PROTOCOL: Interventions to Improve Labour Market Outcomes of Youth: A Systematic Review of Active Labour Market Programmes

There are about 1.2 billion youth worldwide, aged 15 to 24, and nearly 75 million of them are looking for a job (ILO, 2014). Such a sizable youth cohort presents an opportunity for growth but can also become a source of instability if youth unemployment is not addressed by effective interventions. Young men and women have been in the spotlight ever since the hefty impact on youth employment caused by the economic crisis became apparent. The youth unemployment rate saw its largest annual increase between 2008 and 2009: rising from 12 to 12.9 per cent, with youth in industrialized countries being particularly affected. During the same period (2008–2009), youth unemployment rates in developed economies and the European Union (EU) and in Central and South-Eastern Europe (non EU) and Commonwealth Independent States (CIS) increased by 4.1 and 3.2 percentage points, respectively. These are the largest annual increases in youth unemployment rates ever recorded in any region. Stimulus packages, consultations, and private and public investments targeting youth came into vogue. Despite the response to the crisis, the global youth unemployment rate remains stubbornly high and today it is projected to stand at 13.2 per cent (ILO, 2014), as shown in Figure 1. Does this signify insufficient investment or reflect the fact that it takes time for youth employment programmes to have a positive impact? Note: p = projection. Source: ILO (2014). Global youth unemployment is estimated to stand at 74.5 million in 2014, an increase of 4.4 million since 2007. Higher unemployment and lower labour force participation among youth contributed to a decrease in the global youth employment-to-population ratio to 41.1 per cent in 2014, compared with 44 per cent in 2007. Part of this decrease is due to rising enrolment in education but the figures also reflect increasing levels of discouragement among youth (ILO, 2014). The ratio of youth-to-adult unemployment rates illustrates the extent to which the economic crisis impacted regional and country-wide youth labour markets. Unemployment among youth is higher than among adults. Without exposure to a working environment, youth lack the job and soft skills that develop over time with experience. These inherent deficits "naturally" translate into youth unemployment rates that are twice – and sometimes three times – as high as the rates for adults. While the global ratio of youth-to-adult unemployment rates has hardly changed in recent years, its regional dynamics have resulted in some areas experiencing youth unemployment which is four times greater than the adult rate, exposing the vulnerability of young jobseekers to economic shocks, particularly in developing countries. According to the ILO, between 2009 and 2010, at the height of the economic crisis, the youth-to-adult ratio of unemployment rate in South-East Asia and the Pacific increased from 4.6 to 6. At the country level, ILO estimates for 2014 place the youth-to-adult ratios of unemployment rate in Egypt, Indonesia, and Sri Lanka at 5.8, 7.1, and 8, respectively (ILO, 2014). The effects of the crisis on youth went beyond unemployment. The economic downturn also hit employed youth hard. The number of non-standard jobs, including temporary employment and part-time work, increased significantly, as many youth were drawn into lower quality work, temporarily postponing their career aspirations to secure an income, however meagre. In Europe, an increasing number of employed youth have unwillingly accepted non-standard jobs. Youth part-time employment as a share of total youth employment in Europe was 25 per cent in 2011. A further 40.5 per cent of employed youth in the region were engaged under temporary contracts (ILO, 2013). In most regions, the youth unemployment rate is following an upward trend (ILO, 2014), which gives a long-term perspective to the challenge of addressing the issue. With a rather sluggish recovery and poor economic growth, job prospects for youth are not expected to improve substantially in the medium term. This economic landscape and the potential negative consequences of unemployment on human capital, health, happiness, crime, and socio-political stability (Bell and Blanchflower, 2009) call for further research and comparative analyses into the most effective measures to improve the labour market outcomes of youth. This requires (i) learning from past experiences (both successes and failures), and (ii) the provision of a quantifiable estimate of the magnitude of impacts arising from youth employment programmes. Labour market interventions to be examined by this systematic review fall into the category of Active Labour Market Programmes (ALMP), which are further defined as all social expenditure (other than education) which is aimed at the improvement of the beneficiaries' prospect of finding gainful employment or to otherwise increase their earnings capacity. This category includes spending on public employment services and administration, labour market training, special programs for youth when in transition from school to work, labour market programs to provide or promote employment for unemployed and other persons (excluding young and disabled persons) and special programs for the disabled (OECD, 2013). ALMPs require active participation in programmes that enhance labour market integration, a requirement which differentiates them from other labour market – and social protection – policies, such as unemployment insurance schemes and non-conditional transfers. In the case of ALMPs, the economic rationale relies on market clearing, i.e. labour demand and supply matching and market efficiency through, for instance, job-search assistance, labour market information, and pre-screening of programme applicants. ALMPs can also enhance labour supply through training, foster labour demand through labour-intensive public employment programmes, entrepreneurship, and self-employment measures, or alter the structure of demand by offering employment subsidies (Auer et al., 2008). Although the focus of ALMPs tends to be on economic relevance, they can have important social and political dimensions (Betcherman, Dar & Olivas, 2004). ALMPs can foster the social inclusion of disadvantaged groups while signalling a