88362 Youth Unemployment in the Caribbean April 2014 By Mónica Parra-Torrado 1 Authors: This material has been prepared by Mónica Parra-Torrado, under the supervision of Mansoora Rashid, Sector Manager for Social Protection, and Safaa El Tayeb El-Kogali. Sector Leader for Human Development for the Caribbean and Haiti, in the Human Development Department of the Latin America and the Caribbean Region of the World Bank. The content draws heavily on Parra-Torrado (2014). The Caribbean Knowledge Series is an occasional series that presents World Bank knowledge in an accessible format. It is meant to assist knowledge sharing across the region and trigger policy dialogue on topics relevant for the Caribbean This note was prepared to support the participatory policy dialogue in the context of the Caribbean Growth Forum (CGF). The CGF is an initiative facilitated by the Compete Caribbean Program, the Inter-American Development Bank, the World Bank and the Caribbean Development Bank, with the support of the Department for Foreign Affairs, Trade and Development of Canada, the United Kingdom’s Agency for International Development, CARICOM Secretariat, the University of the West Indies, the European Union and Caribbean Export. It aims to facilitate a multi-stakeholder dialogue to identify practical solutions for the growth challenge in the Caribbean. To learn more about the CGF methodology and progress in each Caribbean country visit: http://caribgrowth.competecaribbean.org/ Disclaimer: The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Executive Directors of the International Bank for Reconstruction and Development / The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Visit the entire “Caribbean Knowledge Series” collection at: http://worldbank.org/lac Design & Concept by Room Grupo Creativo | www.room.com.do Cover Photo: Room Grupo Creativo Photo Library 2 3 Youth Unemployment in the Caribbean Preliminary findings and policy considerations. Global economic shocks coupled with natural reports, ILO’s Key Indicators of Labor Markets, disasters left most Caribbean countries with and specific official data and reports produced zero to negative growth and high unemploy- by some of the countries. Official government ment rates. The Caribbean region was strongly af- data was maintained in cases when more than two fected by the last great financial crisis, which result- sources were found. A detailed description of the ed in a regional average of zero economic growth data used is presented in Parra Torrado (2014). 1 in 2010 . While some countries like Anguilla and Antigua and Barbuda were hit the worse and ex- I - Unemployment levels, trends perienced negative rates of 18% and 12% respec- and patterns tively, others like Dominican Republic and Guyana, experienced a slowdown but did not see negative Unemployment rates and trends varied among 2 rates . The economic collapse in the United States the Caribbean countries with the most rapid in- and Europe, and more recently, a fall in commod- creases registered in The Bahamas, Barbados, ity prices (induced by a softening of the Chinese St. Lucia and Belize. In The Bahamas unemploy- demand for raw materials) led to a sharp decrease ment nearly doubled from 7.9% in 2007 to 13.7% in in tourism, remittances and financial activity in the 2011, a 73% rise. In Barbados, unemployment rose Caribbean countries. The widespread recession, from 7.4% in 2007 to 11.6% in 2012, an increase of in addition to high indebtedness and fiscal imbal- 57%. Although the latest available unemployment 3 ances , led to a deterioration of labor market con- figure for Belize is 13% in 2009, it already repre- ditions in the past years. At the same time natural sents a 53% increase compared to the 2007 un- disasters have periodically taken a large toll on the employment rate of 8.5%. Finally, unemployment region, and became a stronger source of vulner- in St. Lucia rose from 14% in 2007, right before the ability, affecting lives, infrastructure and employ- 2008 crisis, to 20.6% in 2012 representing a 47% 4 5 ment . rise (See Figures 1A and 1B). Jamaica, Grenada, Antigua and Barbuda experienced slower growth The purpose of this note is to evaluate the nature in unemployment. In Jamaica unemployment in- of youth unemployment in order to propose creased from 9.4% in 2007 to 12.7% in 2011. In Gre- policy options to address it. It is organized in three nada, unemployment reached 29% in 2010 from sections. The first section describes the trends 25% in 2008, an already high pre-crisis rate; it was 6 and patterns of total unemployment. The second 10.2% in 2001 . In Antigua and Barbuda, unem- section focuses on youth unemployment. The third ployment was 10% in 2011, 1.6 percentage points 7 and final section discusses policy considerations. higher than in 2001 (8.4%) . See Figures 1A and 1B. Data on unemployment and other labor market outcomes is scarce in the region. This note puts together data from different sources including the World Banks’ World Development Indicators and 1 This average estimation includes Anguilla, Antigua and Barbuda, The Bahamas, Barbados, Belize, British Virgin Islands, Dominica, Dominican Republic, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, Suriname and Trinidad and Tobago. 2 Source: World Development Indicators except for Anguilla (Eastern Caribbean Central Bank), British Virgin Islands (2000-2009: Development Planning Unit; 2010-2011: United Nations Statistics Division), Jamaica (2002-2006: ECLAC), and Montserrat.( 2000-2005 y 2007-2011: Eastern Caribbean Central Bank; 2006: United Nations Statistics Division) 3 External and domestic public debt in the Caribbean surpassed 76% of GDP on average in 2012, and it reached ratios greater than 100% in Jamaica and St. Kitts and Nevis (ECLAC, 2014). 4 Some examples of costly natural disasters are hurricanes Ivan (2004), Dean (2007), Omar (2008), Tomas (2010), Tropical Storm Nicole (2010), and Haiti’s earthquake in 2009. 5 See Parra-Torrado (2014) for sources on unemployment for each country. 6 The 2013 Budget Statement mentions that between 2008 and 2012 unemployment in Grenada has doubled but unfortunately, no hard data was found available to confirm this fact. 7 Unfortunately, there is no data available in between this period to have a clearer vision of the effect of the crisis. 4 Dominican Republic and Guyana have main- with available data, Trinidad and Tobago expe- tained persistently high unemployment rates rienced a decreasing unemployment rate from while Trinidad and Tobago experienced a de- 2000 until 2008, and practically unchanged since creasing unemployment rate. Dominican Re- then. At the beginning of the decade, unemploy- public experienced higher unemployment rates ment rate in Trinidad and Tobago was 12.1% and during the early 2000 years, in particular in 2004 in 2008 it decreased to 4.6%, the lowest rate in the when it reached 18.4%, the highest rate in the last period. Currently, unemployment represents 4.8% thirteen years which declined to 14% in 2008 and of the labor force in the country, being the lowest 8 has not changed since then. Guyana has main- rate in the region . Nonetheless, this figure should tained unemployment at around 21% since 2007, be taken with caution as it masks high youth unem- after experiencing a peak of 28.5% in 2006 (see ployment rates, as discussed later. (See Figure 1B) Figure 1B). In contrast to the rest of the countries Figure 1A: Unemployment in the OECS region, countries with available data, 2000-2012 Source: Parra-Torrado (2014). 