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Promoting Youth Employment
A Review of International Experiences
Prepared by: Ms. Azita Berar Awad
CONTENTS
Foreword
Introduction
I. Youth and the World of Work:
An Overview of Basic Facts
II. Youth Unemployment:
Causes and Effects
III. Regional Perspectives
III.1 Youth Labour Markets in Industrial Countries
III.1.1 Special Youth Programmes
III.1.2 Consequences of Youth Joblessness in Industrial Countries
III.2 Youth Labour Markets in Developing Countries
III.2.1 Labour Market Programmes in Latin America
III.2.2 Labour Market Programmes in Asia and Africa
IV. Youth Unemployment: The Policy Agenda
IV.1 Active Labour Market Programmes
IV.1.1 Education and Training
IV.1.2 Minimum Wages and Youth Employment
IV.2 Self Employment
Conclusions
Foreword
This paper is prepared by the ILO Regional Office for Arab States as a contribution to the
Sector Meeting on "Youth and Employment" organized by the UN System and the League of Arab
States and take place in Beirut from 23 to 25 May 2000 at the UN House. It is based on the
outcome of reviews carried out by the ILO in 1998 and 1999, within the framework of the
Action Programme on Combatting Youth Unemployment and Marginalization. This Programme is
conducted by the Development Policies Department of the ILO, in response to the resolution
on Youth Unemployment adopted by the International Labour Conference at its 86th Session
(June 1998). The paper draws heavily on the report "Employing Youth: Promoting Employment -
Intensive Growth" prepared by David Blanchflower for the ILO Interregional Symposium on
Strategies to Combat Youth Unemployment (13-14 December 1999). Finding of earlier ILO
studies on the topic, namely "Youth employment and Youth labour market policies in Germany
and Canada" (D. Cross, ILO WP., 1998) and "Minimum wages and Youth unemployment" (Y. Ghellab,
ILO WP., 1998) have also been used.
It is hoped that this review of international experiences for combatting Youth unemployment
and marginalization, will contribute to the policy debate and action on this important issue
in the Arab region.
Azita Berar Awad
Deputy Director
Director of the Arab States
Multi-disciplinary Advisory Team
ILO Regional Office for Arab States
Introduction
The large, and perhaps growing, number of
unemployed youth is one of the most daunting problems faced by developed
and developing countries alike.
The challenge is to identify practical and effective strategies to eradicate
youth unemployment. Difficulties in access to jobs for young school leavers
do not only pose a problem of integration in Labour markets and earning
an independent livelihood. These may have consequences in terms of social
integration, sometime spreading over a lifetime cycle. Experience has
shown that employment-friendly growth is essential, and targeted programmes
can only provide complementary resources and cross-gap actions. Starting
from this premise, the present paper reviews basic facts relating to the
unemployment of youth in different parts of the world, and suggests some
viable strategies for the inclusion of youth in the process of development.
In an increasingly mobile world, the need to acquire the ability to learn
is, often, more important than the acquisition of a specific skill. There
is, however some evidence to indicate that effective apprenticeship systems
ease the transition from education to work. It is questionable that large
untargeted youth employment or training programmes have positive rates
of return. There is little evidence that such programmes improve either
the employment prospects or earnings for the young and especially so for
the disadvantaged among them. Narrowly targeted and carefully evaluated
programmes can, however, ease the plight of specific youth categories.
The effective use of public resources can only be achieved if there are
ways to measure the short-, medium- and long-term outcomes of specific
strategies.
I. Youth and the World of
Work: An Overview of Basic Facts
In 1995, there were 525 million men and 500 million women aged between 15 and 24 in the world,
according to estimates of the United Nations. About 60 per cent of the world's youth live in
the developing countries of Asia alone, while 23 per cent live in Africa, Latin America and
the Caribbean. Only about 16 per cent live in developed regions.
The share of youth in the total labour force, as seen below, is continuing to decrease as
educational enrolments have increased. The proportion of 12-17 year olds in the world enrolled
in secondary school increased from 7.1 per cent in 1970 to 88.3 per cent in 1990. This
contrasts with 35.8 per cent and 48.2 per cent respectively in developing countries. In all
regions, except eastern Asia, the young female labour force is increasing more rapidly than the
male labour force.
The size of the youth labour force is declining in agriculture and industry and increasing in
services in developing regions, northern Africa and western Asia, Latin America and the
Caribbean. In south-central Asia, increases in the labour force are roughly equally distributed
among the three sectors, but in sub-Saharan Africa, eastern and south-eastern Asia and Oceania,
about half of the increase of youth in the labour force is still in agriculture. From 1980 to
1990, services absorbed all of the increase in the youth labour force in developed countries
and over half the increase in northern Africa, Latin America and the Caribbean and western Asia.
In 1995 nearly two-thirds of the world's youth lived in countries with per capita GDP's of
less than US$1,000 per year.
It can be observed that: (1) the youth participation rates are
higher in developed countries than in developing countries; (2) the participation rates for
young men have declined in almost all countries; and (3) they have declined for women aged
15-19 in most countries, but increased for the older age group of 20-24 year old for most
countries, except for the eastern European countries where the rates have declined.
An examination of overall unemployment rates (with minimum and maximum ages variously defined)
and by gender presents a mixed picture. Overall rates vary from as high as 38.8 per cent in
Macedonia to as low as 0.4 per cent in Uzbekistan. This illustrates the difficulty of
interpreting the unemployment rate in developing and transition economies. For example, in
transition economies it is unclear whether a low unemployment rate is a signal of positive
factors - the economy is working well at full-employment - or of negative factors - little
adjustment has been made to a market economy.
