Luxembourg1.21.11.9Netherlands1.51.52.1Austria1.93.46.7Portugal2.23.03.6Finland4.18.51.1Sweden3.05.28.0United Kingdom2.03.77.3Source: European Commission, 2002. The previous table shows that in all EU countries people with highest level of education have lowest unemployment rates. Spain has the highest average unemployment rate and at the same time the highest unemployment rates according to all educational attainment levels. In the comparison with other countries, the differences between the lowest unemployment rate for third education level and the highest unemployment level for less than upper secondary education level are the lowest in Spain. So, a major benefit of education in the labour market is the lower risk of unemployment at higher levels of education. In case of the Central and Eastern Europe the situation is practically the same. The incidence of unemployment is high for young people and those with a low level of education. The sharp employment decline over the transition period has made entering the very tight labour market extremely difficult for young people. In addition demographic developments have contributed to an aggravation of the situation, as the number of young entrants (esp. in Poland) has been steadily on the increase (Vidovic, 2003: 21). In most countries of the region the LFS unemployment rate among people younger than 25 years is twice as high as the total unemployment rate (similar as in the EU), in Romania it is even three times higher (see table 3). Table 3. Youth unemployment rates in the CEECs and EU, LFS (%) 19961997199819992000200120022003Czech Republic7,28,612,417,017,016,616,017,6Croatia26,928,430,936,535,940,135,5-Hungary18,015,913,512,412,110,812,613,1Poland28,524,823,231,335,141,043,941,1Slovakia20,921,723,632,135,237,336,132,9Slovenia18,817,618,517,916,918,116,715,9Bulgaria33,534,832,234,035,339,536,531,2Romania20,218,018,418,918,717,521,720,1Estonia16,014,415,719,823,922,219,622,9Latvia29,024,927,823,922,822,120,817,6Lithuania27,425,222,226,528,930,223,027,2EU-1520,820,118,617,015,514,915,1-"-" - not available. Source: EUROSTAT (2002), CANSTAT (2003); CSO (1998-2003). It can be concluded that young people are one of the most vulnerable group on the labour market, but still have some advantages in comparison with some other selected groups as older workers, ethnic minorities or disabled ones. So, the main characteristics of youth unemployment are as follows: The problem is less serious than by older workers because they tend to be unemployed for shorter periods; Youth unemployment is frictional phenomenon, reflecting a transitional phase in young people's working lives, which they quickly overcome, settling down into the ranks of the more or less permanently employed; Unfortunately in many countries that is not the case. Prolonged spells of unemployment at the beginning of a young person's "working" life can lead to serious long-term problems. Being unemployed early on in life has been shown to increase the probability of future joblessness; Young people are unemployed because they do not have right skills or experience, not because society has failed to create enough jobs for them; Young people are likely to be the first to suffer when countries move into recession. There are different ways that countries respond to the youth unemployment problem and integration of young people into productive employment. The type of labour market policy that is appropriate will largely depend on the type of education and training system. Youth labour market policies The employment policy measures have become more relevant with increasing unemployment problems. As a rule they appear as a government intervention on the labour market. Labour market function as all other markets: work could be bought and sold. It is allocated according to labour demand considering different occupations, economic sectors and geographical regions. Labour demand and labour supply are fundamental components of competitive labour market. Experience of previous development of market economy undoubtedly point out to imperfection of labour market independently of labour demand or supply distortions. Final result of that imperfection is unemployment. Because of its micro- and macro-economic effects unemployment looks for labour market deregulation in order to improve its flexibility. Grade of labour supply and demand maladjustment is caused by different factors. Oscillations in economic activity bring about different reactions of employers and employees. The first one attracts workers (during expansions) or lay off workers (during recessions) The second one selectively chooses a job (during expansions) or tries to find a way to keep present job (during recessions). There is no doubt that flexibility of labour market does not come automatically with functioning of the market. During recession and expansion of economy even different forms of employment policies are an integral part of labour market policy. Employment policy makes distinction between contents, intensity and unemployment categories to which they are aimed. Developed market economies have numbers of experience in inducing employment. During expansion and low unemployment measures of employment policies are directed to hard-core unemployment (workers with job finding difficulty). During recession programmes of inducing employment are directed to larger number of unemployment