8 Trinidad and Tobago had the lowest rate among those countries in the region with available data on unemployment in 2012. For instance, in 2007/2008, St. Kitts and Nevis had an unemployment rate of 5.1% (6.3% in St. Kitts and 1.5% in Nevis) but there is not more current data to compare. 5 Figure 1B: Unemployment in the non-OECS region, countries with available data, 2000-2012 Source: Parra-Torrado (2014). 6 Unemployment in the region tends to be of Unemployment is considerably higher among long duration. According to a set of four country females than among males in most countries. studies undertaken in the region between 2007 According to the most recent available data on 9 and 2010 there is a large share of individuals who unemployment by gender in the region, women spend more than a year unemployed after they are more affected than men in most countries with lost or left their last job. Half of the unemployed the exception of The Bahamas (2011), as shown in in Dominica (51%) and in Grenada (48%), and one Figure 2. The most marked case is Belize, where third of unemployed in Barbados (34%) and St. Kitts female unemployment was 20% in 2009, almost and Nevis (32%) have been unemployed for more three times the males’ rate. In other countries 10 than a year . There is no more recent data on the female unemployment is nearly twice as large as duration of unemployment in these countries but male unemployment. For instance, in Grenada given current labor market conditions as well as female unemployment in 2008 was 31.8% while for increasing unemployment after the financial crisis males it was 17.9%, 14 percentage points higher. and other external shocks, it can be expected that Even in countries with lower unemployment rates duration of unemployment has not improved. such as Dominican Republic, Jamaica, St. Lucia, and Trinidad and Tobago, unemployment for 11 women exceeds that of men by at least 80% . However, the difference against women is smaller in Guyana (49%) and less so in Barbados (13%). Figure 2: Unemployment by gender in Caribbean countries, latest year available Source: See Parra Torrado (2014). However, for some countries gender gaps have unemployment among women was about 2 been decreasing in recent years, although not percentage points higher on average than among due to a decrease in female unemployment but males before 2009, when such difference came to 12 rather to an increase in male unemployment . zero due to an increase of 87% in the males’ rate. In the second half of the past decade, the Similarly, in Barbados the unemployment gap difference between the unemployment rate for closed in 2009 and 2010 due to a faster increase females and males has narrowed in a group of in men’s unemployment rate; however, the rising countries. This is mainly due to the increase in male trend reverted temporarily for men in 2011 and unemployment during the years of economic crisis for women in 2012, when the gender difference is which is a trend that has been noted in a number at one of its narrowest points, although at higher 13 of OECD countries and the US . In The Bahamas, levels of unemployment for both groups. 9 Country Assessment of Living Condition Barbados 2010; Country Poverty Assessment Dominica 2008-09; Country Poverty Assessments Grenada 2007/08; Country Poverty Assessment St. Kitts and Nevis 2007/08 10 It is fair to say that even though these figures do not refer to complete unemployment spells, these give a sense of the dynamics of labor markets in these countries, in particular on unemployment duration. 11 Dominican Republic (126%), Jamaica (79%), St. Lucia (85%) and Trinidad and Tobago (84%). 12 Another interesting result is that the female unemployment gap widens with age in all countries as shown in Parra Torrado (2014). 13 Albanesi and Sahin (2012) 7 The gender story has been more positive in and Dominican Republic (2007) have experienced the Dominican Republic. Between 2000 and youth unemployment rates around two times as 2007 women’s unemployment rate was around high the total unemployment rates while Grenada 17 percentage points higher than men’s with (2008), St. Lucia (2010), and St Vincent and the the largest gap reached in 2004 (20 percentage Grenadines (2008) have experienced youth points). In 2008 the gap narrowed to 14 percentage unemployment rates around 1.7 times higher than points and continued this trend until 2011, the total unemployment rate (see Panel A in Figure 14 reaching 11 percentage points . This result, unlike 3). Also, in St. Lucia 40% of the unemployed was other countries, derives from a decrease in the younger than 25 years old in 2011. unemployment rate within women (from 30.7% in 2004 to 21.5% in 2011) accompanied by a relatively Teenagers have the highest unemployment constant unemployment rate for men. However, rates. Figure 4 presents unemployment rates in 2012 this trend has relapsed as women’s by age groups for Barbados, Belize, Dominica, unemployment rate increased to 22.1% and men’s Dominican Republic and Trinidad and Tobago. unemployment rate decreased slightly to 9.8%. As the figure shows, individuals younger than 20 years have the highest unemployment rates. In II - Youth unemployment landscape Barbados, individuals aged 15 to 19 years old face unemployment 5 times higher than the total Youth are at higher risk of unemployment. unemployment rate at 47% compared to 14% for 16 Although the information on unemployment by those aged 20-44 years old . In Belize, 43% of age in the region is scarce, available data shows that women in the labor force younger than 20 years in most countries youth unemployment is double old are unemployed compared to 28% of those the rate of total unemployment. Among Caribbean between 20 and 24 years old and 16% for those countries with available data, the highest youth between 25 and 49 years old. The comparable rates unemployment rates are found in Barbados, for men are 26% versus 16%, and 5% respectively. Trinidad and Tobago, Jamaica and The Bahamas In Dominica, where 50% of the unemployed are 17 where youth unemployment is about 2.4 times younger than 30 years old , the unemployment higher than total unemployment. According to the rate among teenagers practically doubles that 2010 Survey of Living Conditions of Barbados, the of the aged 25 to 29 years old, and in the case of youth unemployment rate was 27.6% compared males it is 2.8 times larger. Likewise, in Dominican 15 to 11.1% for the entire population . In Trinidad Republic, the unemployment rate for teenage and Tobago, the unemployment rate for youth females doubles that of individuals between 20 to was 12% in 2012 while the total unemployment 39 years old and for teenage males it is about three rate was only 4.8%; and in Jamaica (2011) and times that of such group. In Trinidad and Tobago Barbados (2007) it was 30.1% and 18.9% compared the situation is quite the same, as shown in Figure 18 to a total unemployment rate of 12.7% and 7.9%, 4 . respectively. Other countries like Guyana (2011) 14 See Parra Torrado (2014). 15 According to the Barbados Continuous Labor Force Survey (LFS), the national unemployment rate in 2010 was 10.7% Unfortunately, the Barbados LFS does not provide figures of unemployment for the group of people aged 15-24 years old but 15-19 years old (see Figure 4), which makes it unsuitable for cross-country comparisons. 