Similarly, in many less developed countries, only the better educated can afford to be
unemployed. Hence, in those countries, unemployment rates for the more educated are above
those of the least educated. In the majority of countries reported, female unemployment rates
are higher than male rates (e.g. Botswana, Jamaica, Chile, Belgium and Spain), while in a few
others, the male rates are higher (e.g. El Salvador, Algeria, Puerto Rico, UK, Sweden and
Australia).
It should also be borne in mind that the unemployment rate provides only a partial picture of
labour markets in developing countries. In fact, the extent of underemployment or in other
words, combining multiple jobs with a low earnings in total, provide a better measure of social
deprivation. Data on current unemployment rates across countries for the 15-24 and 25+ age
groups reveals that the youth unemployment rates are approximately twice as high as adult
unemployment rates across both developed and developing countries. In a number of developing
countries the ratio is considerably higher (Egypt, Colombia, Chile, Honduras, Indonesia,
Republic of Korea and Sri Lanka). The ratio is also above two in several southern European
countries (Greece, Italy and Turkey), as well as in a number of Eastern European countries
e.g. Bulgaria, Estonia, Romania and Slovenia).
An examination of male and female unemployment rates for our two age groups shows that the
unemployment rates for young men aged 15-24 are lower than the equivalent rates for young
women in virtually all of the developing countries and transition economies. The pattern is
more mixed in the developed world.
Youth unemployment rates are significantly higher in the 1990s than they were in the 1980s in
a number of countries. Even where they have not increased significantly they have generally
remained high (e.g. Spain at 36 per cent and Italy 32 per cent).
II. Youth Unemployment:
Causes and Effects
A number of possibilities suggest themselves to explain patterns of high and persistent
unemployment amongst the young: aggregate demand; youth wages; the size of the youth cohort
and a lack of skills. Clearly, in finding solutions to the youth unemployment problem, it is
crucial to determine the relative importance of these factors. Many studies have shown the
importance of aggregate demand. As argued above, youth unemployment rates are approximately
twice as high as adult unemployment rates. It is also the case that young people are not only
more likely to quit their jobs voluntarily but are more likely to be fired as well (last in
first out). However, the opportunity cost to firms of firing young workers appears to be lower
than firing older workers. Young workers are also less likely to be subject to employment
protection legislation. It is often held that the wages of young workers are too high because
of the existence of minimum wage legislation, which raises the wage of the young making them
uncompetitive, especially compared to married women who, around the world, have entered the
labour force in large numbers over the last two decades.
There is a good deal of evidence that youth wages relative to adult wages have declined
considerably in recent times in many countries. Furthermore, there is growing literature
that suggests that the employment reducing effects of the minimum wage have been greatly
exaggerated, especially in the United States where its level is very low. The evidence does
not seem to suggest that youths are being priced out of jobs in any major way. A further
explanation for high and persistent youth unemployment is the size of the youth cohort. The
higher the number of young people, the more jobs that will be required to accommodate them.
This explanation does not fit the data well, as was discussed earlier, since the size of the
youth cohort has been in decline in most countries.
Finally, it is argued that in this new technological age the young do not possess the skills
that firms need. There is less demand than in the past for unskilled jobs, particularly
because of new technology, and this substantially affects the young. No matter what the cause
of youth unemployment is, it does seem to have serious consequences especially if the
unemployment spells are long or if an individual experiences numerous spells of it. The
duration of unemployment spells tends to be shorter for the young than for older workers.
There is, however, some evidence across countries that although youth unemployment is of
shorter duration than that of adults, the difference is not substantial. The longer an
unemployment spell, the more difficult it is for that person to find work because of the loss
of skills, morale, psychological damage etc. There are three major reasons why unemployment
while young, especially for frequent or long periods, can be particularly harmful:
- Early unemployment in a person's career may permanently impair his or her future
productive capacity.
- Barriers to employment can block young people in the passage from adolescence to adulthood,
which involves setting up a household and forming a family. There is some connection between
youth joblessness and serious social problems such as drug abuse, petty crime and single parent
families.
- High levels of youth unemployment may, at an aggregate level, lead to alienation from
society and from democratic political processes, which may give rise to social unrest.
Unemployment makes people unhappy (Blanchflower and Oswald, 1999a, Winkelmann and Winkelmann,
1999; Oswald,1997b).
In the next three sections, evidence that exists on the causes and consequences of youth
unemployment is examined for the OECD, Transition Economies and finally the developing
countries of Latin America, Asia and Africa. As much more is known about the workings of the
youth labour market in the OECD, the first section on the OECD lays out the ground for other
regions of the world. In the following sections, an attempt is made to compare and contrast
the situation in the developing countries with that found in the OECD. Interestingly, there
seem to be important similarities.
III. Regional Perspectives
III.1 Youth Labour Markets in Industrial Countries
A number of OECD countries have experimented with labour market programmes designed to help
youths in the job market. On the supply side are programmes that link schooling to work before
youths encounter difficulties in the market; and second chance programmes that try to increase
the skills of youths who have trouble in the job market. On the demand side are programmes
that raise youth wages, for instance through minimum wage, or that target some employment
opportunities at youths. On the basis of aggregate outcomes, the German apprenticeships seem
to be a highly successful supply-side programme. Less educated young workers have lower
unemployment rates and higher relative earnings in Germany than in the US. In the first five
or so years of work, fewer young Germans are jobless than young Americans.
