Youth Unemployment and Vocational Training

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Youth Unemployment and Vocational Training A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Biavaschi, Costanza et al. Working Paper Youth unemployment and vocational training IZA Discussion Papers, No. 6890 Provided in Cooperation with: IZA – Institute of Labor Economics Suggested Citation: Biavaschi, Costanza et al. (2012) : Youth unemployment and vocational training, IZA Discussion Papers, No. 6890, Institute for the Study of Labor (IZA), Bonn This Version is available at: http://hdl.handle.net/10419/67166 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu IZA DP No. 6890 Youth Unemployment and Vocational Training Costanza Biavaschi Janneke Pieters Werner Eichhorst Nuría Rodríguez-Planas Corrado Giulietti Ricarda Schmidl Michael J. Kendzia Klaus F. Zimmermann Alexander Muravyev October 2012 DISCUSSION PAPER SERIES Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor Youth Unemployment and Vocational Training Costanza Biavaschi Janneke Pieters IZA IZA Werner Eichhorst Nuría Rodríguez-Planas IZA IZA, IAE-CSIC and Universitat Pompeu Fabra Corrado Giulietti Ricarda Schmidl IZA IZA and University of Potsdam Michael J. Kendzia Klaus F. Zimmermann IZA IZA and Bonn University Alexander Muravyev IZA and St. Petersburg State University Discussion Paper No. 6890 October 2012 IZA P.O. Box 7240 53072 Bonn Germany Phone: +49-228-3894-0 Fax: +49-228-3894-180 E-mail: [email protected] Any opinions expressed here are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but the institute itself takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. IZA Discussion Paper No. 6890 October 2012 ABSTRACT Youth Unemployment and Vocational Training1 This paper focuses on the determinants of the labor market situation of young people in developed countries and the developing world, with a special emphasis on the role of vocational training and education policies. We highlight the role of demographic factors, economic growth and labor market institutions in explaining young people’s transition into work. We then assess differences in the setup and functioning of the vocational education and training policies in major world regions, as an important driver of differential labor market situation of youth. Based on our analysis we argue in favor of vocational education and training systems combining work experience and general education and give some policy recommendations regarding the implementation of education and training systems adapted to a country’s economic and institutional context. JEL Classification: J24, I25, O17 Keywords: vocational education and training, dual vocational training, youth employment, youth unemployment Corresponding author: Werner Eichhorst IZA P.O. Box 7240 53072 Bonn Germany E-mail: [email protected] 1 This IZA Discussion Paper is based on a Background Paper for the 2013 World Development Report. The Background Paper was commissioned to IZA by the World Bank in late 2012. It can be found online on the World Bank website: http://www.worldbank.org/wdr2013. The authors are grateful for comments received from the World Bank and two anonymous reviewers. EXECUTIVE SUMMARY Explaining differences in youths’ transition into employment needs to take into account, first, demographic developments and economic growth, and second, the interplay between these dynamics and long-standing institutional patterns, in particular regulatory provisions influenc- ing the supply of flexible or permanent jobs as well as education and training policies. Both general education at schools as well as different forms of vocational education and training, either at schools or on the job or combining both elements in a ‘dual apprenticeship’ are neces- sary preconditions for the employability and productivity of young people. Vocational educa- tion and training is a crucial element as it can link young people’s competences with employers’ needs. Bringing vocational training closer to the needs of dynamically changing and evolving labor markets and economies can help young people move into more productive and sustaina- ble jobs. Taking the perspective of young people, a ‘good job’ is a job that initiates a long-term investment in and attachment to the labor market. A job combined with formal training is by definition a good job. This paper is about the creation of good jobs for the young. The study argues in favor of promoting vocational education and training tailored to labor mar- ket needs, but taking into account peculiar starting conditions found in a given national or local context. While good education and training can contribute to economic productivity and social cohesion, vocational education and on-the-job-training with young workers and companies also need to involve governments, social partners or other societal actors to be stable and effective. Given major differences in the institutional setup in different parts of the world the paper dis- cusses feasible options for implementing vocational training under largely differing economic and institutional conditions. In the developmental context it is also crucial to find solutions how society can partner on vocational training with the informal sector. Challenges, but also capacities to act vary across countries and world region, depending on economic, institutional and societal context. Yet, there are some general points to be made which are relevant for most medium- and low-income countries. Promoting general education In many low- and medium income countries, policies to ensure primary and secondary school attendance, avoid early school drop-outs and leaving school at low levels of qualification are needed. Policy makers should aim at providing basic skills to every young person by compulsory participation in support classes and intensified personal support. This implies stronger empha- sis on individualized, tailored support to young people at risk, educational guidance and job search assistance (also considering incentives to parents such as conditional cash transfers). The increase of the statutory schooling age might be an avenue to increase the overall educa- tional attainment of youth – e.g., up to upper the secondary schooling level. To minimize drop- out rates, this should be done taking into account differences in motivation, ability and oppor- tunity costs of schooling. Tracking systems, based on pupil performance and preferences might 1 help reduce the number of drop-outs. However, the permeability and interconnectedness of tracks is crucial to prevent the emergence of low and high quality tracks. Stimulate the creation of formal and sustainable jobs In countries where high shares of informal employment form a major barrier to upward mobili- ty and economic progress policies should be designed to create more enterprises in the formal sector which offer formal jobs. This can be addressed by economic policy reforms such as the abolition of bureaucratic business registration procedures, tax reforms, stimulating investment in the private sector and creation of formal companies start-up support. In countries with a large segment of fixed-term contracts with limited access to training and promotion to more stable jobs, overcoming the regulatory divide between permanent and temporary jobs is the major priority. This can best be achieved by creating a flexible system of employment protec- tion easing the barriers between fixed-term and permanent jobs. Modernize
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