16 The unemployment rate for those older than 19 years old is 10.8, 10% for male and 11.6% for female 17 In Dominica, the individuals younger than 20 years old account for 13.8% of total unemployed (17.5% of female unemployed and 10.9% of male unemployed), individuals younger than 25 years old account for 36.4% of total unemployed (44.2% of female unemployed and 30.4% of male unemployed), and individuals younger than 30 years old account for 49.7% of total unemployed (55.4% of female unemployed and 45.3% of male unemployed). 18 Note that although female youth unemployment is higher than male youth unemployment, the age gap is wider for males than for females. 8 Figure 3: Total and youth unemployment by gender in the Caribbean, countries with available data, latest year. Panel A Panel B Panel C Source: See Parra Torrado (2014). 9 Figure 4: Unemployment by age groups and gender in the Caribbean, countries with available data, latest year. Barbados, 2012 Belize, 2009 Dominica, 2008/2009 Dominican Republic, 2012 Trinidad and Tobago, 2012 Source: See Parra Torrado (2014). High youth unemployment in the Caribbean is and Tobago where the national unemployment consistent with similarly high youth unemploy- rate is as low as 4.8% the youth unemployment rate 21 ment rates worldwide, but some Caribbean reached 12% in 2012 (2.5 times higher) . Second, countries are among those with the highest some Caribbean countries are among the ones youth unemployment rates in the world. Figure with highest youth unemployment rates in the 5, presents the unemployment rate for the total world. In particular, Guyana and Grenada (2008) population as well as for the youth in all countries join the set of countries with rates above 40% to- 19 with available data in 2011 . Two observations can gether with Bosnia and Herzegovina (57.5%), Mac- be made from it. First, in practically all countries edonia (55.3%), South Africa (49.8%), Spain (46.4%) youth unemployment is double that of the total and Greece (44.4%). 20 population (2.3 times, on average) . Even in coun- tries with low total unemployment such as Trinidad 19 Source is World Development Indicators for all countries except Caribbean countries (in red), for which the country specific sources can be found in Parra Torrado (2014). 20 The country placed close to the 45-degree line in is Kazakhstan with total and youth unemployment rate of 5.4% and 4.6% respectively. 21 In 2011, the national unemployment rate in Trinidad and Tobago was 5.2% while the youth unemployment rate was 13%. 10 Figure 5: Total and youth unemployment in the world, 2011 Source: World Development Indicators and Parra Torrado (2014). A. Some key factors contributing to youth un- One main factor contributing to youth unem- employment ployment is the lack of right skills for the job. Quality of education in the region is low. Also, the While no empirical studies are available for the set of skills youth acquire are not entirely relevant Caribbean on the individual determinants of youth to the labor market needs; there is a mismatch of unemployment, some of the factors are likely to supply and demand of skills. This is aggravated by be similar to other countries. For example, several their lack of work experience, since skills are mas- studies have identified that poor educational tered, and sometimes even acquired, on the job. attainment, disadvantaged family background and test-measured ability and behavioral unobserved The quality of education in the region has shown 22 skills predispose individuals into unemployment . to be low, in spite of efforts and significant Also, institutional arrangements in the education public investments in education. The passing and training systems as well as in the labor rates of the Caribbean Secondary Education 23 market , skills mismatch, low labor demand and Certificate (CSEC) in Math and English are around specific vulnerabilities are factors that contribute to 45% on average and it is not better in other 24 youth unemployment . That said, we present the subjects like Chemistry, Information Technology, to relevant evidence from the Caribbean on select name some. Also, in 2009 only 21.36% of students factors that may contribute to youth unemployment passed five or more CSEC examinations, which in the region: lack of skills and lack of information. is the acceptable performance for matriculation These are detailed in what follows. and entry-level employment (CXC, 2012). The most worrisome part of this story is that the rest of students are far from attaining this goal. 28.14% did not pass any exam, 24.65% passed only one, 12.62% passed two exams, 7.36% passed three exams, and only 5.88% passed four exams. 22 Gregg (2001) 23 Eurofound (2012) 24 Cunningham et al. (2010) propose five general categories of constraints that may limit young people’s access to labor market: job-relevant skills constraints, lack of labor demand, job search constraints, firm start-up constraints and social constraints. 11 Employers face considerable difficulty in that the supply of skills is not meeting the needs finding skilled youth. Employers in Caribbean of labor demand: 72% of educators compared to countries, report a shortage in skills as one of the 42% of employers think graduates are adequately 32 key constraints in hiring workers, and likely new prepared for the labor market . recruits. The 2008 Grenada Employer’s Needs Assessment Survey, carried out under the World Inexperience, strongly tied to lack of skills, Bank’s Skills for Inclusive Growth Project, found also contributes to high youth unemployment that 66% of employers were having difficulty rates in the Caribbean. According to the earlier 33 finding new workers and were also unable to find cited country studies , an important proportion 25 workers with the required skills . Results from the of job seekers has never worked before, a fact 26 Caribbean Labour Market Survey show that the that generally makes it more difficult to find labor main issue employers face in their recruiting efforts opportunities. In St. Kitts and Nevis one third is that applicants have poor or no employment of the unemployed has never worked while in skills (42%) followed by lack of qualified workers Dominica and Grenada about one in four has no (31%). Also, according to a recent study in The work experience at all. In a recent labor demand 27 Bahamas , the main difficulty employers face study, lack of experience stands as the third most for hiring is the under-qualification of applicants important obstacle to fill vacancies, with 24% (33.8% of employers), followed by applicant’s of employers agreeing to this being the most lack of experience (28.8% of employers), and by important issue (Manpower, 2013). According to applicant’s lack of soft skills (27.5%). the mentioned study in The Bahamas, prior work experience is the second most important hiring The shortage of skills is a dominant bottleneck criteria, with 34.5% of employers marking it a for employers worldwide. According to a decisive factor for hiring. Also, 28.8% of employers 28 recent study in nine diverse countries lack of claimed having difficulty hiring workers due to 34 skills is one of the main problems employers face applicant’s lack of experience . As younger when recruiting for entry-level positions: 39% of workers are less experienced than adults, they also employers mentioned a skills shortage as a leading tend to be less attractive candidates. Employers reason. Also, 36% of employers reported lack of prefer adult workers, as they, given their work skills as a cause