J.1.6_Youth Employment at Scale Literature Review.pdf

MONITORING AND EVALUATION SUPPORT

FOR COLLABORATIVE LEARNING AND

ADAPTING (MESCLA) ACTIVITY

APPLYING EVIDENCE: YOUTH EMPLOYMENT IN

THE HONDURAN CONTEXT

LITERATURE REVIEW

SUBMISSION DATE: July 23, 2019

Contract Number: AID-OAA-I-15-00019 – Task Order Number: AID-522-TO-16-00002

This publication was produced for review by the United States Agency for International Development. It was prepared by Dexis Consulting Group.

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) ii

MONITORING AND EVALUATION SUPPORT FOR

COLLABORATIVE LEARNING AND ADAPTING

(MESCLA) ACTIVITY

APPLYING EVIDENCE: YOUTH EMPLOYMENT IN THE

HONDURAN CONTEXT

LITERATURE REVIEW

SUBMITTED TO:

USAID/Honduras

Prepared by:

Dexis Consulting Group

DISCLAIMER:

The authors’ views expressed in this document do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) iii

TABLE OF CONTENTS

ACRONYMS ................................................................................................................................................... iv

PURPOSE

METHODOLOGY

OVERVIEW OF YOUTH EMPLOYMENT CHALLENGES

HONDURAN ECONOMIC CONTEXT

IDB: A TERRITORIAL APPROACH TO DEVELOPMENT (2019)

TMS MARKET DIAGNOSTIC SURVEY (2018)

EMPLEANDO FUTUROS, LABOR MARKET SURVEY (2017)

LARGE-SCALE YOUTH EMPLOYMENT/LIVELIHOOD INTERVENTIONS

EVIDENCE FROM UGANDA

Background

Program Methodology

Key Findings

Benefits and Implications for the Future

EVIDENCE FROM LATIN AMERICA

DOMINICAN REPUBLIC: JUVENTUD Y EMPLEO

Background

Study Methodology

Key Findings

Cost Benefit and Future Implications

PERU: PROJOVEN

Background

Study Methodology

Key Findings

Costs Benefits and Future Implications

OVERALL FINDINGS AND CONCLUSIONS

CONCLUSIONS AND RECOMMENDATIONS

REFERENCES

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) iv

ACRONYMS

ALMP Active Labor Market Program BPO/ITO Business Process Outsourcing/Information Technology Outsourcing CLA Collaborate, Learn, and Adapt COS Centros Operadores del Sistema CPS Competencias Personales y Sociales EF Empleando Futuros IDB Inter-American Development Bank IST Institutos Superiores Tecnologicos JE Juventud y Empleo LAC Latin American and Caribbean region MESCLA Monitoring & Evaluation Support for Collaborative Learning and Adapting PSM Propensity Score Matching RECAP Registro de Entidades de Capacitación TMS Transforming Market Systems Activity TVT Technical & Vocational training USAID United States Agency for International Development WFD Workforce development YLA Youth Leadership for Agriculture

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 1

INTRODUCTION

PURPOSE

The purpose of this literature review is to provide guidance for a large-scale youth workforce development (WFD) Activity that takes into account the current Honduran economy/labor market context. Using the United States Agency for International Development (USAID)-commissioned "What works for Youth-Employment in Low-Income Settings” (Fox and Upaasna, 2017) as the starting point, this literature review provides an update on the Honduran economic context and presents evidence from three large youth-employment/livelihood interventions.

METHODOLOGY

For this literature review, the Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) Activity conducted a desk review of existing studies on interventions for youth employment in developing countries. This literature first introduces a comprehensive USAID review highlighting difficulties and implications for interventions around youth employment across different countries. The following section looks into Honduran economic context and labor market studies, followed by sections that provide summaries and analyses of key findings from three large-scale youth WFD interventions in Uganda, Dominican Republic, and Peru. These interventions are then considered within the context of the USAID review and Honduran economy to identify types of programs that are proven useful for successful large-scale youth employment creation.

