Expanding Youth Access to Formal Labor Markets through Public-Private Collaboration

Keynote speakers:

• Jairo Nuñez, Associate Researcher, Fedesarrollo
• Rafael Pardo, Senator, Partido Liberal Colombiano
• Bibiana Quiroga, Subdirector of Employment and Social Security, Departamento Nacional de Planeación
• Marcela Prieto, Director, Instituto de Ciencia Política (Moderator)
• Christopher Sabatini, Senior Director of Policy, Americas Society/Council of the Americas (Moderator)

Summary

On February 25, 2011, Americas Society, with support from the Ford Foundation and in collaboration with Instituto Ciencia Política, hosted a private roundtable discussion in Bogota to explore ways that governments, the private sector, NGOs, and multilateral institutions can collaborate to expand formal labor market access for disadvantaged Colombian youth. The event was the latest in a series of events in New York, Miami, and Latin America to discuss public and private initiatives that promote social inclusion in the region.

The roundtable brought together Colombian government officials and representatives from Colombia’s major political parties, representatives from major international companies, and domestic and foreign NGOs in. Speakers and participants discussed preliminary findings from Americas Society research, initiatives driven by public-private collaboration that train and integrate young workers into formal labor markets, and programs to promote entrepreneurship among young people and how to expand them.

Youth Unemployment in Colombia and Law 1429

Most economic projections forecast GDP growth for Colombia in the range of 4.5 percent in 2011, but for youth (ages 15 to 24) unemployment nationally was 24 percent in 2010 versus 11 percent for the general population. According to the Colombian research institute Fedesarrollo, disadvantaged young people throughout the country have traditionally faced substantial legal and structural barriers to labor-market entry. Payroll taxes and other expenses incurred by formal-sector employers in Colombia are above the regional average. As a result, many firms are reluctant to hire young workers who possess fewer on-the-job skills than their older counterparts.

There are three categories of youth that are separated by education and employability:

• Those who have not completed high school and lack basic qualifications and cannot find work;
• Those who have finished secondary and some university-level education but are only semi-qualified and find some employment, whether it be formal or informal;
• Those that have joined the formal labor market whose primary concern is income and benefits, not employment.

In December 2010 the Colombian government passed employment stimulus provision Law 1429, known as La Ley De Formalización y Generación de Empleo. The purpose of the legislation is to reduce the costs associated with formalizing businesses and generating formal-sector employment by spurring new business creation through incentives for start-ups.

One provision of Law 1429, also referred to as La ley de primer empleo (The First Job Law), was written to encourage firms to hire employees under 28 years old by offering payroll tax breaks and other incentives to businesses. Colombia’s Partido Liberal (the party that introduced the legislation) was present to provide an overview of the bill and answer questions from roundtable participants.

Numerous concerns about the legislation were raised during the discussion and can be grouped into the following three categories: 1) targeted efforts to alleviate the burdens of business formalization in Colombia are insufficient—a broader overhaul of tax codes and government bureaucracy is necessary to correct the problem; 2) there are some fears that targeted tax subsidies and other incentives could displace adult workers over the long-run; 3) the legislation does not extend to foundations and other non-governmental organizations who are major employers of young workers.

A representative from the Partido Liberal responded to these concerns, saying that the law is only a first step to tackling the complex issue of youth unemployment and not meant to be a total solution. Second, since the law only incentivizes the generation of new employment, there is less risk of young employees displacing older workers. Finally, the bill was designed to increase employment of youth in the private sector where the presence of youth employees is lacking. There may be changes to the bill to include other foundations and NGOs, but, for now, the private sector will remain the focus.

Private Sector Perspectives

Private companies employ more Colombians than any other sector—youth included. Therefore, it was crucial to have company representatives at the table to share their perspective on why young men and women can’t find work, and what is being done to address the problem.

Vast discrepancies exist between the skills employers demand and those students acquire in school. This mismatch hurts firms’ productivity and diminishes employment opportunities for young workers. Manpower Colombia spoke to this point, saying that young people simply do not have the technical demanded by the increasingly specialized labor market. To address the mismatch, Manpower has started a training program providing personalized skills training to young people. According to Manpower, 40 percent of the 300 youth that have graduated from the program found work, largely due to the preparation. However, funding and staff resources limit the company’s ability to scale-up the Medellin-based initiative.

Telefónica introduced the idea of the two roles that private sectors must play regarding the issue of expanding access to labor markets: an employer and a corporate social responsibility. Telefónica directly employs 4,000 Colombians (and an additional 20,000 indirectly) and is active on both these fronts. The Telefónica representative argued that, because youth are under-qualified and private companies are not interested in investing the money to train young employees, the best opportunities for Colombian youth involve finding temporary work. This work is appealing only so far as the income it produces. These jobs rarely develop into long-term employment opportunities, nor do they constitute a first step into a career.
Both private sector representatives warned that, if no action is taken, an entire generation of youth in Colombia will continually fail to find meaningful, career-oriented work and will lack crucial professional formation as they age. Along with Fedesarrollo’s snapshot of the youth unemployment picture, the voices of the private sector made it clear that the stakes are high.

Public Sector Initiatives

The Departamento Nacional de Planeación presented some of the initiatives that the Colombian government has undertaken to help youth get trained and find work. Some of these initiatives include:

• Programa Nacional de Empleabilidad para los Jóvenes en Extrema Pobreza y Desplazados provides vocation training that targets youth populations with the highest risk of unemployment;
• Programa Jóvenes Investigadores promotes innovation among youth, especially in the fields of technology and engineering. This initiative will be scaled up to serve 10,000 young Colombians;
• Public-private collaboration is aimed at developing entrepreneurship skills and promoting socially inclusive business.

Conclusions and Recommendations

The last part of the roundtable was dedicated to developing concrete, feasible solutions to the problem of youth unemployment in Colombia. Some of these conclusions included:

• Better public-private coordination on in-demand skills. Public-private collaborate must be used to create a clearinghouse where business, the government and vocational schools can exchange information on the supply and demand of skills possessed by Colombia’s youth.
• Incorporating socially inclusive business into private sector business models. While private sector corporate social responsibility and philanthropy are both useful in providing funding or other institutional support to programs that address labor market access, systemic change will only come when these companies incorporate socially inclusive and sustainable business into their model. Specifically, private companies must invest money and staff resources into training youth to create opportunities for long-term employment.
• Involving youth organizers and networks in the making of youth-centered policies. Policy makers and employers must involve youth in the discussion of strategies to decrease unemployment. While most of the decision-making apparatus lies at the higher levels of government agencies and private companies, youth are very well organized in Colombia—especially among the political parties that were present at the roundtable. Given that they are the target demographic, and since they are most familiar with their generation’s experience vis-à-vis finding work, they deserve a seat at the table.
• Including the youth of marginalized populations in the discussions and the legislation. A spokesperson from Fedesarrollo Afro—an organization dedicated to the social and political development of the Afro-Colombian population—made the point that much of the conversation and the legislation regarding youth unemployment have not included other marginalized groups, such as Afro-Colombians or the indigenous population. Youth within these groups experience lower graduation rates and higher unemployment rates. Therefore, laws that address the issue of youth access to markets must explicitly include Afro-Colombian, indigenous and other marginalized groups to ensure that this demographic reaps the same benefits as the majority population.