of significant problems in terms experience, are more likely than younger ones to 29 of cost, quality, and time in their companies . successfully apply job-specific skills and to have Another, more comprehensive, study in 42 stronger socio-emotional skills and work ethics, and countries and territories corroborates this result therefore to be more productive in the workplace. finding that lack of technical skills is the main factor Inexperienced candidates are also more costly in behind talent shortages (34% of employers cited the sense that they have to be trained with the risk this as a chief factor) while lack of soft skills is the of leaving or not fulfilling expectations. fourth factor (19% of employers cited this as a 30 chief factor) . Moreover, through a meta-analysis Lack of information is another main factor that of labor demand surveys, Cunningham and constrains youth employment. Informal job- Villaseñor (2014) find that half of employers rank searching methods such as referrals from relatives socio-emotional skills as the most important skill, and friends, or direct contact with employers are followed by higher-order cognitive skills (29%) and commonly used while information systems or 31 technical skills (16%) . They find that the greatest employment offices, which hold better knowledge 35 skills gaps are in socio-emotional and technical of the market, are much less used . This informal skills. Furthermore, the 42-country study shows practice may be effective only for well-connected 25 Hickling Corporation (2008) 26 CKLN (2006) 27 IDB (2013) 28 Brazil, Germany, India, Mexico, Morocco, Saudi Arabia, Turkey, the United Kingdom, and the United States. 29 Mourshed et al. (2011) 30 Manpower (2013) 31 Higher-order cognitive skills refer to logic, abstract and creative thinking, for example. 32 Mourshed et al. (2011) 33 Country Assessment of Living Condition Barbados 2010; Country Poverty Assessment Dominica 2008-09; Country Poverty Assessments Grenada 2007/08; Country Poverty Assessment St. Kitts and Nevis 2007/08 34 IDB, 2013 35 In Mexico, for example, among people aged 15-24 years old, 65.7% search forjobs directly with the employer, 11% ask friends and relatives and 9.4% answer Internet announcements. Only 1.5% resorted to the employment service and 0.9% to an employment agency. Similarly, 58.6% found a job through a friend or relative and 17.9% by contacting directly the employer. Only 0.3% of youth found a job with an employment agency and 0.2% with public employment service. Source: own calculations based on ENNVIH, 2012. 12 people with strong networks. However, youth The NEET phenomenon may be reflected in a tend to have smaller networks, especially declining labor force participation of youth in those out of school and employment, and the the Caribbean over the past decade, even con- vulnerable. Employers do not have information siderably in some countries such as Jamaica (26% on young workers either. Youth generally write compared to 8% reduction of the overall labor resumes basically with information on educational force).This decreasing trend has been stronger and attainment, if any, from which is hard to tell their more common for male youths: only the Bahamas, actual skills. Haiti and Suriname experienced positive growing The lack of work experience by young people trends of labor force participation. In contrast, in makes them less attractive candidates mainly for the case of young women, only Barbados, Guyana, two reasons. First, without work experience there Jamaica and St. Lucia experienced negative trends is not possibility of obtaining referrals regarding in labor force participation over this period. These the candidates’ past performance. Second, as declining trends may reflect discouragement, or mentioned above, employers cite the lack of inability to find jobs. However, these may be ex- experience as a major inconvenient factor for hiring plained partially by recent improvement in school 40 since they value socio-emotional and technical enrollment in some countries in the region . Oth- skills the most, which are proven and acquired on er reasons for youth low attachment to the labor the job. market, as cited by youth themselves, include over- qualification, low wages or willingness to spend lei- 41 B. Costs and risks of youth unemployment sure, stress-free time and enjoy freedom . High youth unemployment also reflects the Despite recent improvements, school enroll- NEET phenomenon. In the Caribbean, and ment rates are still low in several Caribbean 36 worldwide , a significant share of youth is not countries, also reflecting the NEET problem. in employment, education or training (NEET). Secondary education is far from universal in most Information on NEET youth is only available for two of the countries with available data. Guyana is the countries in the Caribbean: Belize and Dominican closest with an enrollment rate of 92.6%, followed 37 Republic . For Belize, it is estimated that 27.9% by Barbados with 89% of enrollment, then Antigua of young people ages 15 to 24 are neither in and Barbuda, St. Vincent and the Grenadines, and employment, education or training; 17% of the male St. Lucia, Jamaica, Dominica and The Bahamas with youth and 38.6% of female youth. For Dominican enrollment rates between 85% and 83%. Belize, St. Republic the estimates of young NEET are higher Kitts and Nevis, Dominican Republic and, in par- for males (33.3%) and lower for females (26.9%), the ticular, Suriname have much lower secondary en- aggregate figure is 20.9%. The youth NEET rates rollment rates. Tertiary education enrollment rates for these two countries are considerably above are available for a reduced set of countries but, in 38 the average estimated by ILO for 24 developing all of these, enrollment rates are quite low, with economies--(12.4 per cent for young men and the exception of Grenada (52.8%) and Barbados 28.1 per cent for young women). Yet, in the case of (60.8%). The enrollment rate for tertiary education 39 Belize, the rates are comparable to those in Brazil . in St. Kitts and Nevis is of 18.2% and in Belize and 42 Given the lack of data on the NEET phenomenon Jamaica is about 26% . St. Lucia, Guyana, and An- in the Caribbean, evidence of declining labor tigua and Barbuda have enrollment rates inferior force participation and low school enrollment is to 15%. Low school enrollment and further school presented in the next paragraphs. completion rates, in addition to low quality educa- tion, narrows the set of opportunities of youth in the labor market, fueling a vicious cycle of youth discouragement. 36 According to the WDR (2013) on Jobs, 621 million young people are idle, that is, they are neither in school or training, nor working or searching for a job. The report estimates that the rate of idleness ranges between 10 and 50 percent among those aged 15 to 24 years old. 37 Author’s estimation based on ILOSTAT (http://www.ilo.org/ilostat/). ILO’s note: For statistical purposes, youth are defined as persons between the ages of 15 and 24 years. Youth not in education are those who were neither enrolled in school nor in a formal training program (e.g. vocational training) during a specified reference period (e.g., one week). 38 ILO’s average is estimated based on household surveys across different years. 