groups according to sex, age, region etc. Employment policy programmes can be divided into following categories (OECD, 2003a): Workplaces creation programme; Vocational training; Combined employment; Inducing entrepreneurship (unemployed workers can get financial aid for starting own business or self-employment). Policies on education and wage-determination can greatly influence outcomes in the youth labour market. Equally important are government policies, particularly policies to combat unemployment. Labour market policies are often described as active or passive. Passive policies include basic social programmes such as unemployment insurance and income assistance that provide monetary support in times of need. Policies are active when the government directly intervenes to modify structural characteristics of the labour supply. Training programmes are typical of active labour market policies (ALMP). A major problem with ALMP in many countries is that policies tend to help mostly those already in a position to help themselves rather than concentrating on the most disadvantaged young people. Therefore, policies need to be carefully targeted if they are to be effective. They must take account of three basic elements (O'Higgins, 2001): The state of the economy; The sectors in the economy that have the potential for development; The target group. It should be noted that there is no clear distinction between education and training systems and ALMP for young people. Most forms of ALMP involve a certain amount of training and, therefore, effectively form part of a country's education and training system. Today in different countries there are several measures of employment policies for young people, but this article will focus on education and training system as a preparation for the world of work. That system is also a key factor in the process of long-life learning of employed workers. The role of education and training systems in reducing youth unemployment There is no doubt that education plays a major role in economic performance in all sectors of the economy. In addition, for the individuals especially young ones, training and education are among the best safeguards against unemployment. There are, therefore, very strong arguments for the promotion of training and the enhancement of qualifications. Education and training systems can be categorized in a number of different ways. First, one can look at the two basic pathways that exist between school and full-time employment, namely, the systems known as "sequential" and "dual". The sequential pathway is the most common and is found in industrialized, transition and developing countries. In this model, individuals are educated in schools and then proceed full-time work with an employer who gives them job-specific training as required. By contrast, a dual system is one in which the majority of school-leavers undertake apprenticeships or traineeships before becoming full-time employees (O'Higgins, 2001). Further distinctions can be made between systems, for example, the extent to which vocational training is provided by schools and the extent to which it is undertaken in the workplace. At one extreme there are systems in which vocational training is largely theoretical and takes place in schools. This is the case in France, for example, and also to some extent in Italy, as well as in many Central and Eastern European countries. These forms of training teach a fairly broad-based theoretical curriculum of occupational activities and are really closer to general education than work-based training. Young people are not confronted with real-life situations, although in some cases training does involve periods of work experience. At the other end of the spectrum there are systems in which training takes place almost exclusively in the workplace, such as in the United Kingdom and the United States. These systems have the advantage of providing concrete work experience but at the cost of low flexibility. The skills acquired are also mainly firm specific. Given the advantages and disadvantages of the two extremes, it is perhaps not surprising that most countries opt for a combination of the two. Germany's dual system, for example, combines on-the-job apprenticeship by enterprises with school-based education. This is also true of the Latin American systems, which are based on vocational training centres that are essentially enterprise based and have close links with employers (O'Higgins, 2001). Entering the labour market is often a difficult period of transition. While the length of time spent in education has increased, a significant proportion of young people still remain in a bad position as if they are neither in education nor working, i.e. they are either unemployed or in non-employment. This situation gives particular cause for concern for younger age groups, many of whom have no unemployment status or welfare coverage (OECD, 2003b: 299). As the interrelationship between education, the economy and the well-being of nations become ever closer, providing for effective educational careers of young people and for successful transitions from initial education to working life become major policy concerns. Rising skill demand in OECD countries have made upper secondary diplomas a minimum for successfully entering the labour market and a basis for further participation in lifelong learning. Young people