Facilitating the School-to-Work Transition

Transcription

1 Facilitating the School-to-Work Transition Labor Markets Core Course April 5, 2011 Mattias Lundberg HDNCY/HDNSP

2 Unemployment among young people is high, much higher than among adults 2 WB WDR 2007

3 So what? Why should we care? Why are young people more likely to be unemployed? Young people are last hired, first fired Churning and switching young people are trying out different jobs (Quintini 2007, Cunningham, et. al. 2008) Search young people spend time looking for the right job (Salehi-Isfahani and Dhillon 2008) We expect more young people to be unemployed. 3So why is this a concern for public policy?

4 So what? Why should we care? 4 Because labor market problems are more costly for young people than for adults Unemployment lasts longer for young people Long-term unemployment is expensive Leads to lower wages and lifetime earnings Drives young people out of the labor force Correlated with crime, violence, drug abuse But youth are more mobile, resilient, and earn high returns to experience

5 The ideal school-to-work transition path Orderly Quick Inexpensive Predictable 5

6 The actual school-to-work transition path Disorderly Confused Timeconsuming Expensive Unpredictable 6

7 The actual school-to-work transition path ARE CHOICES CONSTRAINED? income credit obligations information 7

8 How the labor market works Has in mind a job and wage he is willing to accept Has a set of skills Something prevents the market from clearing Has in mind a set of skills she needs Has in mind a wage she is willing to offer 8

9 Why is there a youth labor problem? Causes of general labor market failure: Supply-side factors (e.g. inadequate or insufficient skills) Demand-side factors (e.g. poor demand, slow growth) Information 9 Matching (employers and workers can t find each other) Communication (workers can t display skills to employers, workers don t know what skills are in demand) Market clearing factors (e.g. rigid labor laws, distance, transactions costs) Constraints in other markets (eg, credit, products)

10 Why is there a youth labor problem? Causes of labor market failure specific to youth: Supply-side factors (e.g. inadequate experience, financial and social capital) Demand-side factors (e.g. discrimination) Market clearing factors (e.g. labor laws that protect established-workers-in-jobs rather than workers) Constraints in other markets (eg, credit, products) 10

11 So what can you do about it? Identify the binding constraints 11 What is most pressing? Identify the possible policy responses What tools do we have? What evidence and experience do we have? What s most cost-effective? Select the most effective combination of policies to address the constraints. Where can we use scarce public resources most effectively?

12 I. Skills Mismatch Constraints Wrong skills Technical skills General skills Life skills Entrepreneurial skills Caribbean: Skills Desired by Employers Honesty/integrity 86% Work ethic 86% Problem solving / efficiency 82% Communication skills 79% The ability to work well on teams 77% Taking individual responsibility 68% Dependability 47% Computer skills 45% 0% 20% 40% 60% 80% 100% 12 Blom and Hobbs( 2007) Interventions Demand-driven voc / tec + life skills training + internship programs Career counselors (information about programs and demand)? 2 nd chance education programs? Entrepreneurship training

13 Example: wrong technical and life skills Jovenes programs: technical training + social skills for the labor market + internship Demand-driven (MOU with internship firms) Private supply with public oversight, accreditation, funding located in poor neighborhoods, stipend to participants Impact on employment Impact on wages Cost= $US700-$2000 per person Proyecto Joven (AR) Chile Joven Jovenes en Accion (CO) Juventud y Empleo (DR) ProJoven (PE) 10% (f) 21% 5% (f) 0% 6% (f) 10% 26% 18% (m) 35% (f) 10% 18% Cost-Benefit NPV> NPV>0 NPV>0 13 Ibarraran and Rosas (2008)

14 Example: poor information about skills 14 Dominican Republic Intervention: inform 8th grade boys of the benefits to completed secondary school. Results: the group that received the intervention 4 pp more likely to go on to 9th grade 0.2 total years of more education, on average Robert Jensen (2006) Kenya Intervention: inform girls in a jobs training program about the average wages paid in male-dominated trades. Results: among the girls who received the intervention 10 pp increase in girls choosing male trades Jonas Hjort et al. (in process) Note that these are information interventions, not labor market interventions.

15 II. Job Search Constraints Don t know how to find a job Workers search for jobs informally (Peru) Interventions asked an employer employment agency asked a friend newspaper or other ads Cunningham et. al. (2008) 15

16 II. Job Search Constraints Don t know how to find a worker Employers search for workers informally (Sierra Leone) Interventions Employment offices with social workers (for both workers and employers)? Job information sites (eg internet, posters) 16 Peeters, et. al. (2009)? School-based career guidance counselors

17 Example: Don t know how to find a job Labor intermediation help workers and employers find each other Information about job vacancies + job search assistance + social worker A service for employers, in terms of locating and transitioning new workers (especially youth) Challenge: employers use the service Cost =$50/participant (Peru) Mexico UK Portugual Employment search time 0 Wages Cunningham (2010)

18 III. Signaling Skills to Potential Employers Constraints Employers can t judge skills Workers can t display skills School certificate (conveys limited information?) Skills training (difficult to judge quality) Interventions? Neutral skills certification / qualification criteria? Accreditation of training providers Work experience 18

19 Example: Signaling skills to employers Skills certification national occupational standards Written or applied tests (depends on occupation) Award certificate indicating level of expertise in a particular occupation Can be tested at any time in life-cycle Can be publicly or privately implemented Evidence of impact still limited: In ChileCalifica, training participants with skills certification earned wages on average 60% above those without skills certification, but 19 the difference was not statistically significant.