39 16.4% of male and 30% of female youth in 2009 (Kovrova et al., 2012) 40 A descriptive analysis of labor force participation and secondary enrollment dynamics may be indicative of decreasing youth LFP in favor of secondary school enrollment in Belize, Dominican Republic, Guyana, St. Lucia and St. Vincent and the Grenadines. However, further analytical work should be done to make any causality statements. 41 UNDP (2012) 42 See Parra-Torrado (2014) for sources. 13 Youth unemployment can also reduce future Unemployment, NEET status and early school employment prospects and earnings. The litera- leaving may lead to youth involvement in risky ture, theoretical and empirical, on the effects of un- behaviors. In addition to the already mentioned employment on future individual labor outcomes is costs, youth unemployment and NEET status 47 extensive and indicative of important scars left by generates discouragement, disaffection, isolation , unemployment spells on the labor profile of those and lack of ownership and of purpose among youth. affected. For instance, a recent study on a set of Car- These sentiments in turn increase the chances of 43 ibbean countries estimates the cost of youth un- youth engaging in risky activities such as adolescent employment, as forgone wages and lost productiv- fertility and sexual risky behaviors, substance abuse, ity, to range between 0.65% of GDP in Anguilla and and crime and violence. In what follows, related 44 2.46% of GDP in St. Lucia . Furthermore, a series of evidence is shown in this regard. studies based on data from the UK have concluded that unemployment in early life increases the chanc- Discouragement from the education system and the labor market may induce youth pregnancies es of experiencing unemployment spells in adult life and sexual risky behaviors. According to a recent for men and less so for women. Also, they find that 48 World Bank study , young woman living under youth unemployment reduces life time earnings disadvantageous conditions are more likely to with the effect being slightly reduced if higher ed- get pregnant and teen mothers are more likely to ucation is obtained or future adult unemployment have poor outcomes such as educational failures spells are avoided. In short, these studies find evi- or unemployment. That is, youth unemployment dence of permanent scars of youth unemployment 49 and educational failure , among other factors, on labor profiles: after 20 years of the experienc- are both determinants and consequences of teen ing youth unemployment of at least 13 months the 50 pregnancy . Furthermore, an IDB study in Peru negative effect on earnings ranges between 10% (if and Paraguay shows that female adolescents opt unemployment has not recurred) and 30% (if unem- 45 for pregnancy, given that the education system is ployment has recurred) . not giving them chances to improve their future, to 51 Unemployment and NEET status affect nega- add meaning to their lives . Similar conclusions are 52 tively the individual’s mental health status and drawn in a study for Colombia . This may be a latent these effects are not compensated when secur- risk for Caribbean youth, given the conditions of high ing employment. There could be other costs to un- unemployment, low school enrollment and already employment aside those already mentioned. Studies high adolescent fertility rates. While adolescent on mental health have shown that experiencing un- fertility rates have decreased in all countries in the employment decreases the scores of mental health region (with the exception of Guyana), these are measures indicating a continued negative effect on comparably high with other countries in the world, mental health, in greater extent in those individuals ex- in particular in the case of Dominican Republic, 46 53 periencing more than one spell . Also, Mckenzie et al. Guyana, Belize and Jamaica . Also, discouragement (2014) find that moving out of employment into inac- may induce youth into sexual risky behaviors tivity and individual deprivation has greater effects on affecting youth’s health, increasing, for instance, mental health and psychological distress than chang- the risk of contracting sexual transmitted diseases 54 es in household income or area deprivation. Further- among youth . This may of particular concern in the more, Flint at al. (2013) find that the negative effects Caribbean where the age of sexual initiation is one 55 of joblessness are not compensated by the positive of the lowest in the world and it has the second- gains in psychological wellbeing from transitioning highest prevalence rate of HIV among people ages 56 into employment as the latter are smaller. 15-24 years old, after Sub-Saharan Africa . 43 Chaaban (2009) 44 Note, however, that this estimated cost does not include, the forgone opportunity of acquiring skills on-the-job, the psychological costs associated with unemployment, and the costs associated to engagement in risky behavior. 45 See Gregg (2001) and Gregg and Tominey (2005). 46 Milner et al. (2013) 47 Eurofound (2012) 48 Azevedo et al. (2012) 49 Azevedo et al. (2012) mention that recent studies have shown that “most adolescent mothers have already dropped out of school by the time they become pregnant, while adolescents who give birth while still enrolled in school are as likely to graduate as their peers.” 50 Poverty, educational failure, drugs and alcohol consumption and unemployment are cited by Azevedo et al. (2012) as both determinants and consequences of teen pregnancy. 51 Näslund-Hadley and Binstock (2010) 52 Gaviria (2000) 53 WDI, World Bank. 54 UNDP (2012) 14 Youth unemployment and early school leaving Furthermore, risky behaviors, such as teen preg- may also lead to youth participation in crime nancy and participation in crime and violence, and violence — a particular rising issue in the can have long-lasting individual and social costs. Caribbean. Youth unemployment is one of the A recent regional study estimated the opportunity 62 socio-economic factors that may push youth into cost of these risky behaviors in terms of GDP . It ar- 57 crime and violence . Likewise, early school living gues that pregnancies at adolescent age have, on is a recognized risk factor for engagement in risky one hand, costs that are associated directly with the behaviors such as substance abuse and violence, pregnancy such as medical expenses, child support 58 among others . Some studies have also established and public subsidies and transfers to teenage moth- that a violent environment is known to increase the ers and their children. On the other hand, there are risk of youth engaging in illegal and dangerous ac- some indirect costs reflecting the opportunity cost 59 tivities , this being of particular concern given the of dropping out from school and the labor market, 60 rising trend of violence in the Caribbean . An ear- proxied as the forgone annual income. Other indi- lier regional study by the UNODC and the World rect costs, more difficult to measure are the costs Bank showed that youth people were increasingly imposed to their families, lower (re-) marrying prob- overrepresented among both victims and perpe- abilities, and social inclusion, among others. The 61 trators of violence . Nonetheless, recent evidence study estimates the financial costs to range from is mixed. According to the UNODC the rates per 2.1% of GDP in Suriname to 0.6% of GDP in Trinidad 100,000 juveniles (aged 17 years old and under) and Tobago while the indirect opportunity cost to brought into formal contact with the police or the be much higher in all countries: 17.1% of GDP in Suri- criminal justice system show relatively