Youth Employment Programs - Independent Evaluation Group

Contract flexibility and low firing costs allow employers to check whetherthe skills of a young worker are a good match for the job and whether theincrease in the firm’s economic activity is sustainable. Less rigid labor marketregulations allow employers to respond to short-term increases in the demandfor products without having to suffer high costs of dismissal. Similarly, parttimecontracts can attract particular types of workers, such as young womenwith children.Pay may affect employment. Whether wage-setting mechanisms arecentralized or coordinated through collective bargaining, whether a minimumwage is imposed or not, and at what level, will matter. A minimum wage(depending on its level relative to average pay) can negatively affect youngworkers more than older workers if young workers’ marginal productivity isbelow the wage level. A youth sub-minimum wage may lead employers tosubstitute lower-salaried youth for low-skilled adult employees (Neumark andWascher 2004). In the United Kingdom, no significant impact was found fromthe influx of less-skilled workers from European Union accession countrieson the employment of the least-skilled youth; however, it did have a slightlynegative impact on wages (Nickell and Saleheen 2008).In sum, the three main determinants that affect the demand for youthemployment are economic growth, structural changes, and employerpreferences. On the supply side, the main determinants are the level ofeducation and the relevance of skills, the size of the youth cohort, andindividual attributes. In addition, institutional factors in the labor and creditmarket matter— including information, regulations, wage levels, and creditcosts.As these factors are influenced by overall development efforts, includingmacroeconomic support to countries and World Bank Group support to thepublic and private sectors, a full picture of the Bank Group’s effects onyouth employment outcomes presents a considerable challenge. It wouldonly be possible to do so if the impact of each of these interventions onyouth employment could be identified. Unfortunately, they cannot. Thus,the evaluation needs a framework to identify what can be evaluated in thebroader context. The following section presents the framework, categorizesyouth employment problems based on the determinants, and proposesstrategic directions and interventions to address the issue.Government Policies to Address Youth EmploymentGovernments use three main strategic directions—investment climatepolicies, labor market reforms, and education reforms—to tackle youthemployment depending on the country context. Table A.1 categorizesyouth employment problems and related determinants, taking into accountthe issues youth face when entering the labor market. It suggests themain strategic directions to address these issues. In all five contexts,policies to improve the business environment, increase trade, and fosterAppendix A: Conceptual Foundation of the Evaluation Framework 61