III.1.1 Special Youth Programmes
Germany's special programmes for youth aim to facilitate a lasting success in the job market.
Target groups include young people who are socially disadvantaged (for examples, those who
receive child care assistance or are former drug addicts), who are slower learners (school
drop-outs at any level), who are physically or mentally disabled and face specific difficulties
in school, and who are foreigners or immigrants. The goals of Germany's programmes are to
increase their chances of entering or completing vocational training and being integrated in
the labour force. There are three kinds of programmes: Vocational preparation schemes,
vocational training support schemes and inter-company training centers.
The vocational preparation schemes consist of pre-vocational measures for youth who have not
found apprenticeship positions. They focus on the first step toward integration, entering
vocational training. The courses consist of classroom training and include (a) basic training
(2 to 12 months) for young people who did not get an apprenticeship position for lack of
opportunity, (b) informational and motivational classes for drop-outs (maximum 3 months), and
(c) intensive social support courses (up to 12 months) to improve the prospects for vocational
training for young people who cannot be integrated into (a) or (b) courses.
In addition, special programmes are organized exclusively for mentally and physically disabled
people. These programmes are concerned mostly with recruiting candidates and training them in
schools addressing their special needs. The courses last between 6 and 36 months.
Vocational training support schemes are special measures for youths with inadequate school
experience or with social problems (or both) who have completed vocational preparation
programme but are likely to drop-out of vocational training. These courses focus on the second
step toward integration, completing an apprenticeship. In addition to extra courses, tutoring,
and intensive language training they offer study help, counselling on how to handle authority,
and examinations.
Finally, the inter-company training centers help young people who, after participating in
vocational training support schemes have still not started training in a company. Inter-company
training centers offer short periods of on-the-job training to acquaint candidates with the
demands and pressures of working life. Participants must have completed a vocational
preparation scheme and are expected to move as quickly as possible to a regular apprenticeship
position. Trainees continue getting vocational training support as well as financial support,
if necessary.
Apprenticeships offer a good return for most young persons. However, the German apprenticeship
system has its own problems. The number of apprenticeship contracts has fallen as more youths
have chosen higher education. Youths who do not find a job immediately after their apprenticeship
face a comparatively long period of non-employment, and those who fail an apprenticeship
programme suffer long-term reductions in earnings. The apprenticeship system does not improve
the effects of family background; children of blue-collar and white-collar employees were more
likely to be employed subsequently than children of non- employed parents.
The Canadian Government, in contrast, spends much less resources than its German counterpart
on active labour policy in general and on alleviating youth unemployment, in particular.
Canada relies mostly on support from general social programme such as Unemployment Insurance
(UI) and Income Assistance (IA). Most of the youth-specific programmes are one of three types:
Career planning, financial support or work experience. Comparing the German and Canadian
experiences, one could conclude that:
- Germany's labour market policies are active and targeted policies. Canada's are
passive and general.
- The goal of youth programmes in Germany is to increase the chance of disadvantaged young
people of completing vocational training.
- Youth programmes in Canada provide counselling services, financial support or work
experience mostly to post-secondary students.
Second chance programmes, including Sweden's much heralded active labour market programmes,
do not seem to be overly effective. There is also considerable evidence that large-scale
programmes designed to move young people from unemployment to work, such as Youth Opportunities
Programme (YOP) and Youth Training Scheme (YTS) programmes that operated in the UK in the
1990s, were ineffectual. For many years Sweden was viewed as having solved the problem of
joblessness and economic inequality. During the 1970s and 1980s, young workers fared
reasonably despite sharp increases in the youth's relative wages. However, the recession of
the early 1990s proved that Sweden was not immune to substantial unemployment nor to a major
youth joblessness problem. In the 1990s, youth unemployment has risen sharply, and the state
has expanded youth participation in active labour market programmes. This has reduced
unemployment somewhat without solving the joblessness problem. Indeed, the increase in
unemployment has been roughly proportional by age and education, implying that these programmes
have not altered the relative distribution of unemployment. The proportional growth of
joblessness suggests that aggregate factors were more important in Sweden's joblessness than
disaggregate shifts in demand for labour among different skill groups.
France has a wide variety of youth programmes and indeed leads the advanced countries in the
proportion of youths employed under some special programme. France also has relatively high
minimum wages which, in contrast to the minimum in the United States, has increased quite
strongly in recent years, possibly leading to an adverse impact on youth employment. To some
extent, these two factors offset one another. The real minimum hourly wage in France (the
Salaire Minimum Interprofessionel de Croissance [SMIC]) has risen steadily since 1967 whereas
in the US, the Federal Minimum Wage has declined. In 1990 approximately 28 per cent of French
workers were at or below or within 5 Francs per hour of the minimum. In 1987 in the US, only
18 per cent of employed persons had hourly wage rates at or below the minimum or within an
additional US$1.00 of the minimum. Young workers paid around the minimum wage in France were
more likely to become unemployed or move out of the labour force than those paid over the
minimum wage. While an analogous similar pattern is found in the US, where a larger share of
workers employed at or around the minimum wage were either unemployed or out of the labour
force in the previous period than was true among workers above the minimum wage, the smaller
scope for the minimum implies less of an impact on the youth market. The employment effects
of the minimum wages in France are mitigated somewhat by participation in employment promotion
programmes that shield workers from some of the effects of the increasing real SMIC. When this
eligibility ends, the probability of subsequent non-employment rises sharply.