high preva- name, 10.3% in Belize, and 3% in Trinidad and Toba- lence of youth crime in 2010: 454.1 in The Bahamas, go. Other studies have found that teenage fertility 2,193.1 in Grenada, 125.2 in Trinidad and Tobago affects negatively school attainment, labor market (2009), 308.6 in Belize, and 20.4 Guyana. As per the performance and wages in adulthood and also puts evidence from Trinidad and Tobago, 42% of youth pressure on young fathers to get a job to provide 63 join gangs for friendship, 29% are looking for pro- for their children . Also, adolescent motherhood tection and safety and 8% are interested in making has been found to increase the probability of their money (UNDP, 2012). However, the Caribbean Hu- children engaging in risk behavior, in addition to man Development Report 2012, dedicated to Citi- increasing health risks such as maternal mortality, zens Security, suggests that violent behavior is not fetal death, and infant mortality, morbidity and sui- 64 prevalent or endemic among Caribbean youth. The cide incidence among teen mothers . Finally, the report is based on the UNDP Citizen Security Survey same regional study argues that the cost of youth 2010, applied at the household level in seven Carib- crime can be disaggregated into direct costs as- bean countries, and finds that 1.6% of surveyed in- sociated to public expenditure on policing, arrests, dividuals between the ages of 18 and 24 years old judicial processing and incarcerations, and into the self-reported to have been criminally accused or ar- opportunity cost of having youth crime, which en- rested for violent crimes involving the use of weap- tails the forgone earnings of the involved juvenile, ons, while 2.5% for violent crimes without weapons. and the forgone revenue from tourism as this may That said, the higher numbers are worrisome and be negatively affected by both the perception and this issue bears further investigation. awareness of crime. It estimates that the total cost of youth crime amounts to about 3% or 4% of GDP in 65 some of Caribbean countries . 55 Blum et al. (2003) 56 Cunningham et al. (2008) 57 World Bank (2007), UNODC and World Bank (2007), UNDP (2012). 58 UNDP (2012) 59 UNODC and World Bank (2007); Cunningham et al. (2008); UNDP (2012) 60 Recent figures place the Caribbean as the sixth most violent subregion in the world (UNODC, 2013). Belize and Jamaica are placed fifth and sixth in the list of countries with the highest intentional homicide rate in the world, after Honduras, El Salvador, Ivory Cost and Venezuela. St. Kitts and Nevis, The Bahamas, and Trinidad and Tobago follow in the list, placed in the ninth, eleventh and fifteenth positions. St. Lucia, Dominican Republic, St. Vincent and the Grenadines, Dominica, Montserrat and Guyana are also part of the fifty most violent countries. (Violence is defined by the intentional homicide rate). 61 UNODC and World Bank (2007) 62 Chabaan (2009) 63 See Azevedo et al. (2012). Also see Arceo-Gomez and Campos-Vazquez (2011) for Mexico; Levine and Painter (2003) for the United States; Chevalier and Viitanen (2003) for Great Britain; among others. 64 Azevedo et al. (2012) 65 Chabaan (2009) 15 Box 1. Active Labor Market Policies in St. Lucia An inventory of active labor market policies (ALMP) was created for St. Lucia by a World Bank team in 2013 collecting data from official documents and interaction with government representatives. Spending on ALMPs in St. Lucia in 2012 represented 1.16% of GDP. This percentage is high compared to OECD countries, which in 2011 spent less than 1% of GDP, with the exception of Belgium (1.6%), Denmark (2.3%), Sweden (1.1%) and the Netherlands (1.1%). Comparing with Latin America, spending in St. Lucia is particularly high: Chile allocated 0.45% of its GDP in 2010, Argentina and Colombia allocated 0.45 % and 0.35%, respectively, in 2010. Figure 6 shows the distribution of spending on ALMPs by program category. A larger proportion (47.8%) went to direct job creation, followed by apprenticeship programs (36.7%), training (9.6%) and development (5.8%). Direct job creation has also the largest number of beneficiaries (78.3% of the total), followed by learning programs (10.1%), promotion of entrepreneurship (7.2%), and training (4.5%). Note also that spending on youth programs is low compared to the total spending. Figure 6: Distribution of spending on ALMPs in St. Lucia, 2012 Source: Parra-Torrado and Soto (2013) A set of challenging characteristics emerged from the analysis of the ALMP in St. Lucia that may be preventing individuals to receive assistance in improving their job prospects. First, in St. Lucia there is no a unique governing body responsible for the management of all ALMPs. Employment and education matters are integrated following the merger of two ministries into a single entity and the Ministry of Social Transformation is responsible for managing and financing five of the fourteen existing programs. The NICE program was conceived as an umbrella instrument, which would absorb all other programs, but in practice the programs continued existing without change and coordination, and collaboration between actors is marginal. The lack of coordinated management has led to duplication of efforts. For instance, in St. Lucia there are five enterprise-incentive programs. This institutional arrangement may pose challenges unless there are clear coordinating structures that allow for an articulated functional provision of services. Second, St. Lucia does not have a sole institution that compiles vacancies with unemployed workers. Some programs provide assistance for job search, such as HOPE, Skills for Inclusive Growth and NAPP, but the country does not offer a single public service for the intermediation of labor supply and demand. Third, St. Lucia does not have a unique registry of beneficiaries nor a profiling instrument of beneficiaries and their needs that would support a more efficient provision of services. Fourth, most activation programs do not include a monitoring and evaluation component that could provide feedback to the design and implementation of the program and, in turn, an opportunity to correct mistakes and maximize good results. Furthermore, there is not a policy of evaluating the whole ALMP strategy based on the country’s labor market needs and the cost-effectiveness of the programs. 16 III - Policy discussion and systems should be implemented at all levels so recommendations: that program design and implementation can be adjusted according to results and outcomes, The diagnostic above leads to two main policy as well as to the local changing conditions of the areas for discussion: (i) collection of data and economy. creation of information systems; (ii) active labor market policies, which include, inter alia, labor There are some recent promising initiatives in market intermediation, and employment/training the region aimed at closing the information gap. 66 programs—especially those targeted to youth. It A new World Bank IDF grant aims at improving should be noted that active labor market policies capacity for labor market monitoring and the and programs are just one policy area that establishment of information systems for improved needs to be tackled in order to address youth labor market performance in a group of Caribbean 67 unemployment. Ensuring macroeconomic growth, countries . The IDF will principally strengthen the reducing vulnerability to shocks, developing a institutional capacity of government