The purpose of first-job initiatives is to strengthen the human capital of young people to increase their opportunities for access to the labor market and thereby reduce risks and/or costs to employers.
Young people are one of the groups at the greatest disadvantage in the la-bor market; they have no way to effectively transition from school to work, and they do not receive extensive, comprehensive support to increase their opportunities for labor market entry. Young people in the region share this vulnerability with their peers in other regions of the world. Their careers gen-erally do not get off to a good start. As indicated in Chapter 1, this is reflected in the high rate of youth unemployment and the high proportion of young peo-ple who are neither in education nor working. Enabling these young peopeo-ple to successfully enter the labor market would represent a real opportunity for growth and social development.
Policies to help connect young people with their first job: a fragmented vision.
Over the past three decades, the governments of the region have adopted a series of palliative policies to improve the youth employment situation, at least in the short term. Their implementation is usually piecemeal rather than a coherent youth employment policy aimed at correcting structural defects in the labor market while meeting short-term objectives at the same time.3 Neither are they linked with productive development policies that combine the development objectives of certain sectors or regions with lowering the barriers to young people getting these new jobs. Grouping these programs and policies more succinctly, based on the classification used by the Interna-tional Labour Organization (ILO, 2015a), they can be divided into four types:
i) on-the-job training programs for youth, which have generally followed the Chile Joven (Chile) or PROEMPLEO (Mexico) model; ii) training or appren-ticeship contracts, which include contracts for apprentices; iii) employment subsidy programs, which include wage subsidy policies as well as policies that offer tax exemptions or contributions to social security; and iv) special employment arrangements for youth (for example, first-job laws). Table 4.1 describes the initiatives of this type in the region.
3 Moreover, these measures may have conflicting objectives. For example, employment subsidies can act as a disincentive, discouraging young people from looking for work, while support for self-employment can reduce formality.
Table 4.1 Initiatives to support workers’ fi rst jobs
Apprenticeship Law (Law 10.997), Brazil (2000)
Aprendices Program, Chile (2000)
Training Contract in Law 4.951/13, Paraguay (2013)
Types of on-the-job training for graduates and in enterprises in Law 19.133, Uruguay (2013)
Since the mid-1990s:
Training programs following the Joven model: classroom training and internships in fi rms (Argen-tina, Chile, Colombia, Dominican Republic, Peru, Uruguay)
Training programs following the Scholarship Program for the Training of Unemployed Workers (PROBECAT): on-the-job training (Mexico, Honduras)
New initiatives:
Jóvenes con Más y Mejor Traba-jo, Argentina (2008)
Chile Califi ca, Chile (2002)
Más Capaz (+Capaz), Chile (2014)
National First-Job Incentive Program (PNPE), Brazil (2003)
Primer Empleo, Mexico (2007)
Law of Formalization and Job Creation (Law 1429), Colombia (2010)
40.000 Primeros Empleos, Colombia (2015)
Youth Employment Subsidy, Chile (2009)
Social Benefi t Subsidy for Young Workers, Chile (2008)
PROJOVEN, Panama (2015)
Minimum wage regimes:
Chile, Costa Rica, Paraguay Employment regimes:
Law 4.951/13 on youth employ-ment, Paraguay (2013)
Law 19.133 on the promotion of decent work among youth, Uruguay (2013)
Special contracts promote training for workers. They do not establish an employment relationship with the fi rm when workers are enrolled in a vocational training institute under an international fellowship program (IFP) or another training center.
These contracts emphasize the educational nature of the youth’s job duties.
Some countries require fi rms to hire a minimum quo-ta of apprentices (Brazil, Colombia, Paraguay), while others allow for voluntary apprenticeship contracts.
Some recent initiatives off er wage subsidies for fi rms that hire apprentices (Paraguay, Uruguay).
In general, these programs are managed by the ministries of labor.
Programs target vulnerable youth with little or no work experience and limited job skills.
