International Youth Day: 12 August 2015

Formal employment: A critical way to engage young people

The theme for International Youth Day in 2015 is youth civic engagement, which includes economic and social engagement. Young workers who are part of the formal economy have a greater chance of having access to decent work as adults.

Feature | 11 August 2015
Guillermo Dema, ILO youth employment specialist for Latin America
GENEVA (ILO News) – For many young people in developing countries, their first job experience is in the informal economy. And for most of them, transitioning to the formal economy is often an uphill struggle if not an impossible battle.

Their lack of experience and training is a factor, as is the fact that they are disproportionately affected by economic cycles.

However, some countries are putting into place policies to facilitate the entry of young people into formal employment.

On the occasion of International Youth Day, we talk to ILO youth employment specialist for Latin America, Guillermo Dema about some of the policies being applied across this region, which has one of the highest incidences of informality in the world.

ILO: What are the main obstacles and barriers facing youth in Latin America and the Caribbean that prevent them from getting more involved?

Guillermo Dema: Young people represent the promise of positive change in our societies. However, there are not enough jobs for them. There are also millions of young people who have no access to decent work opportunities and are at risk of social exclusion.

Latin America and the Caribbean is a young region. Population dynamics have led to a "demographic window" in which the young people (108 million) have the potential to lead the transformation of our societies in the 21st century. However, the youth of Latin America and the Caribbean face particularly difficult working conditions, resulting in high rates of unemployment and informality. This situation can be attributed to their lack of experience and training, as well as the fact that economic cycles affect them disproportionately. This is especially relevant in a time like this when the region is facing a slowdown in economic growth.

ILO: Youth are particularly hard hit by informal employment. Why is this? What is the scale of the problem in Latin America and the Caribbean?

G. Dema: The formalization of employment, especially youth employment, represents a challenge for countries of this region. Informal employment outside of the agriculture sector in Latin America and the Caribbean has been reduced from close to 50 per cent in 2009 to 47 per cent in 2012, with variations in terms of size and speed in the various countries analysed. Age disaggregated data show that informality is more prevalent among young workers than among adults.
  •  It is estimated that about 27 million young workers are in informal employment; this represents 56 per cent of all employed young people, compared with 46 per cent of adults (over the age of 25). Six out of ten jobs that are being created for young people are in the informal economy.
  • Thirty-one per cent of young people working in formal sector enterprises are in informal employment, twice the proportion of adults (15.2 per cent).
  • Forty-five per cent of young people with non-salaried, wage employment are in informal employment, as opposed to nearly 30 per cent of adults.
  • Eighty-seven per cent of young people who are self-employed are in informal employment (83 per cent for adults).
  • In the poorest 20 per cent of the population, only 23 per cent of young employees have a written contract, and very few have access to social security (12 per cent in health and pensions).

ILO: The ILO has identified best practices in the Latin American region to promote the transition to the formal economy. Can you please give us a couple of examples?

G. Dema: There are many and diverse experiences which show promise in the region. Some examples are as follows:

Uruguay institutionalized incentives for hiring young people with the Investment Promotion Scheme and the Law on Promoting Decent Work for Youth. Tax exemptions are given for up to 30 per cent to promote youth employment and wage subsidies in some cases when hiring youth between 15 and 24 years old who do not have previous formal working experience. These wage subsidies may reach 60 to 80 per cent in the case of employers who hire young people under 30 years old who are unemployed and vulnerable.

Brazil has passed a law that accords subsidies for hiring young apprentices and training them. It aims to facilitate the transition of young people from school to formal employment. It also establishes a quota for hiring apprentices that companies must meet. The law requires medium and large companies to cover between five and 15 per cent of its workforce with occupations requiring training of young people between 14 and 24 years of age who are attending formal education or accredited training centres. The workday is six hours and the minimum hourly wage corresponds to the minimum hourly wage in the country. Apprenticeships can last a maximum of two years. Between 2005 and 2015, more than 2 million young Brazilians have benefited from these modes of training and recruitment.

ILO: A new ILO Recommendation to facilitate the transition to the formal economy was adopted during the June 2015 International Labour Conference (ILC). How can this new legal instrument help reduce informal work for young workers and all other workers in Latin America and beyond?

G. Dema: The new Recommendation adopted at the ILC 2015 will be an important input to promote the formalization of the youth labour force and promote labour protection in a changing world of work. It also promotes the transition from the informal to the formal economy for small and medium enterprises. The Recommendation calls for giving consideration to young people as a subgroup where the deficits associated with informality are more serious.