Confronting the Youth Employment Challenge with Active Labour Market Policies

Decent work for all is integral to sustainable development. This is recognised in the 2030 Agenda for Sustainable Development, through which the world has committed to achieving decent work for all, as described by Sustainable Development Goal 8; including substantially reducing the youth inactivity rate (Gammarano, 2019).

Youth labour market inclusion is a persistent global challenge, the effects of which are particularly tangible among developing and emerging market economies. Generally considered as the group between the ages of 15 to 24, youth comprise approximately a third of the total working age population in these economies (Datta, Elzir Assy, Buba, Johansson de Silva, Watson, et al., 2018, p.8; Ahn, An, Bluedorn, Ciminelli, Kóczán, Malacrino, Muhaj, & Neidlinger, 2019, p. 4). Unfortunately, 2015 data from the International Labour Organization (ILO) indicates that approximately two-thirds of these youth are “either unemployed or trapped in low-quality jobs,” while 20% are inactive as of 2018 (Gammarano, 2019; Ahn et al., 2019; IDRC, 2015).

Calling for decent work

According to the ILO, decent work involves “opportunities for work that is productive and delivers a fair income, security in the workplace and social protection for families, better prospects for personal development and social integration, freedom for people to express their concerns, organise and participate in the decisions that affect their lives and equality of opportunity and treatment for all women and men” (“Decent work”, Accessed June 2019).

The youth employment issue is complex, and varies by country-context, with notable gender and urban-rural biases. Often lacking experience, skills, social networks, and assets, young people are led into situations of unemployment, or underemployment in low-quality informal jobs with limited earning potential (OECD, 2017; Datta et al., 2018).

Addressing this challenge will require enhancing job and earning opportunities. As such, part of the solution must be to address labour market constraints and limitations which young people face. One way in which this may be achieved is through the effective implementation of strategies, which include Active Labour Market Policies (ALMPs).      

Defining ALMPs

ALMPs are:

Government programmes which help the unemployed to find work, comprising public employment services, training schemes and short-term employment subsidies. (McCord, 2018, p.9)

Recognised as a powerful policy instrument, ALMPs involve targeted interventions which seek to improve labour market conditions by remedying certain failures. The goal is to improve employment prospects and increase the availability of decent work, simultaneously improving social conditions (ILO, 2016; O’Higgins and Pica, 2017). To achieve these objectives, ALMPs include the following elements (OECD, Accessed 2019):

• Enhancing motivation and incentives to seek employment;
• Improving job readiness and help in finding suitable employment; and
• Expanding employment opportunities

How these elements are prioritised differs between labour market strategies. There are four main types of ALMP interventions  (O’Higgins and Pica, 2017, p.5): 

• Employment services and job search assistance;
  • These interventions facilitate job matching by serving a mediating role between jobseekers and employers.  
• Subsidised employment;
  • These interventions primarily include employment-generating public work projects, or wage subsidies to support private employment. 
• Skills training; and
  • These interventions enable participants to acquire job-related skills, either through on- or off-job training.
• Entrepreneurship promotion
  • These interventions increase prospects for self-employment through various means including entrepreneurial skills-training, facilitating access to credit, providing technical support, or facilitating market access.

To reap the greatest benefits and ensure sustainable results, interventions are best implemented in conjunction with other social protection measures (ILO, 2016; Ahn et al., 2019). For instance, well-coordinated unemployment insurance benefits or targeted cash transfers can protect vulnerable workers from labour market volatility so that they can fully engage with interventions to which they have access (Ahn et al., 2019; OECD, 2019). With active monitoring and evaluation to ensure policy effectiveness, this holistic approach can contribute to reducing youth inactivity (OECD, 2019; Ahn et al., 2019).