with lower qualifications run a higher risk of long-term unemployment or unstable or unfulfilling employment, which can have additional consequences such as social exclusion. Therefore, in most OECD countries, education policy seeks to encourage young people to complete at least upper secondary education. Since jobs on offer in the labour market require ever higher general skill levels and more flexible learning skills, persons with low attainment are often severely penalised. Comparative analysis of education system in EU and Croatia Compared with education systems in EU, fundamental problems and key elements of effect of education policy creators in the field of higher education in Croatia (university, college and vocational education) are as follows (Bari, 2003): The proportion of younger labour force (25-34 years) in the education system should be increased in the next period. Available indicators for fifteen members of the EU show a huge difference in comparison with Croatia: in 2000 a proportion of younger labour force in education in EU was around 14,6%, while in Croatia that proportion was only 5,5%. Considering dynamic changes on the labour market and inadequate educational structure of younger labour force changes in that segment are very important. The same is true for the older proportion of the labour force (35-59 years) in the education system. In the EU countries around 6,9% of older labour force participate in some way in the education system (in Scandinavia even around 20%!), and in Croatia only 0,3%. Inadequate education of older workers in Croatia has a particular role in their reemployment problem. Average length of study is one of fundamental indicators of higher education efficiency. Present failures on this field cannot be exclusively ascribed to the organization and quality of tertiary education: long-lasting recession of Croatian economy was not in favour for great employment chances of graduates. Out of total number of enrolled, only 20% of students graduate in legal period, and in England even 90%! Another 30% of enrolled students graduate after 7 years of study. Remaining 50%, or every second student stays somewhere between beginning and the end of study. In the next period it is important to make parallel effort to increase internal efficiency of the system and consolidation of whole national economy. It is important to coordinate a proportion of students in some forms of studying with that in EU. In the countries of the EU, out of 13 million students around two thirds are students of vocational education. In Croatia from 100 000 full-time students just one fifth are vocational students. Changes in this field have to be coordinated with changes of countries' economic structure. Expenditures for education in Croatia should be brought closer with those in the EU. GDP in Croatia is five times lower than EU average (5000 Euro/25 000 Euro), budget expenditures per citizen for education in Croatia is 7,5 times lower than EU average (EU sets aside 1500 Euro per citizen on average and Croatia around 200 Euro), budget expenses for full-time students in Croatia are 15 times lower than EU average (EU sets aside 15 000 Euro for full-time student on average and Croatia around 1000 Euro). In the next period changes in financial system of education in Croatia should come through larger proportion of expenditures for education in GDP, currently dominated by government budget financing should be supplemented by other sources, and diversification of financial obligations for education to lower government levels (county, community) should be accomplished. Under the circumstances of the emphasized technological and other changes once acquired education is not a benefit of an individual during his whole life. Therefore, in expert and scientific circles the concept of life-long learning is gaining on importance. Contribution of the life-long learning education concept in solving unemployment problem is explained by narrower time horizon in which changes happens, so no individual can feel safe on the labour market. Economic uncertainty is becoming stable fact in our lives: old occupations in contemporary conditions of using information technology (IT) are substituted by new ones. Therefore, more and more workers with wide profiles of skills and different knowledge are looked for. In near future education and training of adults will gain on importance. Those who have left the school, in the future will be motivated to continue education. The state of life-long learning education concept in 18 selected countries in 1998 is very illustrative. The proportion of young people between 7-15 years old show signs of stability. Because of different factors, the proportion of young people between 16-20 years in formal education drastically decreases. Percentage of population older than 16 in informal education is around 40 and 50% and after 40 years informal education starts to fall rapidly (see figure 2). Figure 2.  