Questions and Answers: Employment

1. How do you create jobs for young people?
2. What does the report say about minimum wages?
3. Does the report view youth participation in much of the informal sector — non-registered companies, street vendors — as positive?
4. What does the report say about globalization and jobs for youth?
5. Does the report advocate higher health and safety standards to protect young workers who are most vulnerable?
6. What does the report say about youth entrepreneurship and job creation?
7. What does the report say about the needs of rural youth?

1. How do you create jobs for young people?

There are policies that can be tailored specifically to create jobs for young people by creating financial incentives for employers in the private sector to hire and train new entrants, and by designing public works programs to target young unskilled workers in rural and urban areas.

Expanding opportunities in the labor market benefits everybody including young new entrants. In fact, a good investment climate and a well-functioning labor market disproportionately favor skilled and relatively more mobile youth, while growing export oriented sectors are shown to employ large numbers of young people. During episodes of economic expansions, in places like Brazil and Chile, youth employment rose even faster than adult employment.

 

2. What does the report say about minimum wages?

Minimum wages, like so many other labor market institutions, are intended to protect workers against exploitation and market failures. When enforced, they are shown to raise workers wages, and reduce wage inequalities.

Despite good intentions, minimum wages in many developing countries are set too high. For example, In Chile, Columbia, Costa Rica, Nicaragua, Panama and Peru, the minimum wages exceed 50 percent of the median wage for workers between 25 and 40 years old. This makes inexperienced youth relatively more expensive to employers, thus reducing youth employment and/or increasing the number of youth earning less than the minimum wage and working in the informal sector.

Aligning the minimum wage with market wages, and providing incentives (like sub minimum wage, or trainee's wage) for employers to hire and train young workers is important to protect young people against adverse consequences of high minimum wages.

 

3. Does the report view youth participation in much of the informal sector — non-registered companies, street vendors — as positive?

In some countries where the informal sector is widespread, it can be an important stepping stone in the transition to work for those who have the choice. In Latin America and the Caribbean, the vase majority of apprenticeship occurs in this sector, and new entrants to the job market can use it to acquire marketable skills. In other countries, like the US, evidence indicates that early turnover enhances subsequent job matches.

However, not all youth are mobile, and some risk getting stuck in low paid work with little protection. The report shows that in 74 countries surveyed, the incidence of unpaid work is two to four times higher for youths than adults. Even among those who are paid, youth are less likely to have access to social security than adults. So youth still need to get the education and skills to allow them to adapt and move across jobs and sectors, and governments need to reduce the barriers to their entry to the formal labor market.

 

4. What does the report say about globalization and jobs for youth?

Because young people are most able to respond to growing demand in labor, the report shows that expansion of world trade by shifting production around the world has benefited youth. Examples from Indonesia and Vietnam show that export industries have high shares of youth employment, particularly the educated.

Furthermore, there is evidence that opportunities in export-oriented industries are better paid and give young people the incentives to acquire more skills. Among 48 developing countries, increases in apparel and shoe exports as a share of GDP were found to be positively associated with subsequent upturns in both male and female secondary school enrollment.

 

5. Does the report advocate higher health and safety standards to protect young workers who are most vulnerable?

Youth are less likely to have access to social security than adults, and they are sometimes found working in very hard conditions. In fact, the ILO (2006) reported that 126 million children between the age of 5 -17 are found in hazardous work.

The report recommends governments take steps to broaden opportunities for young people, such as using conditional cash transfer programs, to prevent them dropping out of school and to improve their employment potential. It also suggests that young people be trained in the right skills so they can move up to better jobs. And finally, it asks governments to consider funding "second chance" programs for child laborers and youth stuck in bad working conditions, such as remedial education schemes and training.

 

6. What does the report say about youth entrepreneurship and job creation?

The report discusses in general the role of the investment climate in promoting job creation for everyone, including youth. It also shows how reforming institutions could minimize unintended consequences for youth employment and how expanding trade and non farm rural employment could benefit youth disproportionately. .

The report also shows that expanding demand is not enough, and policy makers also have to focus policies to improve the capability of youth to choose among opportunities when available, and to create their own. The report highlights the difficulties some young entrepreneurs face when starting their own businesses and draws on examples of successful policies from countries like Argentina and Chile to promote entrepreneurship activities among youth.

 

7. What does the report say about the needs of rural youth?

In several countries, many youth still live in rural areas, where the range of opportunities is far wider than might be apparent at first glance. For youth, employment opportunities are not only in agriculture but also in non-farm sectors. In fact, in Asia and Latin America, about 40 percent of employment is in the rural non-farm sector.

With technological innovation, productivity on the farm increases, and more labor is freed up to move to the non-farm sector. Because young people are the most mobile, they are most likely to switch sectors to take advantage of new opportunities, so policies that develop the non farm sector will have a profound effect on youth. For example the promotion of small and medium rural enterprises that use imported technologies could have differential impact on youth given their advantage in using new technologies (e.g., China). While better- educated youth are found to be more likely to move into highly productive non-farm work (e.g., in Brazil and India). Finally, better transportation and infrastructure give youth access to urban opportunities, without them having to migrate.