Key constraints for youth employment

According to Datta et al. (2018), there are various common market failures and constraints which contribute to youth inactivity:

• Gaps and mismatches in technical, cognitive and socio-emotional skills;
  • Deficient investments in education and training that are responsive to labour market demands, as well as health and social issues, can all contribute to a gap in skills necessary for employability.
• Asymmetric information;
  • Youth may be improperly informed due to information gaps and limited access to social networks, or little or no work experience. In the first instance, youth may be unaware of labour market demands (ex. job availability or high demand sectors) while also lacking the necessary social networks to inform them of these demands and connect them to suitable opportunities. Alternatively, employers may simply favour experienced workers for given positions, thereby excluding youth from consideration.   
• A lack of assets and limited access to credit;
  • Lacking capital, many young people are excluded from engaging in productive self-employment opportunities. These constraints have a strong rural bias, particularly in economies where agriculture is an important productive sector.  
• Regulatory constraints to hiring youth; and
  • Regulations which limit labour market flexibility can deter employers from hiring young new employees. For instance, employee protection legislation and mandatory social benefits offer protection for those already in employment, but they may discourage hiring first-time job seekers who may be higher risk.   
• Restrictive social norms.
  • In some societies, social norms may constrain certain groups from seeking formal employment or employment in specific sectors. Social norms often have gendered effects which particularly constrain women’s opportunities

What works best

The most important factors to consider when choosing impactful interventions are the ALMP’s responsiveness to country context and target groups’ profiles (O’Higgins and Pica, 2017). In developing and emerging economies in particular, comprehensive programmes which leverage synergies between supply side and demand side labour market interventions  have been shown to most effectively benefit youth employment outcomes. These programmes are usually implemented in conjunction with structural policies aimed at increasing labour market flexibility and encouraging quality and formal employment (O’Higgins and Pica, 2017; Ahn et al., 2019; ILO, 2016).

Youth in Action

Many governments throughout Latin America have experimented with the implementation of ALMPs as they attempt to confront the challenge of securing decent work for youth (ILO, 2016). This includes Colombia, where "Jóvenes en Acción," or "Youth in Action," was implemented in the mid-2000s.

Overseen by the Department for Social Prosperity, the objective of Youth in Action is to increase youths’ economic and social integration by promoting human capital formation through training and life skills development, with an economic incentive (McCord, 2018; Food and Nutrition Security Platform, Accessed June 2019). Focused on urban areas, the programme targets unemployed high school graduates between the ages of 16 and 24, with a priority on marginalized groups including the displaced, the poor, and those from indigenous backgrounds (McCord, 2018; Owens, 2012).

To achieve its objectives, Youth in Action seeks to address key barriers which constrain the target groups’ achievement of higher education and decent employment. Barriers include: “opportunity costs (linked to income poverty), social immobility, lack of skills, lack of information, [and] lack of social and psychosocial skills” (McCord, 2018, p.51). The programme is comprised of four components.     

1. The primary component of the programme is training to develop technical and academic skills geared towards labour market demand. (McCord, 2018; Food and Nutrition Security Platform, Accessed June 2019). 
2. The secondary component involves ensuring the sustainability of participants’ education by reducing academic dropout rates among vulnerable students (McCord, 2018).
3. The third component is to improve labour market entry conditions for youth. One way in which this is achieved is through the involvement of private enterprises who offer internship and apprentice opportunities for participants (ILO, 2015) 
4. The fourth component is the development of life skills which complement training to enhance youths’ employability. A range of skills are covered to address various socio-emotional issues (McCord, 2018, 51; Food and Nutrition Security Platform, Accessed June 2019)

Additionally, Youth in Action employs a conditional cash transfer as an economic incentive to keep participants engaged. This transfer is intended to offset programme participation costs and is conditional on school attendance with the possibility of performance bonuses (McCord, 2018). Transfers stop once participants complete the programme.

Challenges exist and broad outcomes are constrained by lack of existing decent employment opportunities (McCord, 2018). Nevertheless, Youth in Action has successfully contributed to increasing employability and enhancing employment outcomes for those who complete the programme (ILO, 2015; Owens, 2012; McCord, 2018). Women experienced the greatest benefits in employment and earning gains; many of whom transitioning from unemployment to formal employment (Owens, 2012; ILO, 2015). While less significantly impacted, men who successfully completed the programme still increased their likelihood of securing a formal sector job (Owens, 2012; ILO, 2015).