They off er three to six months of technical training.
The Joven model includes a classroom training phase provided by public and private training institutes as well as an internship phase in a fi rm, each for an avera-ge of three months. In the PROBECAT model, fi rms are responsible for training.
Programs emphasize the role of the demand for skills in the productive sector. In the Joven model, training entities are usually responsible for establishing part-nerships with fi rms to guarantee the implementation of internships. In the PROBECAT model, the program is responsible for linking benefi ciary youth with fi rms.
New initiatives focus on developing soft and life skills.
They also introduce competencies associated with entrepreneurship.
These promote youth employment through hiring subsidies.
Normally, the subsidy is for fi rms (Brazil, Mexico, Panama), but in some cases, youth also receive them (Chile).
Subsidies can cover part of the salary (Brazil, Chile, Panama), social security payments, or other contri-butions for which the fi rms are responsible (Chile, Colombia, Mexico).
In some programs (Mexico’s Primer Empleo and Colombia’s 40.000 Primeros Empleos), the subsidy is delayed to encourage youth to remain on the job.
In Paraguay and Uruguay, new legislation was en-acted in 2013 to introduce special hiring practices for young workers. Specifi cally, formal fi rst-job contracts were introduced. These target young people with little or no formal work experience and provide wage subsi-dies to encourage the hiring of young workers.
Similar initiatives in the Dominican Republic, Nicara-gua, and Peru failed due to the lack of prior consensus with social actors.
Source: ILO (2015a).
Examples General description
The region still lacks apprenticeship programs like those found in many coun-tries around the world. Effective programs of this type could foster broader, more robust labor market entry for youth in LAC. The major challenges in-volved in establishing this type of program in the regional context are the high levels of informality, the possibility that the programs will be used as instruments for obtaining cheap labor (ILO, 2012a), the need to guarantee enterprise involvement to ensure an adequate supply of formal vacancies for apprentices, and the obligation to ensure quality on-the-job training. In Europe and the United States, apprenticeship systems smooth the transition to the first job (Clark and Fahr, 2002; Reed et al., 2012; Lerman, 2013), but they are based on institutional systems still lacking in LAC; they are also a part of a continuing education system. As will be seen further on in Chapter 6, several countries in the region have embraced apprenticeship contracts and other similar initiatives. However, they tend to use them as employment sub-sidies rather than on-the-job training tools for placing workers in quality jobs.
Among these measures to support young people, short-term training pro-grams have proven to be modestly (but persistently) effective in terms of the quality of the jobs found. The measures most frequently adopted by the coun-tries of the region to tackle youth employment problems include programs in urban areas that offer short-term training and a mechanism for connecting young people with the labor market. These programs combine services to increase the human capital of the beneficiaries (for example, cognitive and socioemotional skills and work experience) and lower the cost of the job search for this population. They also offer tools for demand-based training;
that is, they respond to the needs of the productive sector.
Current evidence regarding the impact of these programs in the region sug-gests that they yield positive (although modest) results, especially with re-spect to the quality of the employment found (in terms of formality and in-come). The achievements have proven to be greater in urban areas, where more opportunities for formal employment are created (González–Velosa, Ripani, and Rosas, 2012). One study on the long-term effects of this type of program (Ibarrarán, Ripani, and Rosas Shady, 2015) showed that the impact on the quality of the job found persisted, even six years after the intervention.
These programs also tend to have “unexpected” impacts (see Box 4.1).
Some reasons for the successes, albeit modest, of on-the-job training pro-grams for youth, and room for improvement. The encouraging findings re-garding the impact of the programs implemented in the region may reveal that many of them have incorporated certain elements considered
success-Box 4.1 “Unexpected” impacts of on-the-job training programs
The main objective of on-the-job training programs is to increase the probability of unemployed people fi nding a formal job and raising their productivity and income by acquiring the experience and skills valued in the labor market. Assessments of these programs’ impacts have therefore concentrated on measuring their effect on job performance with variables such as labor market entry, tenure, wages, bene-fi ts, working hours, etc. It has been shown, however, that in addition to their impact on these variables, on-the-job training programs have positive externalities (for example, lower adolescent pregnancy rates; less drug, alcohol, and cigarette use;
and less involvement in crime and violence).