willingness on the part of politicians to engage with the problems. This section offers some theoretical underpinning to the ways in which the interventions included in this systematic review may improve labour market outcomes of youth. The underlying assumption of programmes is that participation in ALMPs will ultimately improve the employment and earnings outcomes of participants, as well as the performance of the businesses that programme participants start or already own. Exposure to ALMPs is expected to create a spillover effect among non-programme participants, as well as general equilibrium effects throughout the economy. While some of these spillovers may positively affect overall employment outcomes, in certain cases ALMPs may have a negative impact on the performance of non-participants. For example, there is evidence that wage subsidy programmes may lead to substitution effects (with subsidized workers replacing non-subsidized workers) and windfall effects (when part of the subsidies go to workers who would have been hired in any case), therefore decreasing the overall employment impact of the programme. To address this issue, increased attention must be given to programme design features that can help to compensate for negative spillovers, such as the establishment of conditionalities for employers (Almeida, Orr & Robalino, 2014). This section summarizes the theories of change behind ALMPs for youth, aiming to map out the relationship between: (i) the resources that are invested ("Inputs"); (ii) the intervention that takes place, including the different activities that may be part of the intervention ("Activities"); (iii) the individual-level competencies and constraints (such as knowledge, attitudes, and behaviours) which are directly affected by the intervention ("Outputs"); and, finally, (iv) the individual labour market outcomes that can be measured as part of an impact evaluation study ("Outcomes"). Key assumptions are also drawn to determine whether one event in the sequence actually yields the expected changes in labour market outcomes. Once the theories of change are clear, the systematic review will seek to examine whether the evidence supports the expected transition channels and causality. Building on existing literature, operational manuals, and programme information, this section describes each intervention and its underlying theory of change. Even though labour market programmes often combine interventions from different categories, separating the results chains for each category seeks to provide further transparency in the assumptions and support the interpretation of results revealing potential causal mechanisms. In the interest of a well-defined intervention description, we omit those activities and outputs that are not strictly linked to labour market effects. Similarly, we focus narrowly on individual-level labour market outcomes, leaving aside other potential side-effects, such as increased psycho-social well-being. For simplicity, higher level or "longer term" outcomes – such as poverty reduction, economic growth, or democratization – are not explicitly shown in the chain of effects, nor are potential general equilibrium effects that may reduce the macroeconomic effectiveness of an intervention. Nonetheless, most of the programmes under study will have broader macroeconomic effects which will play an important role when scaling up or replicating the programme. In fact, some of the interventions may explicitly target higher level (economy-wide) outcomes, such as social protection aspects (e.g. public employment programmes may be designed to smooth consumption during recessions or crises). Education and skills are considered a core factor in determining the chances of young people in the labour market (Biavaschi et al., 2012). Skill training programmes are therefore the most widely used labour market intervention for young people worldwide and are increasingly delivered as a complement to other labour market measures (Betcherman et al., 2007; Fares & Puerto, 2009). The objective of skill training programmes is to develop employment-relevant skills of jobseekers. Broadly speaking, employability skills refer to a set of job-specific technical skills, but also include non-technical, soft (or behavioural) skills, such as self-management, teamwork and communication. Increasingly, employers across the world are placing higher value on these non-technical skills than on technical competencies (Cunningham, Sanchez-Puerta & Wuermli, 2010; Youth Employment Network & IYF, 2009). Technical training programmes are popular in development cooperation because many developing countries experience a skills mismatch between their labour force and emerging segments of their economies. However, pure training programmes have not proven very successful in many contexts (Betcherman et al., 2004). Therefore, most recent programmes tend to combine skills training with other types of interventions; for example, on-the-job training or employment services (Cunningham et al., 2010; Fares & Puerto, 2009). An example of a comprehensive skills training programme is provided in Box 1. The Youth and Employment Programme, Juventud y Empleo (JE), in the Dominican Republic represents an innovative model of a comprehensive active labour market programme (ALMP) to improve employability and human capital of young people between the ages of 16 and 29 who did not complete high school. The programme provided young people with vocational training (150 hours) and basic or life skills training (75 hours) combined with internships in private sector firms (240 hours). The programme was managed by the Ministry of Labour in cooperation with the National Institute of Technical and Vocational Training (Instituto Nacional de Formación Técnico Profesional) and with financial support from the Inter-American Development Bank. Training services were provided by private training institutions. The programme came into operation in 2001 and was the first job-training programme in Latin America and the Caribbean to incorporate a randomized evaluation component in the project design. The first impact evaluation showed limited impacts on employment and wages, which led to changes in the programme that focused on working more closely with the private sector and providing a stronger life skills component. Further evaluation results showed that the