ministries vibrant private sector, and investing in sound and agencies, through the University of the West education system are other policy areas that Indies, who are responsible for labor market are critical for fostering growth and promoting policies and programs by establishing a culture employment. However, a discussion of these policy of monitoring and evaluation, and information areas is outside of the scope of this paper. management in the Caribbean. Also, a World Bank team from the Poverty Reduction and Economic A. Collection of data and information systems Management Unit has been supporting the OECS Statistical Office the strengthening of the statistical The lack of information is a challenge for better units in OECS countries and the development of 68 diagnostics of labor markets in the Caribbean harmonized labor force surveys . In fact, the OECS that should be further addressed. It would be Member States are working towards establishing useful for the region to produce detailed statistics a Sustainable Household Data Collection of labor markets conditions and outcomes that Programme (SDP) for the Measurement of Living help answering simple questions like how the Standards in the OECS under the leadership of the labor force look like and what the quality of jobs in OECS Living Standards Measurement Committee the Caribbean is. On one hand, it is important for (LSMC), with the additional support of ILO. countries to collect micro-data on a regular basis to estimate basic indicators of employment status, by gender, age group, education level and sector of work for the employed. Also, it would be useful to have information on quality of jobs, such as labor income, hours of work, type and terms of contract, social security, and labor benefits, among others. For the unemployed and inactive, it would be informative to know what the job search methods are (if any), how long they spend searching for a job or inactive, and the barriers they face, among other variables. Additionally, collect information on personal and household characteristics, including sources of income, such as remittances, as well as information on migration at the individual level. On the other hand, monitoring and evaluation 66 IDF Grant Strengthening Labor Market Monitoring and Performance in the Caribbean 67 Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica, St. Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines and Trinidad and Tobago. 68 St. Lucia, St Kitts and Nevis, Antigua, Dominica, Granada, St. Vincent and the Grenadines 17 B. Active Labor Market Policies Programs that focus on matching employers and job seekers can be exemplified as job place- There is a need for implementing effective and ment programs or subsidized youth employment affordable active labor market policies in the programs. For instance, programs like the public region. Active labor market programs (ALMPs) are employment service of Argentina (Servicio Público a key pillar of a social protection system, the two de Empleo) and Jobcentre Plus in the UK provide other pillars being: social assistance for the poor diverse services to both employers and job seek- and social insurance to help individuals manage ers. In the region, an example is One Stop Job 69 shocks . ALMPs include labor market intermedia- Centre (OSEC) in Antigua and Barbuda, which is tion and job counseling at public employment ser- currently being transformed to become fully op- vices, training and skills development programs, erational under the World Bank’s Public and Social employment incentives, direct job creation, start- Sector Transformation Project. Examples of subsi- up incentives, among others. In the region, an anal- dized youth employment programs are Subsidio al ysis of some of the active labor market programs Empleo Jóven in Chile and Contrato de Aprendi- indicates that while such programs exist, their cov- zaje in Colombia. erage is small and there is considerable redundan- cy, duplication, lack of coordination and evident Programs that aim both at developing skills and gaps in the supply of such services. For instance, bringing together employers and job seekers an analysis of active labor market policies in St. Lu- include versions of a dual vocational education and cia provides an example of the challenges faced by training program that provides both vocational current arrangements of programs including poor training and apprenticeship opportunities in coordination, weak provision of key services, and firms that are implemented in Germany, Austria, inadequate or no monitoring and evaluation. (See The Netherlands, Denmark and Switzerland. Box 1). Similarly, the Australian industry-led technical and vocational training system combines training, As noted above, the lack of job relevant skills apprenticeships and qualification development. and information asymmetries are likely to be Different alternative approaches that combine key constraints to youth employment. In what on-the-job training or work-based activities and follows, youth activation interventions aim- job placement initiatives are the Career Academy ing at addressing these constraints are briefly model and YouthBuild implemented in the United presented in three large groups: (i) activation 71 States . Some successful examples in Latin programs that aim at improving skills; (ii) programs America are two programs by the International that focus on matching labor supply and demand, Youth Foundation (IYF): Entra 21 implemented and (iii) programs that combine both skills devel- 72 in 17 Latin American countries , including Belize opment and matching labor supply and demand. and Dominican Republic; and New Employment To conclude, it is briefly argued in favor of the third Opportunities (NEO) implemented in nine 70 group and some implementation modalities are Latin American countries, including Dominican presented. 73 Republic . The Programa Juventud y Empleo provides training, a monetary stipend and a two- Programs that focus on skills development month apprenticeship in Dominican Republic. generally have the objective of providing partici- And in Jamaica, the pilot of the Steps-to-Work pants with education towards attaining a degree, program, which provides training and on-the-job- vocational, high school or equivalent, aiming at experiences to a targeted population. improving their chances in the labor market. Some examples of this type of programs are ChileCalifica in Chile, the National Guard Youth ChalleNGe and Job Corps in the United States. 69 The emphasis of the system (choice or pillars) and complexity varies by country and its context (e.g. fiscal and administrative capacity) 70 A broader discussion of the programs’ advantages and disadvantages, and their impact evaluations, can be found in Parra Torrado (2014). 71 YouthBuild has also been implemented in Mexico as Jóvenes Constructores de la Comunidad (JCC) with some success in terms of continuation of education or training and employability (YouthBuild presentations and http://www.youthbuildinternational.org/) 72 Argentina, Belize, Brazil, Chile, Colombia, DominicanRepublic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay, and Venezuela. 73 The nine countries are: Brazil, Chile, Colombia, Dominican Republic, El Salvador, Mexico, Panama, Peru, and Uruguay. 