The country which seems to have most successfully dealt with the youth problem is Germany.
While some German youths have great trouble in the job market, young, less educated Germans
have done markedly better in terms of both employment and wages than comparable youths
elsewhere. The situation for young women is less worrying, as young women have continued to
move into the job market in increasing numbers and as female pay has improved relative to male
pay. Still, in the late 1990s, young women earned less than seemingly comparable young men and
experienced a similar twist in the age-earnings profile against them.
We have identified one basic pattern in the worsened job market for young workers: the
disproportionately large response of youth employment or unemployment to changes in overall
unemployment.
III.1.2 Consequences of
Youth Joblessness in Industrial Countries
A number of other important changes in society accompanying the high and rising levels of
youth unemployment are correlated with a number of other social outcomes:
- Unemployed youths are increasingly concentrated in workless households.
- Increasing proportions of young people are living with their parents.
- The young are increasingly involved in crime.
- Increasing numbers of young people are committing suicide.
III.2 Youth Labour Markets
in Developing Countries
III.2.1 Labour Market
Programmes in Latin America
Youth unemployment rates are approximately twice as high as adult rates in most countries in Latin America.
Since the beginning of the current decade, training programmes focussed on unemployed young
have spread rapidly through several Latin American countries. These were pioneered in Chile
in the late eighties under the name of "Chile Joven" (CHJ). The programme is specifically
directed at young people in a situation of "social risk and/or structural unemployment". The
CHJ makes use of short training and apprenticeship programmes that help young people to acquire
basic skills to be eligible for work. The scheme, originally implemented with the intention
that it should last for four years (1991-95), was extended for a further four years. The
training and occupational practice process normally lasts about six months (from 200 to 300
hours training and two to three months of work practice, although in some variants of the
Chilean case training reaches up to 420 hours). The programme is highly decentralized and
relies on around 1,000 private training centres which undertake public bidding for training
contracts. While they are on the programme, the users get a maintenance and transportation
subsidy to encourage them not to drop out. Usually, the subsidy is about 50 per cent of the
minimum wage in force. Firms who take trainees are not obliged to remunerate trainees or give
them employment subsequently. There are some interesting features that must be underlined in
the Chile Joven scheme:
- Programmes must include both training and practical apprenticeships in the private
sector; this aims at ensuring that the training and experience acquired correspond to the market needs;
- Considerable attention has been given to targeting; special programmes have been designed
for specially marginalised population segments; and
- Assessment mechanisms to evaluate the performance of the programmes were introduced as an
integral part of the exercise.
Evaluation studies have stressed the success of the CHJ in promoting employment. The programme
enrolled more than 128,000 young people, well above its target. In the first three years,
almost 60 per cent of the young people found jobs at the end of the programme, compared to
40 per cent for those who did not get the training. Around 55 per cent of the participants
were employed in the company where they took the traineeship compared with 41.3 per cent in
the control group which was made up of youths residing in the same neighbourhood with the
same socio-economic characteristics as the programme participants. The difference was even
greater for women Π45.5 per cent and 27.0 per cent respectively, and those who were relatively
younger had the greatest problems in finding a job. Of these, the overwhelming majority came
from the target population: 95.6 per cent came from low income sectors, and 79 per cent were
below the age of 24. In the rest of Latin America, there have been other ambitious schemes to
improve the economic situation of the young, particularly in Argentina and Brazil, but also
in Colombia, Peru and Uruguay. In Argentina "Proyecto Joven",which is a variant of Chile Joven,
has been in existence since 1994. It is addressed at young persons with employment problems
from low-income homes, low educational levels and little or no occupational experience. By
training youth, the programme attempts to increase their productivity and instill in them
values and attitudes which are thought to improve their chances of obtaining and keeping a job.
Courses are completely free of charge, including teaching materials, tools, transportation,
inputs, safety and hygiene implements and other elements required for training purposes. The
programme has set itself the goal of training 280,000 people. The first phase, which started
in 1994 and which recently came to an end, had over 100,000 young participants; another
180,000 will be trained in the following three years.
There have been some successes in Argentina, but they have been smaller than found in Chile,
especially for women. The overwhelming majority of participants are poor (80 per cent belong
to low-income families) and only 7 per cent had finished secondary education. Males increased
their employment rates from 43.7 per cent to 61.3 per cent over the 11 month interval between
the training and the survey, compared with 51 per cent and 51.9 per cent for the control.
Results for females are less convincing - employment went up from 35.4 per cent to 38.6 per
cent whereas the control group did better, increasing from 35.3 per cent to 41.5 per cent.
There are some concerns about the nature of the control groups as they were generated ex-post
and do not appear to have matched characteristics to the treatment group.
In 1996, Brazil implemented PLANFOR targeted towards youths, the unemployed and the
dispossessed. During the first year of operation the programme trained close to 1.2 million
workers. The programme targets rural areas: blacks and non-whites are over- represented. The
programme is much more heterogeneous than the Chile Joven but does appear to be having some
success. There is some evidence of statistically significant impacts on employment and wages
of men and older workers but lesser effects for women and younger workers (de Moura, Castro
and Verdisco, 1998).