20 IV. Insufficient Labor Demand Constraints Slow growth of labor demand Restrictions on labor market (legislation that increases the costs of hiring or firing) Reluctance to hire young, inexperienced workers Interventions Public works / public service + training (short-run) Wage subsidy for low productivity workers (short-run) Apprenticeships 20

21 Example: Stagnant jobs growth Youth Service: volunteer (or subsidized) work that contributes to the community Long-term time investment (>1 year) Volunteers can provide local services (health, educ, housing, environmental protection) Can be expensive (US programs >$10,000 per beneficiary annually) US AmeriCorps Higher probability of subsequent employment, lower arrest rates, higher technical skills, greater civic participation. US Job Corps Improved literacy & numeracy, 16% lower arrest rates. 21 Cunningham, et. al. (2008)

22 V. Business start-up constraints Constraints Hard for young people to start a business: Young people may lack financial capital social capital Young people may have a harder time negotiating regulations and institutions. Interventions? Microfinance? Entrepreneurship training? Entrepreneurship mentoring? Bundled services ( one-stop-shops ) 22

23 Summary: What s the evidence? Constraint Incorrect or insufficient skills (technical, entrepreneurial, general, life skills) Job search Signaling to potential employers Insufficient labor demand Business start-up Proven program response Job training + life skills + apprenticeship; information Employment information and matching services Potential program response youth service, secondchance education, career counseling, entrepreneurship training Jobs posting, in-school career counselors Skills certification, training program accreditation Apprenticeships, wage subsidies, youth service Training, mentoring, microfinance 23

24 What s the World Bank doing? Support to programs and policy reforms in numerous countries, including Kenya, Uganda, Tanzania, Sri Lanka, Liberia, Sierra Leone,. Coordinated training and research programs (understand impact of job skills, life skills, entrepreneurship): 24 Adolescent Girls Initiative (Liberia, Sudan, Rwanda, Nepal, Afghanistan, PNG, Laos, Jordan) BNPP / Spanish Impact Evaluation Fund (Uganda, India, Dominican Republic, Liberia, Malawi, Tunisia, Turkey, South Africa)

25 New directions Engaging with national policy and programs rather than small pilot projects (SLE, LIB, WBG) Bringing insights from psychology and behavioral economics Self control, self efficacy, self esteem Time preference, discounting Risk-taking Trauma and recovery in post-conflict environments Financial literacy / capability / decision-making 25

26 Take-way messages (I) Evidence is getting better: 26 we know that supply-side interventions can work. But we still don t really know what type of intervention is most effective (job skills, life skills, )? or what combinations of interventions are most effective? for whom interventions are most effective? in which environment or circumstances? whether programs are cost-effective. More importantly, what constrains employment? wrong skills, poor skills, insufficient demand, information, or are the constraints elsewhere (eg credit markets)?

27 Take-way messages (II) The school-to-work transition looks dramatically different in different places, and among different groups of people. Diagnosis is essential: what are the major constraints to successful s-2-w transition in your country among your target population? Check the evidence base for solutions. Do we have effective tools? Are they cost-effective? Continue to experiment and learn, to build the evidence base. 27

28 A few references Betcherman, G., M. Godfrey, S. Puerto, F. Rother, and A. Stavreska, A Review of Interventions to Support Young Workers: Findings of the Youth Employment Inventory. SP Discussion Paper No Washington, DC: World Bank. Cunningham, W., L.M. Cohan, S. Naudeau, and L. McGinnis, Supporting Youth at Risk: A Policy Toolkit for Middle-Income Countries. Washington, DC: World Bank. Ibarrarán, P. and D. Rosas Shady, Evaluating the Impact of Job Training Programs in Latin America: Evidence from IDB funded operations. Journal of Development Effectiveness, June. Knowles, J.C. and J.R. Behrman, The Economic Returns to Investing in Youth in Developing Countries: A Review of the Literature. HNP Discussion Paper. Washington, DC: World Bank. World Bank, World Development Report 2007: Development and the Next Generation. Washington, DC: World Bank. Sanchez Puerta, Laura Managing Labor Market Risks and Creating Better Jobs: Alternative Designs for Income Protection and Active Labor Market Policies (manuscript) Katz, Elizabeth Programs Promoting Young Women s Employment: What Works? oymentkatz.pdf. 28