Source: OECD (2001). The figure shows that informal education includes around half middle-aged adult population annually. Indicators for developed countries (Australia, Canada and the USA) show larger participation of adults on universities and other informal forms of education. Adult education is very important segment in Croatian education system. The education process of adults in Croatia is conducted in 372 institutions today according to the following structure (Bari, 2003): High schools - 202, Open public universities - 19, Others - 152. The number of persons included in education is still modest (during 2000/2001 school year 25,576 persons attended educational system), especially when one considers unemployment problem in the country. The highest interest of adults is present in the programmes for acquiring high school occupation level and in the programmes of retraining. Unfinished transition process and unsuitable forms of creating new firms are weak factors of possible interest of Croatian firms in inducing adult education. Experience of highly developed countries point to exactly opposite: interest of companies for different forms of training for employees (general and specific) is much greater. Future trends in education policy Demographic development of majority of developed countries constantly reminds on unstoppable process of population ageing. This fact will negatively influence growth of labour force, but also educational capacity of countries. In recent years there is an evident decreasing trend in number of young people between 18 and 19. In this way, the portion of this age group in total population in France and Sweden is reduced to only 15%. What this means for a fundamental input of university studying? Logically one can conclude that pressure on educational programmes of higher education will be reduced. Researches in OECD countries have shown that this will not be the case. There are two reasons for that. First reason relates to the fact that in spite of reduced number of 18 years old in total population the number of those who will continue education will increase. Expected increase in France is estimated to 80% of total number of 18 year olds and in the USA 50% of young people with completed high school will continue their education on universities. The second reason relates to increased number of enrolled adults above 25 years of age. Although some countries will be satisfied with smaller pressure on overcrowded university institutions none will be satisfied to face with drastic decrease of student numbers (OECD, 2001). In the context of increased unemployment, the education and training process are getting more and more in importance. Namely, the main question is whether the existing education can meet the needs of new economic developments in this millennium and how education should be changed to prepare future generations for the knowledge-based economy? Second key question is concerned about how the education system should be resourced and funded in a more efficient and effective way in order to meet diverse growing demand for education. The supply of education to meet these demands is often limited by the amount and types of available resources. A match between demand and supply is the kernel concern of education policy. In reality, supply often does not meet demand in certain, if not all aspects, whether it is over-supply or under-supply. Inevitably, how to ensure the match between supply and demand becomes the core issue in education planning and financing (Cheng, Hung Ng, Ching Mok, 2002). Those who have recently, or early enough abandoned school will be motivated for the continuation of education. Employees have possibility to join special part-time programmes and courses with particular schedules. Scandinavian countries take the initiative in active education and employment policy. Sweden has even legally obliged universities to enrol certain number of older students, what is not surprising if it is familiar that in this country half number of total student population is older than 25. Under these circumstances, status of universities and generally education authorities is peculiar. Under the pressure of higher costs and in an effort to reduce dependence on budget funds the universities' supply will be enriched with different specific courses. These courses should bring additional financial funds to the universities. Education authorities will support increase of enrolled number of students and in the same time make every effort to re-establish a balance between particular disciplines. Financial support will be given to those educational fields for which there are highest interest on the labour market. At present, those are technical courses, management and other programmes, which indirectly stimulate economic growth and in this way enhance competitiveness of a particular country on the global market. On the other hand, some universities will be closed. It should be stressed that support of public funds is mainly directed to vocational education (Fachhochschulen in Germany). Therefore, the thesis is that those educational programmes that make employment easier should be supported. It is generally accepted that one of the most significant reasons many people choose to study today is to improve their employment opportunities Conclusion One of the most important findings concerning the analysis of the youth labour market in different group of countries is the fact that unemployment is not evenly spread among young people. Which groups are most at risk will vary according to differing circumstances, but there are certainly three groups of young people that seem to be repeatedly subject to a higher incidence of unemployment than others. Namely, those with low levels of educational attainment, disabled and ethnic minorities. The