Youth Employment Programs - Independent Evaluation Group

Fostering Job Creation and Work Opportunities (I)Firms’ demand for youth and self-employment is unevenly covered in theBank’s analytical reports, which focus more on the skills gap constraintfor employers. The Bank’s Investment Climate Assessment reports examinewhether entrepreneurs see the lack of skills as a constraint to investment.They identify the sectors that are likely to grow, the kinds of skills needed,and whether young employees are learning these skills (for example, inMongolia). Where there is little prospect for increasing formal sector jobs as,for example, in sub-Saharan Africa, some Bank reports argue for more focuson raising the productivity and incomes of youth working in the informalsector or in agriculture.Improving the business and investment climate has been linked toinvestment and employment growth (Bruhn 2008), but the impact on youthemployment is unknown. Four Bank operations supported trade reforms inyouth-intensive industries. However, the effect on employment and earningsis unknown. In Liberia, Mali, and Sierra Leone, the Bank facilitated theexport of fish and local artisanal products. Reforms in export competitivenessin Turkey contributed to a one percentage point increase in private spendingon research and development. In Armenia, an enterprise incubator helped 18local information technology companies attract foreign investors, resultingin a 15 percent annual increase in graduates employed in informationtechnology. In Bhutan, which has the highest youth-to-adult unemploymentratio (8.7) in the world, the Bank helped shortening the administrativetime to recruit foreign workers, thereby increasing the labor supply. Thesubstitution effect on Bhutanese youth is unknown.Data on job creation for most IFC investment climate advisory projects have notbeen tracked. IFC-supported investment climate reforms in four African countries(Burkina Faso, Liberia, Rwanda, and Sierra Leone) created roughly 60,000 jobsfor all age groups through newly established businesses across different sectors.However, no information is available on the distributional aspects.Regulations to encourage hiring of youth allow greater flexibility andreduce segmentation in middle-income countries, but the impact on youthemployment is not clear. Labor market regulations mainly protect formalsector “insider” workers, and can make it more difficult for youth to enter themarket. For example, in Latin America, the unemployment effect of stricterregulations is almost two times larger for youth than for adult workers(Heckman and others 2000). Based on data from 17 OECD countries, Neumarkand Wascher (2004) found that the negative employment effect of minimumwages on youth can be reduced by a youth sub-minimum wage. Higher youthminimum wages in Portugal led to a flatter wage profile over time as firmswould compensate a higher initial wage with a slower wage progression(Cardoso 2009). The Bank did not collect any information on the youthemployment effect from Bank-supported regulatory reforms in Eastern Europeand Central Asia.What is the Evidence on the Effectiveness of Support to Youth Employment? 37