Conclusion

While imperfect, ALMPs are a powerful tool for confronting the youth employment challenge; particularly in developing and emerging market economies, which will rely on youth to lead the future of sustainable development. When implemented through a holistic approach embedded within comprehensive labour policy frameworks, ALMPs may be part of the solution to achieving the decent work objectives of the 2030 Agenda for youth.  

References

Ahn, J., An, Z., Bluedorn, J., Ciminelli, G., Kóczán, Z., Malacrino, D., Muhaj, D., & Neidlinger, P. (2019, January). Work in Progress: Improving Youth Labor Market Outcomes in Emerging Market and Developing Economies. Maurice Obstfeld (Ed.). Staff Discussion Note 19(02), International Monetary Fund. Retrieved from https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2019/01/18/Work-In-Progress-Improving-Youth-Labor-Market-Outcomes-in-Emerging-Market-and-Developing-45130

Datta, N., Elzir Assy, A., Buba, J., Johansson de Silva, S., Watson, S., et al. (2018). Integrated Youth Employment Programs. A Stocktake of Evidence on What Works in Youth Employment programs. Jobs Working Paper, 24. World Bank: Washington, DC. Retrieved from https://openknowledge.worldbank.org/bitstream/handle/10986/31424/135321-WP-14-3-2019-16-5-44-FINALDeliverableStocktakeofevidenceonYouthEmploymentProgramsDraftCS.pdf?sequence=1&isAllowed=y  

Food and Nutrition Security Platform. (2019). Programa Jóvenes en Acción [Youth in Action Programme]. Accessed June 2019. Retrieved from https://plataformacelac.org/en/programa/483

Gammarano, R. (2019, March). Labour market access—a persistent challenge for youth around the world. ILO Stat-Spotlight on Work Statistics. International Labour Organization. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---dgreports/---stat/documents/publication/wcms_676196.pdf

ILO. (2015). Public Employment Services in Latin America and the Caribbean: Colombia [note]. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_policy/---cepol/documents/publication/wcms_426611.pdf

ILO. (2016). What works: Active labour market policies in Latin America and the Caribbean. ILO: Geneva. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/---publ/documents/publication/wcms_492373.pdf  

ILO. Decent Work. Accessed June 2019. Retrieved from https://www.ilo.org/global/topics/decent-work/lang--en/index.htm

International Development Research Centre. (2015, March). Putting youth employment at the heart of growth. Insight: Inclusive Growth. Retrieved from https://www.idrc.ca/sites/default/files/sp/Documents%20EN/Youth-InSight-ENG.pdf

McCord, A. (2018, March). Linking Social Protection to Sustainable Employment: Current Practices and Future Directions. Social Protection for Employment Community (SPEC). Retrieved from https://socialprotection.org/sites/default/files/publications_files/Report-Social%20Protection%20and%20Employment.pdf 

O’Higgins, N., & Pica, G. (2017). Complementarities between labour market institutions and their causal impact on youth labour market outcome. EMPLOYMENT Working Paper No. 224. ILO, Employment and Labour Market Policies Branch. Retrieved from https://www.ilo.org/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_614369.pdf

OECD. (2017). Assessment and policy recommendations. In Youth Aspirations and the Reality of Jobs in Developing Countries: Mind the Gap. OECD Publishing: Paris. Retrieved from https://doi.org/10.1787/9789264285668-4-en. 

OECD. (2019). Active Labour Market Policies: Connecting People with Jobs. Accessed June 2019. Retrieved from http://www.oecd.org/employment/activation.htm

Owens, J. (2012, December 10). Vocational Training for Vulnerable Youth in Colombia [web blog]. World Bank Blogs, Jobs and Development. Retrieved from http://blogs.worldbank.org/jobs/vocational-training-vulnerable-youth-colombia