18 Of all youth programs, those that combine The participation and commitment of employ- skills development with on-the-job training or ers is fundamental. Having the employers on work-based activities and job placement com- board in a youth employment and training pro- ponents are more effective in improving em- gram is essential for assuring success. First, em- ployability and earnings. Empirical research pro- ployers know their labor supply needs so a fluent vides evidence in favor of programs that provide communication with education providers is crucial participants with on-the-job training opportunities. to assure that education being imparted is relevant Examples are the dual-education model in Germa- to the labor market, which will directly improve the 78 ny and Switzerland, apprenticeships and work trials employment opportunities of graduates . Second, in the UK, Entra 21 in Latin America and YouthBuild employers’ commitment in training apprentices and Career Academies in the United States. In the not only on-the-job but supporting their technical region, the Programa Juventud y Empleo of Do- formal training guarantees the sustainability of the minican Republic has shown positive results and programs. Also, incorporating mentoring compo- the Jamaican pilot Steps-to Work-Program has also nents with employers into the program strength- shown good results and now it is being roll-out in ens them as youth learn through observation and 74 79 the whole country . The success of this approach imitation . Such commitment can be leveraged is due to three factors: skills are better learned on with the imminent need that employers have of 80 the job, industry participation, and government overcoming the increasing talent shortages . coordination and regulation. Third, active interaction of employers with policy makers in feeding information systems allows for Skills are better learned on the job, in particu- informed design of policies and programs. lar life and work skills. The strength of these programs is based in the fact that by providing Government coordination and regulation is es- beneficiaries with on-the-job training they get the sential to ensure quality and proper functional- chance to see how the real world works in terms of ity of the schemes. Governments are key actors the work-specific activity but also in terms of the in youth employment and training programs not relationships and situations that evolve in regular only due to their role as policy makers and financial days at work. Combining the developing of cogni- supporters (although private financial support is 75 tive and technical skills in academic settings with encouraged) but as coordinator and regulators. It on-the-job training or work-based activities allows is to the government to provide the institutional in- students to see how the topics learned are applied frastructure for these programs to evolve. It should in real life. Also, in working environments students provide spaces for communication among actors get the chance to face real problems, consequenc- (education providers, employers, trade unions), es and challenges that helps them in the develop- guide the dialogue and make sure that action is ment of self-confidence, problem-solving and criti- taken. Moreover, it is to the government to guaran- cal thinking abilities, work ethics, among other life tee the quality of training programs as well as the 76 and work skills . Moreover, there is evidence that labor and social protection rights of participants. youth prefer to learn in interactive settings: on the 77 job (62%), hands-on (58%), multimedia (54%) . 74 Lerman (2013), Eichhorst et al. (2013); Cahuc et al. (2013); Eichhorst et al. (2012), Ibarrarán et al. (2012) 75 Real-life classroom settings are also a newer and interest approach proven to have better results than traditional classroom settings. An example of this intervention can be found in Colombia with SENA’s new adapted environment classrooms. 76 Lerman (2013); Halpern (2012); Halpern (2009); Rauner (2007) 77 Mourshed et al. (2011) 78 World Bank (2011); Mathews (2013) 79 Halpern (2009) 80 According to a recent article in the New York Times, companies in the United States have resorted to creating their own apprenticeships programs or partnering with specialized providers in order to create their own labor force with the needed skills (Schwartz, 2013). 19 A critical element in effective delivery of pro- services approach is more effective in responding grams is ensuring that programs are delivered to the simplicity or complexity of individual situa- in a coordinated fashion, with strong adminis- tions. Also, a clear advantage of this approach is tration. Setting a one-stop shop with tailor-made that resources can be better utilized as it allows for services allows the job seeker to obtain informa- more accurate targeting of programs and services. tion on all programs and services provided for his benefit of securing a job even though in some Ensuring programs are cost effective and fi- cases these programs or services are not directly nancially sustainable. Given scarce resources it is provided by the official labor institution but are important that the Government can assess which referred to. Additionally, the one-stop shop allows programs are most cost effective and suited to for the coordination of programs and services sup- country context. Therefore piloting interventions ply, avoiding duplication and closing any gaps in and evaluating them prior to scale up is essen- provision, strengthening a system approach of so- tial. More generally, a program of monitoring and cial protection. Furthermore, setting-up a one-stop evaluation allows a feedback loop to policy makers shop allows policy makers to design programs in an who can then assess whether programs are well interconnected manner that would ensure a path designed, financially sustainable and effective in out of unemployment towards a self-sustained in- achieving their outcomes. come generating status. This approach would also facilitate the collection and maintenance of data- bases to the authorities, for example, using a single data registry and a profiling instrument of benefi- ciaries to enhance service provision. Heterogeneity of job seekers and their needs must be recognized when providing employ- ment services. Not all unemployed face the same constraints to employment. It is essential that a first step in to the employment services is the identifica- tion of the job seekers’ needs and characteristics. It is not just the standard demographics or academic qualification what explains unemployment spells. It is also the interaction of the individual character- istics with life trajectories what better explains the needs of service. In fact it may be that an individual facing difficulties with securing a job does not nec- essary need a service from the employment office but from social services in general. For example, a qualified single woman with children may not be vulnerable in the labor market just for being women but for a combination of her living situa- tion; she may not need more training or any type of intermediation services but affordable child care solutions. A similar case can be argued with a per- son having difficulties holding a stable job due to mental health problems. Thus, a good profiling of the individuals helps understand their needs and allows for a more effective assistance by referring them to the right service or program. A tailor-made x 20 Cunningham, Wendy; McGinnis, Linda; García References Verdú, Rodrigo; Tesliuc, Cornelia; Verner, Dorte. 2008. 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