Colombia has implemented the programme of Occupational Training for Young People. Its general
objective is to help low income young people from 17 to 25 years of age that are unemployed
and have not completed their secondary education, by giving them semi-skilled training in
occupations for which there is evidence of demand in the productive sectors. Peru has
implemented their own Pro-Joven programme of Youth Occupational Training. The purpose of
Pro-Joven is to supply semi-skilled training and labour experience to low-income young people
in specific trades in demand in the productive sector. It thus endeavours to face the problem
of access of deprived young persons into the labour market.
It is intended to have an intake of 150,000 youngsters over a period of five years. Uruguay's
PROJOVEN is much smaller than the programmes in Brazil, Chile, Argentina, Colombia and Peru.
An initial set of pilot schemes organized training courses with a coverage of only 4,090 young
people between 1995 and 1996. To date, they have trained 1,200 to 1,500 young persons a year.
Castro and Verdisco (1999) compare the projects in Chile, Argentina and Brazil regarding the
quality of the training they offer and the targeting mechanisms used, and come to a conclusion
that the two "Joven" schemes are strong in targeting but weak in quality, while the courses
sponsored by PLANFOR tend to be of good quality but poorly focussed. Those in charge of the
Chile Joven programme point out that the growth experienced by the Chilean economy is the
key factor in the success ascribed to the project. According to Messina (1995), the only
positive effect in the Chilean case would be the opportunity of a temporary labour experience
for beneficiaries.
Just as in Europe and the US, the evidence on the effectiveness of training schemes in Latin
America is mixed at best.
III.2.2 Labour Market
Programmes in Asia and Africa
The lack of good data makes it difficult to evaluate the extent of the youth labour market
problem in many Asian and African countries. Considerable variation in the levels of GDP per
capita in both Asia and Africa (cf. Gabon and Eritrea; Singapore and Nepal) and similarly for
other variables such as infant death rates and primary school attendance. There are no
consistent patterns of youth unemployment - they are very high in some countries (e.g. Algeria,
Egypt, Mauritius, Sri Lanka) and very low in others (e.g. Burkina Faso, Central African
Republic, Ethiopia, Thailand). Female unemployment rates are generally higher than male
rates. There has been considerable growth in Asia and Africa, but presumably from a very low
base, in the proportion of young people in‚ third-level™ or higher education, more prominently
in general in Africa than in Asia and also more notably so for females rather than males.
The relationship between youth unemployment and educational attainment is mixed. In Africa,
the unemployment rates for the least and the most educated tend to be lower than for those
with intermediate level of education (e.g. South Africa). On the other hand, in Asia, they
are generally higher for the more educated than the less educated. This is partly due to the
increased participation in education, resulting in a greater number of educated youths. For
example, in Indonesia, among the rural male unemployed adolescents (15-19 years old), more
than a third have completed primary schooling, more than a third have had a junior high school
degree and about a fifth possess senior high school degree; their female counterparts are
slightly better placed in this regard.
In comparison with the OECD as well as the transition economies and the Latin American
countries, much less empirical work on wages and/or youth unemployment has been undertaken on
other developing countries.
A number of generalized facts emerge from a set of country studies commissioned by the ILO on
the nature of the youth labour market in Asian and African countries:
a. Youth unemployment in most developing countries is perceived as a major problem.
In many countries young people constitute a very high proportion of both the total population
and total unemployment, comprising more than half the total number of the unemployed in Africa.
In many countries the young unemployed are looking for their first job (e.g. India).
b. Inadequate and incomplete data make it hard to know exactly the scale of the problem.
Some of the features of the problems related to the data for the purpose of making
cross-country comparisons are: (1) cross-country variations in the definition of youth; (2)
cross-country variations in measurement of employment, unemployment and underemployment;
and (3) country-specific data gathering and survey systems.
In general, Africa is thought to be caught in a number of self- reinforcing, vicious circles:
a. African economies are unable to generate adequate growth rates in GDP and enough
employment and income generating opportunities to absorb the majority of their labour forces;
b. The inability of the private sector to generate sustainable livelihoods has given
prominence to rivalry over control of the state as a primary means for attempting to share in
whatever fruits of the economy that there may be, further exacerbating the possibility of
unrest; and
c. The capacity of the state to govern and deliver with respect to social services,
such as education, and the security is compromised.
High inflation and restrictive macroeconomic policies have especially harmed youth. The main
feature of the African labour market is the slow growth of employment in the formal sector
and the retrenchment of labour in the course of implementing structural adjustment. In
response, the non-formal sectors have not only acted as residual sectors but also as labour
absorbers of last resort. Such structure of wages and unemployment can have some perverse
effects on youth:
a. High unemployment rates may discourage youth from investing in education and
training as the investment appears wasted;
b. The association of increasing age with increasing probability of employment may
result in a passive approach to job search; and
c. Youth who have relatives in wage employment may develop a dependency that makes
them have a high reservation wage for entry into formal employment (ILO/SAMAT, 1999).
In a different context, the south-east Asian experience has demonstrated that youths are more
vulnerable to external shocks such as the financial and the resulting socio-economic crisis
since they are the first ones to be retrenched and face greater difficulties in finding
employment.