programme had a positive impact on job formality for men and a positive effect on monthly earnings among those who were employed. In addition, the programme was effective in reducing teenage pregnancy and showed a positive impact in various measures of non-cognitive skills. A number of conditions determine whether skills training programmes are successful in bringing additional youth into work – most notably, consistency between the skills offered by a training programme and those demanded by the market. To this end, some programmes introduce a market-based (or bottom-up) approach in programme design. The application of this approach enables training curricula and programme components to respond much more effectively to the needs of employers (in both private and public sectors) and communities in a demand-driven fashion. Furthermore, the success of all these interventions relies on the assumption that the (correct) target group participates in the training and that the training is appropriate and conducted in a way which actually augments the skill sets that are relevant to the labour market. Finally, a crucial element may be the award of a legitimate certificate on successful completion of a programme to prove the acquisition of increased knowledge and skills to potential employers in the job market. Entrepreneurship promotion programmes aim to lower the barriers and costs for young unemployed and underemployed planning to establish or maintain a business. Since the scope of formal wage employment is often limited in developing countries, increasing (formal) self-employment among the labour force is considered an important anti-poverty strategy (Gindling & Newhouse, 2012). Because self-employed and small-scale entrepreneurs often face numerous internal and external constraints, a multitude of measures exist to support the process. ALMPs that facilitate access to finance often provide technical advice and imply setting partnerships and capacity building schemes with (and for) microfinance institutions (MFIs) and banks. In addition to access to finance, there are programmes that offer business advisory services and mentoring for soon-to-be or already self-employed youth. Finally, some interventions try to reduce the barriers to business creation by assisting prospective entrepreneurs to enter markets or existing value chains. The above-described interventions and their underlying theory of change are shown in Table 2. We included training related ALMPs, which deliver the skills relevant for starting or maintaining a business (such as management skills, leadership skill and financial literacy), described in section 1.3.1 above. Many entrepreneurship programmes take a comprehensive approach; for example, combining access to credit with business skills training or post-programme consultation (i.e. mentoring and coaching). Most microfranchise programmes follow this pattern – delivering finance, business networks and mentoring services. Primarily, entrepreneurship programmes increase employment through their direct effect on the soon-to-be self-employed participant. The assumption is that beneficiaries actually plan to set up a new business after receiving credit and/or training (i.e. that targeted and trained individuals have been appropriately selected for the programme) and that they would not have done so without the intervention. The Start and Improve Your Business (SIYB) programme is a management-training programme with a focus on starting and improving small businesses as a strategy for creating more and better employment in developing economies and economies in transition. The SIYB programme is a system of interrelated training packages and supporting materials for small-scale entrepreneurs. The programme is designed by the International Labour Organization (ILO) and implemented with support from certified trainers in partner institutions in more than 100 countries. Initially developed in the 1980s, it has now been translated into more than 40 languages and had reached more than 4.5 million potential and existing entrepreneurs by 2010. The Start Your Business (SYB) package provides a five-day training course for potential entrepreneurs with concrete and feasible business ideas and proposes a follow-up programme including counselling sessions. SYB assists participants to develop a business plan with a marketing strategy, a staffing plan and a cost plan. The 2011 SIYB Global Tracer Study found that in new businesses started after the training, on average, three jobs were generated. In Uganda, a randomized control trial (Fiala, 2014) providing mainly young business owners with loans, cash grants, and the Start Your Business (SB) training module or a combination of these components showed that, six and nine months after the interventions, men with access to loans with business skills training report 54 per cent greater profits. In order to generate additional jobs, entrepreneurship programmes have to assume that the intervention leads to either (i) increased marginal productivity of the input labour or (ii) increased output and profits resulting in additional investments and labour demand. To achieve this end, the training must suit the context and knowledge of the participants. Beneficiaries then have to apply the training or credit to their business and thereby increase performance and competitiveness.2 Whether an entrepreneur will finally hire additional workers may also depend on the macroeconomic and labour market environment. Box 2 describes the programme Start and Improve Your Business (SIYB), a widely used and adapted entrepreneurship training package designed by the ILO and tailored for youth. Employment service programmes are generally based on the (matching and) intermediation approach to active labour market policy. Intervention types within employment services are shown in Table 3. Job-placement programmes acknowledge the existence of information asymmetries in the labour market. Hence, these programmes aim to improve the job-matching process by providing information and support to both sides of the labour market. the one they young jobseekers about job is of to youth who have the labour market and are experiencing in marketing or lack the knowledge and networks to job and, on the other they provide information to potential employers about and unemployed youth. The underlying is to facilitate the