Various estimates have quantifi ed these impacts on both the region and in the rest of the world. A recent study in the United States found that on-the-job training and mentoring programs for at-risk youth had reduced the violent crime rate by 43% (Heller, 2014). The analysis also revealed that the impact of the intervention increased with the passage of time, so that 16 months out, it was seven times greater than it was right after the program ended. Likewise, assessments of the impact of disadvantaged youth participation in other programs with on-the-job tra-ining components in the United States, such as Jobstart, the Service and Conser-vation Corps, and the National Job Corps, indicate that they have contributed to a reduction in drug abuse, arrest and conviction rates, and the length of incarce-ration, respectively (Cave et al., 1993; Jastrzab et al., 1996; Schochet, Burhardt, and McConnell, 2008). Schochet, Burhardt, and McConnell (2008), for example, found that the National Job Corps (through which youth receive i) individualized vocational training, based on an assessment of their skills and interests, and ii) support for job placement) had helped lower detention and conviction rates and shorten detention periods for the participants.
In LAC, the Dominican Republic’s Youth and Employment (Juventud y Empleo) on-the-job training program (which targets vulnerable youth and includes training in socioemotional skills) has reduced the probability of adolescent pregnancy by 20%, especially among adolescents who are not yet mothers (Novella and Ripani, 2015). This result is attributed to the fact that the program raises young women’s job expectations and, therefore, the opportunity cost of having children.
Given these promising effects, it is important for on-the-job training programs to consider not only their impact on the job performance of their target populations, but these “unexpected” impacts, which are often the consequences of including modules that support the development of socioemotional skills.
ful by specialized publications. Such elements include i) a demand-based approach; ii) the participation of private sector providers; iii) a solid labor intermediation component; iv) a heavy emphasis on on-the-job training; v) a concern for ensuring the quality of the training, both in the classroom and on the job (for example, through periodic accreditation of the training insti-tutions or instructors from the firm and/or through the monitoring of program graduates’ performances in the labor market; vi) the inclusion of modules for the development of socioemotional skills, such as self-esteem, perse-verance, self-control, motivation, responsibility, and commitment; and vii) the integration of training programs for vulnerable groups in the continuing education system (González-Velosa, Ripani, and Rosas, 2012; Urzúa and Puentes, 2010). While the cost of these programs per beneficiary is low, and the cost-benefit ratio in many cases has been positive (Card et al., 2011), the returns are still relatively meager, indicating the need to further refine these programs to achieve better results. As Figure 4.1 shows, active labor market policies that emphasize intermediation (or some type of connection
0,15
0,1
0,05
0
-0,05
-0,1
-0,15 Training only in educational institutions
Only on-the-job
training Combination of training in educational institutions and
on-the-job training
Combination of training in educational institutions, on-the-job training, and other
services
Approximate measurement of the quality of the intervention
Source: Fares and Puerto (2009).
Note: The vertical axis of the figure shows an approximate measurement of the quality of the intervention, because the program has an impact on employment outcomes and is cost-effective.
Figure 4.1 Effects of combining on-the-job training with classroom training
with a private sector fi rm in the form of on-the-job training) are more effective in promoting labor market entry than those that emphasize only classroom training, which suggests that information failures are as important as skill gaps (Fares and Puerto, 2009).
Youth employment subsidy programs. Some countries in the region have opted to offer youth employment subsidies, which promote labor market en-try for young people through hiring subsidies. The most common mechanism consists of giving this subsidy directly to the fi rm (through direct support that covers part of the young person’s wages in the business or lowers the fi rm’s contributions to the social security system). Other countries, in contrast, have opted to grant the subsidy to the young worker (see Box 4.2).