Overall, there seems to be some recognition that the problem is closely linked with adult
unemployment and overall economic performance. A number of countries have experimented with
some success with policies to increase self-employment in both urban (e.g. PMRY in India)
and rural areas (e.g. TRYSEM also in India). These include workshops on how to set up in
business (e.g. Mali and Zimbabwe), provision of lines of credit and advisory activities to
help the creation and survival of small businesses (e.g. Philippines, Indonesia, Sri Lanka,
Zimbabwe, Mali, Côte d'Ivoire and Cameroon). It is increasingly the case that reforms of the
existing educational and training institutions are integrated into programmes for
entrepreneurship development and enterprise promotion.
There seems to be broad recognition of the importance of formal schooling and the need to
improve its quality (e.g. Indonesia, United Republic of Tanzania, Zambia, Zimbabwe). Raising
the school leaving age, reducing child labour and raising the quality as well as instituting
"appropriate" curricula of education are important objectives. These findings reaffirm the
need to "increase investment in basic education targeted at improving the quality of education
and access to further and higher education for disadvantaged categories of young people" as
noted in the resolution concerning youth employment adopted by the ILO's General Conference
at its 86th Session.
There is little evidence that job training schemes work, especially in difficult times,
partly because they are biased towards preparation for formal sector jobs which simply do not
exist on any adequate scale (Zambia Ministry of Sport, Youth and Child Development - MSYCD -
1996). One exception perhaps is Egypt which has adopted the Mubarak-Kohl initiative which
attempts to adapt the successful German dual education and training system to the Egyptian
context. Several pilot schemes suggest some success. The rate of return to programmes is
likely to be a function of the state of the labour market (national and local). It is easier
to place programme participants when unemployment is low and vice versa. The displacement
effects for non-participants are potentially serious.
It will be hard to 'solve' the problem of urban youth unemployment as this is likely to
induce a flow to the cities from the land in countries where the reserve of rural youth labour
force is large. Programmes need to be developed to slow the flow from the land and deal with
the underemployment of the young in rural areas.
The situation in sub-Saharan Africa (SSA) has been somewhat different to that in Asia - modern
economic growth has succeeded in increasing the welfare of many developing countries, but it
has left most of Africa behind. Thirty six per cent of the region's population live in
economies that in 1995 had not regained the per capita income levels first achieved before
1960. The evidence on whether the openness to international trade enhances economic growth is
also rather mixed (Sachs and Warner, 1995; Harrison, 1998).
Inequality does not seem to be a major factor inhibiting growth in SSA of low levels of human
capital. However, recent work has produced equivocal results on the effects of education on
productivity (see Krueger and Lindahl, 1998; Topel, 1999; Pritchett, 1997). Freeman and
Lindauer (1999) argue that the main limit on African growth is political turmoil, corruption
and the lack of security of property; by implication, fast economic growth can only be
achieved in a peaceful, stable environment where property rights are guaranteed:
"The return to schooling requires stable property relations and a safe economic
environment, which have been lacking in most African states. Wars, corruption, revolutions
and other instabilities that disturb or distort the normal functioning of markets may make
the value of schooling less than it would be in a more stable world. If your country is riven
with strife, better to pick up a gun than a book".
The good news is that investment in physical capital is well correlated with economic growth,
but for this to occur, property rights have to be guaranteed. Namibia and Uganda, who ranked
as 'mostly free' have experienced rates of growth in investment in excess of 7 per cent per
annum. Lowly ranked Nigeria (95th) and Togo (134th) experienced investment declines of nearly
10 per cent a year.
India: Training of Rural Youth for Self-Employment (TRYSEM)
TRYSEM is a facilitating component of a poverty eradication programme which aims at
providing basic technical and entrepreneurial skills to the rural poor in the age group of 18
to 35 years to enable them to take up self- or wage-employment. At least 40 per cent of the
beneficiaries have to be women. Training is imparted both through training institutions and
through the non-institutionalized mode, e.g. master craftsmen functioning from their own
place of work. Every TRYSEM trainee becomes eligible to avail of assistance for setting up a
self-employment enterprise. During the Eighth Plan (1992-97), 1.528 million youths were
trained under TRYSEM, of whom 34.2 per cent took up self-employment and 15.0 per cent
wage-employment, while the remaining 51.8 per cent remained unemployed (Govt. of India, 1999,
p. 14). The situation was not satisfactory during the earlier years either. For example, over
the 16 years between 1980 and 1996, nearly 3.9 million rural youth were trained but only 53.0
per cent of them were employed; almost a quarter of them had found work as wage employees
rather than as self-employed "entrepreneurs" (Visaria, 1998, p. 40).
The pilot project in the 10th of Ramadan City
In Ramadan City, Egypt, the modern private sector is organized in the Investors'
Association (IA). Many of its members use relatively sophisticated production methods, and
have serious difficulties recruiting adequately qualified workers. Therefore, the IA was
willing to invest in the Mubarak-Kohl Initiative. In 1995, a dual vocational education and
training centre became operational. The youths, who were to become mechanics, electricians or
textile workers, were selected by the factories themselves. Each week for a period of three
years, these students receive two days of general and technical education (arranged by the
Ministry of Education) and four days of practical work experience. The Regional Unit of the
Dual System (RUDS), with specialists from the private sector and the German GTZ, supervised
the internships and designed some specialized courses. Together, the Ministry and RUDS designed and evaluated the exams.