problems facing young women are less obvious, at least from an examination of unemployment rates, but strong arguments can be made for the claim that women also face additional difficulties in gaining access to high-quality employment. All available figures in 26 selected countries (15 EU countries and 11 transition countries) show that youth unemployment is almost twice as high as adult unemployment. Tested models show that youth unemployment appears to be more affected by shocks hitting the aggregate labour market than the adult unemployment. The youth unemployment rate is more sensitive in EU countries than in transition one. In order to combat youth unemployment governments need to formulate appropriate labour market policies. It should be noted that there is no clear distinction between education and training systems and ALMP for young people. In this article attention is restricted to education and training system as a preparation for the world of work. The major benefit of education in the labour market is the lower risk of unemployment at higher educational levels. Comparison of education system in EU and Croatia shows that proportion of young people in education in Croatia is three times lower than in EU. The differences are even greater in older population. Namely, in the EU countries around 6.9% of older people participate in some way of education system and in Croatia only 0.3%. The efficiency of higher education in Croatia is rather poor. Namely, out of total number of enrolled, only 20% of students graduate in legal period, and for example in England even 90%. Budget expenditures per citizen for education in Croatia are 7.5 times lower than EU average. Therefore changes in financing of Croatian educational system are urgently needed. Currently dominant government budget financing should be supplemented by other source, and diversification of financial obligation for education to lower government levels (county, community) should be accomplished. References: Bari, V. (2003) Socijalna infrastruktura kao imbenik razvoja hrvatskog gospodarstva, u Hrvatski gospodarski razvoj (urednik i redaktor Dru~i, I.): 392-425; Ekonomski fakultet i Politi ka kultura, Zagreb. CANSTAT (2003) Statistical Bulletin 2003/2; Statistical Office of Republic of Slovenia, Ljubljana. Cheng, Y.C., Hung Ng, K., Ching Mok, M.M. (2002) Economic considerations in education policy making: a simplified framework; The International Journal of Educational Management, 16/1: 18-39. CSO (1998-2003), Results of Labour force Survey - Statistical Reports, different issues; Zagreb. European Commission (2002), Economic portrait of the European Union 2002; Theme 2 - Economy and Finance, Luxembourg. Economic Commission (2003) Employment and labour market in central European countries; Theme 3 - Population and social conditions; Luxembourg. EUROSTAT (2002), Statistical Yearbook on candidate and South-East European countries. ILO (1999) Key Indicators of the Labour Market, Geneva. ILO (2000) Employing Youth: Promoting employment-intensive growth; International Labour Office, Geneva. Mincer, J. (1991) Education and Unemployment; NBER Working Paper No. 3838; Cambridge. Obadi, A. (2003) Structural policy Issues of Labour Markets in Central and Eastern Europe; in publication: Long-term Strategies for the Central and Eastern European Candidate Countries after their Entry to the EU; Studien des Instituts fr den Donauraum und Mitteleuropa, No. 1, January, Vienna: 79-89. OECD (2001) Education Policy Analysis: Education and Skills, Paris. OECD (2003a) OECD Employment Outlook - Towards More and Better Jobs; OECD, Paris. OECD (2003b) Education at a Glance, OECD Indicators, Paris. O'Higgins, N. (2001) Youth unemployment and employment policy - A global perspective; International Labour Office; Geneva. Vidovic, H. (2003), Labour Market Trends; WIIW Structural Report 2003 on Central and Eastern Europe, October 2003, Volume 2; Vienna. Weber (2002) The link between unemployment and returns to education: evidence from 14 European countries; Education & Training, 44, 4/5: 171-178.  "Youth" comprises of young people from 15 to 24 years of age inclusive, although in practice operational definition of youth or young people varies widely from country to country, depending on cultural, institutional and political factors.  Recent ILO estimates suggest that at least 60 million young people are without a job and that youth unemployment rates in some countries are, on average, three times as high as adult rates (O'Higgins, 2001).  That is confirmed in many empirical models. For example, strong empirical evidence that unemployment rates decreases as the educational level rises is also find for 14 European countries between 1992 and 1999 (Weber, 2002).  For example, employers are unlikely to regard younger and older workers in the same way. Some types of work may require "youthful" qualities, such as adaptability, while other jobs may require more "adult" qualities, such as responsibility or reliability. Information on the unemployment rates of disabled young people and ethnic minorities is minimal, but a little evidence indicates that they encounter significant difficulties in entering the labour market (O'Higgins, 2001).  Of course, such strict dichotomy does not characterize the majority of countries, most of which operate some form of dual system. 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