OVERVIEW OF YOUTH EMPLOYMENT CHALLENGES

Economists from USAID produced the comprehensive literature review that serves as a starting point for this literature review. The document analyzes key challenges for youth employment across developing countries using evidence across evaluations of youth employment interventions. Findings across studies indicate that a comprehensive understanding of the economic dynamics and a robust economic forecast for the current and future employment opportunities are necessary for the successful design of strategic policies and interventions to address challenges for youth (Fox and Upaasna, 2017).

“In Honduras, a shortage of quality jobs is at the center of the cycle of intransigent poverty and continued underdevelopment. It is estimated that 61.9 percent of Hondurans live in poverty, and Honduras ranks as the second poorest and most income‐unequal countries in Latin America (Gini coefficient of 50.5). While the official rate of unemployment reported by the National Statistics Agency (INE) was 5.7 percent in 2018, the invisible and visible underemployment rate in 2018 was

62.8 percent. More than a quarter of Honduran youth – age between 15 and 29 – is neither employed, nor in school or in training and the percentage is increasing every year. Self‐employment and informal employment accounted for 56.5 percent of total jobs in Honduras in 2018, which tend to be low‐wage and offer little stability. Only 53.5 percent of the working age population is actively engaged in the workforce. The current economic situation results in high levels of external migration

– 91 percent of migrants reported economic opportunity as the number one reason for external migration.”- "Diagnosing Honduran Market Systems," 2019

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 2

A part of this comprehensive understanding is the ability to diagnose typology of an economy and identify the appropriate strategies for most advantageous outcomes. Countries face different employment opportunity creation challenges at different stages of economic development and transformation, and country context influences the nature of these challenges, as well. Across studies it is clear that there are two key factors for consideration:

1. Initial income levels, which reflect the accumulation of physical and human capital; and

2. Potential for inclusive economic growth and transformation, which reflects the extent of structural employment transformation (such as percentage of the labor force entering wage employment outside of the traditional agricultural sector) (Fox and Upaasna, 2017).

Developing economies fall within the following categories, each with specific employment challenges and barriers particular to youth entering the workforce:

• High potential, transforming economies (low-income; lower-middle income);

• Low potential, non-transforming economies (low-income; lower-middle income); and

• Stalled economies (Fox and Upaasna, 2017).

While no real-world national economy may fit perfectly into any one typology in its territory or all sectors, the economic typology is useful to help define the challenges that necessarily form the logic of the youth employment interventions. Honduras by GDP/per capita is a lower middle-income country but its labor structure more closely matches a low-income country profile so either categorization could inform decisions when considering youth-employment creation interventions (see Table 1).

Table 1: Youth employment challenges and interventions depend on the prospects for structural and employment transformation

Category Description Inclusive growth challenge Youth employment challenge High potential, low income countries

Among the poorest countries in the world, these countries have been posting solid growth rates with modest poverty reduction. But they remain plagued by low human capital, high dependency ratios, and often-ineffective institutions. As much as 70–80 percent of their populations reside in rural areas.

Typical countries include: Benin, Burkina Faso, Cambodia, Malawi, Nepal.

• Productivity in the agricultural sector remains low.

• Nonfarm employment activities are still low productivity.

• Constraints to growth include infrastructure, human capital (secondary education but also management and technical skills)

• Uneven economic institutions, and weak governance.

• Per capita growth remains low owing to high population growth.

• Youth need to develop mixed livelihoods and/or access to commercial agriculture opportunities

• Limited wage employment activities in urban areas.

• Low productivity in non-farm informal sector.

• Limited financial access.

• Education is inefficient and low quality, so basic skills weak.

High- potential, lower-middle-income countries

These countries posted much higher GDP growth rates over the last decade and a half than in the past, and they have been diversifying their economies out of agriculture. This diversification is led by increased private investment and labor productivity growth, especially in the non-agricultural sectors. Typical countries include: Bangladesh, Côte d’Ivoire, Ghana, India, Kenya, Philippines, Senegal.

• Quality of human capital is too low; higher secondary completion and job-readiness rates needed.

• Management skills are scarce.

• Transformation is tilted toward services.

• Underdeveloped financial sector, poorly managed infrastructure.

• Poor urban governance

• In SSA, slow fertility decline.

• Need investment in labor-intensive enterprises to accelerate transformation, grow wage employment.

• Reform secondary, higher education curriculum toward labor market needs.

