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PERDAS E GANHOS SOCIAIS NA CRISTA DA POPULAÇÃO JOVEM
YOUTH INS AND OUTS OF EMPLOYMENT IN BRAZIL A three page summary
International Development Research Centre Centre de recherches pour le développement international
This study was presented and discussed with international experts on July 12, 2013, in Rio de Janeiro during the seminar: “Youth and Risk” organized and supported by the Institute for Applied Economic Research (IPEA), the Secretariat of Strategic Affairs (SAE), the International Development Research Centre (IDRC) from Canadá and the Centre for Distributive, Labour and Social Studies (CEDLAS).
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YOUTH INS AND OUTS OF EMPLOYMENT IN BRAZIL a three page summary 1
Carlos Henrique Corseuil (IPEA) Miguel Foguel (IPEA) Gustavo Gonzaga (PUC-Rio) Eduardo Pontual Ribeiro (UFRJ)
One of the most worrisome and widespread stylized fact in economics is the very low employment rates and related very high unemployment rates for young workers. Brazil is no exception for this matter. According to a nation-wide household survey (PNAD/IBGE) the unemployment rate for 15-24 year olds was 16.3% in 2011, while the rates observed for ages 25-49 and 50+, were 5.7% and 2.8%, respectively. Unemployment and employment levels can be understood as the working of a tap and faucet pool, with inflows to and outflows from employment. Employment levels rise if inflows are larger that outflows. Employment levels decrease if outflows are larger than inflows. Large outflows signal short employment spells, on average, accompanied by job insecurity, low levels of training and destruction of job specific human capital.
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This is a summary based on the results from our paper Youth labor market through
the lens of the flow approach, with partial support from IDRC. The opinions expressed here do not represent the official positions of the institutions we are affiliated with.
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We contribute to the policy debate on the issue providing a sharper picture of youth labor market through little used, but important lenses: worker flows in and out of jobs (hiring and separations) and jobs opening and closings. We overcome the lack of appropriate data, exploring a very rich set (RAIS/MTE) that records hires and separations (either fires or quits), with detailed information from the firm and the hired or separated worker, with a long term look from 1996 to 2010. Here, young workers are considered those from 14 to 23 years of age. Older workers are those from 24 to 60 years of age. The first startling fact is that it is not hard for a youngster to start in a position. In any given year, the number of hires as a share of the worker age category is twice for youngsters than for adults. The average 92.6% hiring rate for youths suggests that for any ten employed youths, nine were hired over the course of the year, allowing for the same person to be hired more than once over the year. The same figure for adults is less than half, at 42.8%. In the tap and faucet figurative example, the youth tap flows relatively twice more water than the older workers tap. Yet very often a youth quits or is laid off. Younger workers lose their jobs more frequently than older workers. The separation rate, which measures the number of workers leaving their jobs, either because were fired or quit, relatively to the number of employed youths is as high as 72.4%. Seven in every ten workers, on average, may leave they jobs over the course of a year. Or alternatively, there are workers that leave their jobs much more often than once a year. The separation rate for older workers is a little more than half, fluctuating around 41.3% for the older group. Net employment growth rates are always 15 percentage points higher for younger workers than for older workers. Using our analogy, the tap for younger workers is more wide open than that of older workers, and while the youngsters faucet is wider, the outflow is smaller relative to the inflow, raising the level of the pool faster for youths. Put together the higher hiring and separation rates indicate a more turbulent job market for youth, where short employment spells, associated with higher separation rates, coexist with quick entry into employment, on average, with higher hiring rates. These shape of things present tradeoffs. On the one hand, transiting across many different jobs may enhance better matching with firms. On the other hand, entering and leaving jobs very easily tend to depress the acquisition of general and firm-specific labor experience. Since the accumu-
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lation of this type of human capital is important, the elevated turnover experienced by youths in Brazil is a factor that hinders the increase in their (future) productivity and wages. The sheer number of youth transitions into and out from jobs raises some inquires. First, whether some way firms are consistently replacing older workers with young ones, or, actually, whether their job opportunities are segregated. Departing from the set of all young worker separations in the country, in any given formal firm, we estimate that the share of substitution of one type of worker for the other (youth and adults) for these separations never surpasses the 5% level over the entire period of analysis. Replacement within the same age category is the more common prospect after a separation. And about 40 to 30% of the separations are not replaced, i.e., the position is terminated. In short jobs for workers seem segregated by age. Nevertheless, surprisingly, the pattern of young workers hiring either in temporary contracts or on cooperatives is similar across age groups and account for a diminute share of jobs. These low quality positions, with little on the job human capital accumulation nor labor benefits, do not explain the large figures for worker turnover. This leads to an important question. Should one consider worker oriented policies to foster youth employment? Or should one consider firm oriented policies to foster youth employment? This depend on whether younger workers are disproportionally allocated to firms that present high turnover rates compared to older workers. For instance, young workers may be allocated to high turnover industries, like construction or retail trade. Our estimates indicate that clearly shows that businesses in high turnover sectors tend to employ a higher share of young workers. Therefore the high turnover computed for young workers may be, at least in part, due to the allocation of this group across industries and so work turnover reduction may be achieved focusing on high turnover firm policies. Before moving to our final comments, one must first recognize that other factors operate, as we found out, such as the education level of the worker. In this sense, the more education policy accelerates the increase new worker cohorts schooling levels, the lower should be the turnover expected for them. Condensing our results for policy purposes, we highlight that young workers
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experience very high turnover rates in Brazil due to both hiring and separation rates, even in the face of relatively high firing costs by international standards. To decline worker churning, the main margin of policy should be the separation rate. Though hirings and separations are interrelated, tackling high separations looks more efficient as it directly attempts to keep workers longer in their jobs. High hiring rates do not credence a lack of jobs for youth. Rather, the high separation rates imply short lived unstable jobs. Job search assistance initiatives should not do much, unless capable of generating worker-firm matchings that produce longer employment durations. The focus should be on creating incentives for firms and young workers to increase the value of longer job relationships. Firm subsidies to extend the tenure of youths should be thought very carefully in particular because its potential high costs. Finally, training programs partially funded by the worker and the firm may create incentives for both parties to invest in each other in the longer term.
JUVENTUDE
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International Development Research Centre Centre de recherches pour le développement international
PERDAS E GANHOS SOCIAIS NA CRISTA DA POPULAÇÃO JOVEM