Almost all factories that participated in 1995 are still participating four years later. This
confirms the viability of the dual training system. But the pilot project also showed that
even under ideal circumstances (an enthusiastic and organized private sector, with modern
factories and a clear need for qualified workers), a dual training system is not established
easily. Some individual factories used their interns as cheap labour (and were consequently
excluded from the project), and participating factories are concerned about their trainees
moving to competitors after graduation (a fear that is not confirmed by dual training system
experiences in Germany). To some extent, these issues were solved by recruiting students "the
Egyptian way": through people who already work for the company and who supported the candidacy
of friends or relatives. While this type of favouritism is generally considered harmful,
impeding fair and effective recruitment processes, the principle proved useful in the case of
the dual training system. Youngsters whose parents or relatives work in the same factory are
unlikely to be exploited, as their relative will keep a keen eye on their duties and learning
process. After graduation, the family's loyalty towards the factory keeps students committed
to their employers.
IV. Youth Unemployment:
The Policy Agenda
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 the structural characteristics of the labour supply.
Training programmes are typical of active policies.
IV.1 Active Labour Market
Programmes
The evidence from the programme evaluations that have been conducted in OECD countries suggests
that large-scale interventions have been only partially successful in overcoming the problem of
widespread unemployment. As discussed in an earlier section, a number of developing countries,
particularly in Latin America, have conducted labour market programmes for the disadvantaged
(e.g. Chile, Argentina, Peru, Colombia and Brazil). There has been evidence of moderate
success, but to an even greater extent than was the case in OECD countries, the schemes have
not been subjected to the strict scrutiny of researchers in the way that programmes such as
JTPA in the US have been examined.
A number of conclusions can be drawn from the experimental and non-experimental evaluation
literature that is mainly focussed on the developed countries but that may have implications
for the developing countries.
IV.1.1 Education and
Training
a. Investing in formal schooling for the most able young people conveys high rates of
return, which in most countries has increased in recent years. The more skilled do more
investing, even after they attain high skill levels;
b. Private sector training typically excludes low-skilled persons - firms choose not to
train the disadvantaged. "The lack of interest of private firms in training disadvantaged
workers indicates the difficulty of the task and the likely low rates of return to the
activity";
c. In general, training programmes for the disadvantaged do not appear to raise wages
or employment prospects for the young. Evidence is somewhat more positive for adults.
Large-scale schemes such as JTPA in the US and YOP/YTS in the UK appear to have been a waste
of money. Most importantly, they have not improved the job prospects of the young;
d. Young people are increasingly choosing to stay on in formal schooling, either at
high school or tertiary college. There would seem to be more merit in encouraging young people
to remain at school, possibly by raising the school leaving age and/or providing them with a
subsidy to do so. It may be cheaper to train young people in schools rather than creating a
new parallel bureaucracy or, perhaps, maintaining old ones;
e. Consideration should be given to pre-school programmes that intervene in the lives
of children and their parents;
f. Careful consideration and planning needs to be given on the types of the training
young people are being given. Governments are not well placed to predict market demands.
Public sector job creation is generally not an option;
g. Any schemes that are implemented probably need to be small, narrowly targeted and
carefully piloted and monitored. Considerable care needs to be taken - and more than has been
in most countries outside the US - in careful selection of a control group to overcome the
selection bias problem;
h. Successful schemes are likely to be very expensive - Job Corps, a residential
programme in the US, which runs for around six months costs roughly the same as undergraduate
tuition at Harvard. It is probably better to spend US$10,000 on one person than US$1,000 each
on ten people;
i. The rate of return to training is likely to vary across sites. What works in one
place may not be effective in another. Careful selection of control groups from the same
labour market seems crucial;
j. Rates of returns to training programmes are likely to be highest at times when the
economy is booming and lowest when it is in recession. There are more jobs available in
expanding economies and programme participants are easier to place. The programmes are most
needed during the downturns of the economic cycle and when there is a lack of jobs;
k. It makes sense to consider the displacement and substitution effects of any
programme. Do youths take jobs away from the older age groups?
l. In any evaluation, it makes sense to calculate the social returns from a society
investing in a training programme as well as the private returns that accrue to the individual
in question. A major benefit to society of getting young people into the world of work could
be a lower crime rate, fewer people in jail, fewer homeless people, fewer teenage pregnancies,
less illicit drug taking, lower suicide rates, etc.
IV.1.2 Minimum Wages and
Youth Employment
The question of link between MW and youth employment has held and still holds a prominent
place in the economic literature and the policy debate because of the feeling of disarray of
both economists and politicians in front of the high unemployment affecting young people.
What emerges from the analysis is that the nature of the link between the change in MW and
youth employment is not automatically negative. Contrary to the conventional view which
has dominated the economic debate for a long time, neither the theory nor the empirical
evidence support uniformly such a prediction. Indeed several theoretical models predict
that MW's may increase employment through productivity and improvements in workers' efficiency.
Furthermore, the empirical research conducted in several countries (United States, United
Kingdom, etc.) Shows that there is still a big uncertainty about both the direction and size
of the impact of the MW on youth employment. All in all, it seems fair to conclude that the
existing evidence supports both positions in the debate. Whether a MW has a negative or
positive effect depends on many factors such as, its relative level, the structure of the
labour market and the country concerned.