• Increase commercial agriculture opportunities for rural youth—including addressing land rights/market as needed.

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Low-potential, low-income countries (including all fragile states

Mostly affected by conflict, which has prevented them from realizing growth potential. Once conflict settles, opportunities abound for bounce-back growth. But conflict or the threat of conflict hinders infrastructure and human capital development. These countries tend to be aid dependent. Typical countries include: Afghanistan, Burundi Haiti, Mali, Niger, Somalia, Yemen, Zimbabwe.

• Conflict stalled growth

• Risky environment for private investment.

• Displacement and demobilization.

• Low human capital.

• Missing infrastructure, low resilience to natural disasters (risk of violence from drought).

• Weak institutions.

• Most youth lack education and skills

• Low private investment means few wage job opportunities.

• Low economic growth limits informal sector opportunities.

• Weak agricultural value chains - youth lack skills & capital to enter.

• Returns to illegal activities > legal.

Low-potential, lower-middle-income countries (including resource rich

Resource wealth has led most of these countries to develop rentier economies. Political and economic life is dominated by an elite that distributes some mineral wealth through public goods but otherwise uses the public sector to enrich itself. Education levels of youth entering the labor force are rising, but private investment is low with few opportunities. Typical countries include: Angola, Nigeria, Republic of Congo, Timor-Leste, Venezuela, Zambia.

• Dependence on resource exports creates growth volatility.

• Rent economy excludes most of the population.

• High fertility, rapidly growing youth population.

• Urban, educated, and slum youth tend to be unemployed.

• Youth in rural areas have few options.

• Governance challenges limit demand side options; experimentation needed

Stalled lower-middle- income countries

These economies were able to increase the share of wage employment in the labor force owing to private investment in modern nonagricultural firms– exporters and producers for a growing domestic market. But their transformation stalled, often because economic elites block new entrants, stifling innovation and productivity growth Despite slower labor force growth, they suffer from high rates of unemployment. Typical countries include: Armenia Egypt, Morocco, Nicaragua, Tajikistan.

• Political stability and security are new challenges in some countries

• Need more well-managed medium and large, competitive firms but narrow elite resist business climate improvements

• Labor regulation may be an issue

• FLFP is low in some countries – norms and customs

• -Quality of education and job-readiness are issues

• Need productivity improvements in informal sector, which is absorbing most new entrants.

• Skilled youth need more opportunities -wage employment needs to expand in urban areas.

• Need faster transition to work among urban youth.

• Employability skills weak; incorporate these into post-primary education.

• Female empowerment for better opportunities for women.

The Country categorizations used in this typology are based upon the income status boundaries set by the World Bank.

Source: Fox and Upaasna, 2017

For high potential lower-middle income economies, the authors recommend a double-barreled approach focusing on demand-side policies/project to spur enterprise growth and productivity and support for youth to enter the informal sector (agricultural and non-agricultural sectors). Obstacles vary by sector, on agriculture sector access to land and markets often looms large, while in non-agriculture sectors access to finance, infrastructure, are more important (Fox and Upaasna, 2017). For the high-potential, low-income category, characterized by predominantly rural population, the authors recommend a mixed livelihood strategy in the informal sector in rural areas—a combination of household farms and firms—and provision of access to startup funds and possibly to land. In non-transforming economies the authors recommend an employment strategy that focuses on preparing and enabling youth to pursue successful, stable self-employment (Fox and Upaasna, 2017).

The authors based their recommendations on a review of impact evaluations of interventions classified as supply-side interventions which aim at improve the labor participants skills and assume wage employment opportunities exist, business climate interventions which aim to affect factors not related to the quality of labor force that increase profitability and firm expansion and assume an adequate supply

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 4 of labor exists, and finally they assess interventions aimed at increasing household employment start-ups and self-employment (Fox and Upaasna, 2017).

On the supply-side the authors assessed Technical and Vocational Training, Life Skills, and Work Experience or Mentoring intervention or combinations thereof, employment matching and counseling, and incentives for job search. Overall the results were not particularly encouraging, and benefits seem to diminish over time (Fox and Upaasna, 2017). There are relatively few impact evaluations of business climate interventions, however there is some evidence that public works, quality business development services and most consistently access to adequate quality and quantity electricity had positive impacts on job creation. In terms of household enterprises and self-employment, business skills plus life skills and mentorship and financing interventions showed positive results (Fox and Upaasna, 2017).