matching of employment with jobseekers while reducing the costs and to employers with young The of job-search include job-search training, or career counselling and programmes. Such programmes address disadvantaged or youth who are from the labour market. aim is to improve the and effectiveness of by participants. programmes are also provided to youth who are not unemployed but are in education or have the labour market in some to in education or in In many countries, employment a approach barriers to individual jobseekers to interventions and job-search which has been to be the most effective of providing these services & While in some countries public employment being the of employment some have into an important role for private employment to address and information in the labour market. Box illustrates a model by a public employment to facilitate counselling and for youth. In the jobseekers with potential employers and provides and job counselling to the In the to with employment services for young who had been unemployed for at six months to private The programme aimed to help jobseekers work and to support the in that job or finding a new For the first six months of the the private employment the and to a job with a of at six During the first six months of the to be and by the A randomized measured the direct and impacts of job on the labour market outcomes of young The evaluation found that the counselling programme had a positive impact on the employment of young jobseekers months after to the compared to jobseekers. However, these positive effects to have at the of workers who did not from the particularly in labour markets they mainly with other workers and in labour markets. There is that in employment services (and in ALMPs in a effect on participants & and & this effect is a for successful To this end, and job-search programmes are often to financial for jobseekers and/or For example, such schemes may the of on the unemployed for with the intervention. Similarly, marketing of unemployed youth may be combined with the offer of subsidies to labour demand is one of the constraints by young job market – particularly in developing economies. employment interventions wage subsidies and labour-intensive public employment programmes both of which are designed to increase the job and training to young The aim of both types of intervention is to that individuals who not a job on the labour market and to economic and social To that end, such programmes offer interventions but work labour market effects. subsidies in numerous and can be provided through various from direct to in social and subsidies reduce the financial costs or with not the productivity of the to be employed. with employment this is a which is particularly relevant to youth the labour market for the first and marginal productivity may be market subsidies may also to lower the costs to employers of providing on-the-job youth Such training subsidies offer the of the number of training for disadvantaged young subsidies promote labour supply through increasing the from employment and increasing to seek and While it is that subsidies may also more active job-search they will be to providing may better targeting of Furthermore, subsidies a lack of labour subsidies may be more appropriate in countries labour supply constraints, for example due to is important to acknowledge the limited and evidence of wage subsidies in developing countries. et the results of and impact the Most evidence from the with rather results the effectiveness of wage subsidies as for job The for Young the to lower unemployment among youth to other interventions, including subsidized education and The programme is in Box While evidence in developing countries is more it is also negative impacts of wage subsidies in & but positive and impacts in et al., 2014). The for Young was in the in and aimed to help the young unemployed into work and to increase their employability by combining different interventions, job-search and subsidized was for all people aged who had unemployment for a period of six months or enter a period of job-search under the of a to than four who were receiving the at the of the period were to take one of four (i) into education or training for those without basic (ii) a job with a sector (iii) a job on the (iv) employment in a wage subsidy programme. In addition, under the of the employers were to offer education or training on at one a showed that the programme to have an increase in the of young men had been unemployed for six finding a job within the four months & and that a period of subsidized employment was a more effective of unemployment and employment than the other under The of labour market intervention in this category is labour-intensive public employment programmes. employment programmes are the for public programmes and employment Despite the of these programmes with and there is a trend in the social services and programmes & In this of basic social are for public jobs and a small to their unemployment Programmes target disadvantaged or long-term unemployed workers with the aim of them in with the labour market and the of human capital during of unemployment. While public employment programmes have been often as a in times of (e.g. or economic they are increasingly used as a component of employment et al., In addition, they have become popular as a for addressing youth unemployment & both as an to the world of employment and as a to maintain social This is particularly relevant for youth service programmes, in which youth can an active role in and development while learning new skills, increasing their and to their overall (Cunningham et al., 2008). Most wage subsidies and public employment programmes are designed to support employment in the or medium term. A positive effect on outcomes is if the work experience and training during the period of subsidized work also the employment prospects of participants. For this (i) wage subsidies are often to firms that to provide additional training to subsidized (i.e. in with and (ii) public employment programmes are often with such as skills training or and are to the youth employment looking for ideas and evidence on and in order to improve the labour market conditions of young Youth employment interventions, such as entrepreneurship promotion

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