IV.2 Self Employment
The persistence of the youth labour market problem seems to demonstrate that standard economic
policies have been insufficient. One idea is that policy should attempt to create more
entrepreneurship among the young. Governments on the other hand, frequently see self-employment
as a route out of poverty and disadvantage and for this reason, offer aid and assistance for
small businesses.
a. Entrepreneurship may promote innovation and thus create new jobs;
b. There may be a direct effect on employment if new, young entrepreneurs hire fellow
youths from the dole queues;
c. New, small firms raise the degree of competition in the product market, bringing
gains to consumers;
d. Young entrepreneurs may be particularly responsive to new economic opportunities
and trends; and
e. Greater self-employment among young people may go along with increased self-reliance
and well-being.
This finding suggests that self-employment brings direct microeconomic benefits to people.
The literature on micro-enterprises also identifies a lack of capital as a primary constraint
on enterprise development. The Grameen Bank in Bangladesh has demonstrated very successfully
that the poor will repay small, non-collateralized loans or micro-loans. Grameen organizes
borrowers into self-selected, peer groups usually clustered together in villages; if any
member of the group defaults, no member can ever again borrow from the bank. By getting
borrowers to monitor each other, Grameen has consistently been able to recover 98 per cent
of its loans from its mostly female customers, enabling it to offer credit to over 1 million
families a year. The Grameen Bank's data suggests that a good percentage of its members manage
to pull themselves out of poverty. The main lesson to be learnt is that there is a demonstrated
need in Bangladesh and many other developing countries such as Thailand, Indonesia and
Botswana, for institutional changes which channel loans to micro-enterprises. This helps to
overcome the capital constraints confronted by the poor.
Many countries, including the UK and the US, have government programmes to provide loans to
small businesses and even exempt small businesses from certain regulations and taxes.
Furthermore, many states and municipalities in the US have had programmes to encourage
minority and female-owned small businesses. There is evidence of an underlying interest in
self-employment among large numbers of citizens who are currently employees. Schemes which
provide help and advice to young people on how to set up their own business and remove
regulations that prevent individuals from doing so may also have some value.
Conclusions
This paper reviews some facts, relating to youth joblessness in the world and to consider
what might be done about it. It has been found that:
a. There are many similarities across countries, not least of which is the fact
that youth unemployment is approximately double adult unemployment in most countries of the
world. This ratio appears to decline as unemployment increases. The 2 times rule means that
solving adult unemployment is the key;
b. The following are ruled out as explanations of high levels of youth joblessness -
wages; minimum wages; cohort size; shifts in industry composition; trade; technology;
increased female participation;
c. On the other hand, the level of aggregate demand in the economy is ruled in as an
explanation. Similarly, the level of unemployment and welfare benefits seem to explain the
high levels of youth joblessness;
d. An encouraging sign is that young people around the world appear to have responded
to the lack of jobs by staying on in school longer and increasing their education. The young
are more likely these days than was true in the past to continue living with their parents.
Increased drug taking, more participation in crime and increased suicide are direct
consequences of youth unemployment. It makes young people very unhappy, which suggests it is
not a conscious choice as some may believe.
As it appears that the solutions to youth unemployment are driven by what happens to overall
unemployment, macroeconomic strategies are examined. The contraction or stagnation of modern
sector employment and the growth of the informal or survival economy in developing countries
do not augur well for the young who are increasingly better educated. Self-employment
strategies for carefully selected population segments clearly seem to be a promising
alternative. Such strategies must include micro-finance components and should be carefully
monitored and evaluated. Strategies to deal with youth joblessness have been examined. Minimum
wages can help to improve poverty in developing countries but, if set too high, can increase
unemployment. Schemes to encourage self-employment and entrepreneurship, which provide advice
on how to set up in business or which help to overcome capital constraints, may have some
value. Active labour market policies have generally not been very successful in improving the
situation of the disadvantaged young. A series of recommendations are made for narrow
targeting and careful monitoring. The first and most fundamental lesson is that youth and
adult unemployment cannot be dissociated from each other and are driven by what happens to
overall employment.
Rising levels of aggregate demand will reduce both adult and youth unemployment but it will
have twice as high an impact on the young than it will on older age groups. The debate about
education versus training needs to be revived. In an increasingly mobile world, the need to
acquire the skills to learn are often more important than the acquisition of a specific skill,
though some evidence does indicate that effective apprenticeship systems ease the transition
from education to work. Investment in better, earlier and longer education might be more
effective in developing the attitudes and competencies required for the world of work.
It is questionable that large untargeted youth employment or training programmes have positive
rates of return. Emphasis must be placed in "untargeted" and "large". There is little evidence
anywhere in the world that such programmes improve either the employment prospects or earnings
for the young and especially so for the disadvantaged young. Narrowly targeted and carefully
evaluated programmes can, however, ease the plight of selected youth categories. The effective
use of public resources can only be achieved if there are ways to measure the short-, medium-,
and long-term outcomes of specific strategies. It is strongly argued that detailed evaluations
must be conducted for any job creating strategy for the young.
From the above, it can be concluded that to combat youth unemployment and exclusion:
a. Employment-intensive
economic strategies that boost aggregate demand must be adopted;
b. Economy specific, dual apprenticeship - education systems should
be implemented;
c. These dual systems:
i. must be carefully targeted to cover relatively
small specific young population groups,
ii. will require the expansion of the formal sector;
and
iii. must rely on the active participation of
the social partners;
d. The enhancement of self-employment and small enterprises in
the formal sector is a promising strategy. It must be backed up by adequate
training and financial support; and, finally
e. The effects of strategies and policies to combat youth unemployment
must be carefully assessed.
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