Youth Employment Programs - Independent Evaluation Group

Wage Subsidies to Provide Incentives for HiringTemporary wage subsidies paid to employers to hire youth can have a positiveimpact on individual employment—mainly if work provides them with higherlevelskills. The challenge is low take-up among employers. Kluve (2006), ina review of European countries, found these private sector incentive schemesto have a 30 to 50 percentage-points higher employment effect than skillstrainingprograms offered under ALMPs. The Swedish Youth Practice Programsubsidized wages of unemployed youth hired for six months in the privateand public sector. However, subsidized participants were less likely to findemployment compared to youth who received job search assistance, becausethere was insufficient planning and follow-up, as well as low-quality taskswithout building any higher-level skills (Larsson 2003). Sri Lanka reportspositive results from a wage subsidy paid to 22 percent of micro-entrepreneurswho were willing to hire low-skilled workers, mostly youth. The median firmreported a sales increase by 25 percent as a result of the hiring. After thesubsidy expires, 86 percent of the firms plan to keep the worker (de Mel andothers 2010). The U.K.’s New Deal wage subsidies program includes one dayof training per week and positively affects youth employment, but it suffersfrom low uptake among employers (Van Reenen 2003).Wage subsidies need to be high enough for employers to participate. TheBank supported wage subsidies in middle-income countries, includingBulgaria, Turkey, Colombia, and Argentina. In Colombia, the subsidyprogram benefited more than 100,000 workers, 40 percent of whom previouslyworked in the informal sector. However, because of low program uptake, thegovernment stopped the subsidy and is now analyzing the pilot to identifylessons.Public Works ProgramPublic sector employment programs are part of Active Labor Market Programs.ALMPs also include short-term skills training for jobseekers, private sectorschemes to create job opportunities for youth, and job search assistance tohelp graduates and the unemployed find work. ALMPs can be targeted toyouth or other population groups; however, their high costs to governmentrequire ALMPs to be well targeted and of limited duration. Public spending inOECD countries on ALMPs ranges from 0.2 percent of GDP in the United Statesand up to 2 percent of GDP in the Netherlands (Kluve 2010).International evidence on direct employment in the public sector showsmixed results. In Europe, the post-program employment effect of public worksprograms is negative for youth, and scores below wage subsidies and skillstraining programs. There is little relationship between program effectivenessand other contextual factors, including in particular the macroeconomicenvironment and indicators for institutional features of the labor market(Kluve 2010). Van Reenen (2003) finds a positive post-program employmenteffect of the public works “environmental task force,” which is part of theNew Deal Program for youth in the United Kingdom.Appendix F: Lessons from Impact Evaluations and World Bank Group Operations 143