Box 4.2 Youth employment subsidies in Chile
Youth employment subsidies in Chile (Law 20.338 of 2009) are a benefi t that the state provides to young workers (salaried and self-employed) in si-tuations of vulnerability and to their employers. Young workers receive two-thirds of the benefi t, and employers receive one-third. To be eligible for the benefi t, workers must be 18 to 25 years of age, from a family in the poorest 40% of the population, and earn less than $360,000 CLP. The purpose of this instrument is to reduce youth unemployment, supporting the most vul-nerable individuals by promoting the formal hiring of young workers. Accor-ding to a University of Chile study (2012), in its fi rst two years of execution, 2009 and 2010, the program covered 4.6% and 4.8%, respectively, of the eligible population, based on the scoring criteria of the Social Protection Scorecard and age. Furthermore, the number of benefi ciaries as a propor-tion of the total eligible youth (based on age and the score on the Social Protection Scorecard) who were formally employed in the income brackets was 21.2% in 2009 and 21.3% in 2010. Enterprise participation in the pro-gram was low: around 3.75%. The majority of the fi rms that took advantage of the subsidy were microenterprises (44%). The quasi-experimental impact evaluation conducted by the University of Chile indicates that this program had signifi cant positive effects in terms of increasing the likelihood of young people (both men and women) getting a job and participating in the labor market. Among participating fi rms, the study showed a slight substitution effect favoring eligible young workers over other groups.
Source: Prepared by the University of Chile (2012).
First-job laws are another option adopted by the countries of the region to increase youth employment opportunities. Several countries in LAC have en-acted such laws, which are policy instruments designed to encourage busi-nesses to hire more young workers. In this sense, these programs are similar to youth employment subsidy programs, except that they take the form of laws. They include an incentive system, whereby, in general, the firm com-mits to hiring young workers and, in exchange, it receives some exemption or benefit that reduces its labor costs. The objective of this type of policy, which in the majority of cases is broadly applied in the legislative setting, is to re-duce youth unemployment, facilitate the school-to-work transition, and help young people who have recently completed their formal education access the labor market more quickly and, specifically, find a good job (in a firm in the formal sector).4 One example of these laws in the region is Brazil’s Appren-ticeship Law, which grants tax exemptions to firms that hire and train youth, generally for their first work experience. According to Corseuil, Foguel, and Gonzaga (2014), this law increases the probability of having a comparatively better paying and more stable job, especially in the medium term (four to five years after participating in the program).
Seriously lacking in the region are policies to provide vocational counseling services. These services provide young people with information and guid-ance about options and returns in the labor market, enabling them to make better decisions about what occupation to choose. This type of policy can produce highly positive results at a minimum cost. Vocational decisions are often made with little information; this can lead to less-than-optimal choices, such as the selection of a career path or occupation with low returns or false expectations and costs associated with repeated studies or low graduation levels. The preliminary results of some studies suggest that interventions aimed at informing young people and their families about the returns of dif-ferent educational options (for example, technical versus general education or what branch of technical education to choose) that offer vocational coun-seling and information about wages and employment rates in different oc-cupations to promote better decision-making can be cost-effective (Jensen, 2010; Goux, Gurgand, and Maurin, 2013; Hastings, Neilson, and Zimmer-man, 2015).
4 Current initiatives of this type in LAC have the following characteristics: i) they target young people aged 16 to 24 who have recently completed their academic education or vocational training, have no professional experience, and are looking for a job; ii) the state provides a tax or monetary benefit to the firm, which translates into tax exemp-tions, discounts on social security payments, or wage subsidies; and iii) first-employment contracts are short-term (a minimum of three months and a maximum of 12 months), and once ended, the employer can rehire the young worker under a conventional hiring modality, bringing the first job and its associated benefits to an end. The tempo-rary nature of the jobs created by the law therefore becomes a challenge.