Overall the analysis suggests that the conditions underlying the shortage of wage employment relative to the size of the labor force in low- and lower-middle income countries are unlikely to end soon.

Economic transformation is a multi-generational process, however, for good reason development actors usually aim to creating opportunities for youth now (Fox and Upaasna, 2017). The paper argues that actors should seek to improve productivity and incomes in the informal economy, where most people, including youth, will work, at least over the short to medium term. These interventions include those focused on the household economy sector. Additionally, it highlights that improving the quality of education is a neglected strategic option, in part because the payoff is longer term; it will not help the youth entering the labor force in the next few years but it is absolutely essential for longer term inclusive growth (Fox and Upaasna, 2017).

HONDURAN ECONOMIC CONTEXT

This section presents relevant findings from the recent papers focused on Honduras, the Inter-American Development Bank (IDB)’s “A Territorial Approach to Development” study in 2019, the Transforming Market Systems’ Market System Diagnostic in 2018, and the Empleando Futuro Labor Market Study whose data is from July-September 2017.

Honduras, a lower-middle income country has had a volatile macroeconomic performance over the past 15 years. While inflation has decelerated since 2014 as a result of established monetary policy and low commodity prices, changing international commodity prices affect Honduras due to their unvaried export products. The country’s geographic location offers a strategic and competitive advantage in accessing different markets; however, its location also makes is vulnerable to negative impacts from climate change such as the extreme droughts, hurricanes, and extreme flooding. In addition, without inclusive growth taking place over the past years poverty still has a vast affect in Honduras.

IDB: A TERRITORIAL APPROACH TO DEVELOPMENT (2019)

In an effort to drive production Honduras has targeted public investment in a spontaneous manner, “generating a territorial economic model in which both public administration and the private sector have concentrated their main investment efforts in two key areas: the capital city and the San Pedro Sula region” (IDB, 2019). The result of this is a T-shape development pattern of consolidated territorial investment. This T-shape economic model created more challenges and disparities than benefits. For instance, furthering a non-inclusive economic model with systems that have perpetuated poverty and

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 5 inequality in many areas of the country (see Figure 1). Additionally, various reforms were implemented in 2014 including the “reduction of public sector hiring and freezing of public wages” (IDB, 2019).

Figure 1: T-shape historical Economic Model

Source: IDB, 2019

Both manufacturing and agriculture contribute substantially to the Honduran economy. The production of primary and low value-added manufactured goods is the main concentration of economic activity in the country. The primary source of labor income in Honduras comes from the agricultural sector, which covers about 30 percent of employment in the country. Also, Honduras is highly ranked with the best foreign market access, for example for its agro-industrial products, but a major barrier that presides for trade in Honduras is the high cost of exporting. Furthermore, Honduran productivity levels are one of the lowest in Latin America and prevent the improvement of wages in the two sectors previously addressed. This low productivity combined with the country’s vulnerability to external challenges (e.g.

climate change and international trade policy) intensifies poverty.

Regarding Honduran human capital, “a third of businesspeople see their workers’ educational shortcomings as the main barrier to doing business” (IDB, 2019). Inclusive growth is limited due to lack of access to education and low quality/relevance to the labor market. Although there has been an advancement in access to education there is still the capability for further growth considering that school attendance is 45 percent for the third cycle of basic education, whereas, it is 95 percent for the first and second cycle. “Moreover, the education system has no means to detect and develop the labor market’s human capital needs and lacks administrative and pedagogical management capacity” (IDB, 2019).

Creating an Inclusive Economy. In looking to reform Honduras’s T-shape historical economic model six types of interventions were identified that can help foster more inclusive economic growth in Honduras by promoting vertical mobility, social wellbeing and economic growth (IDB, 2019). These interventions have the potential to overcome the socioeconomic, production and environmental challenges the country currently faces. The six types of interventions would be applied to the eight newly developed growth poles (territorial areas throughout Honduras) that cover 51.9 percent of the

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 6 country’s population and were established through a geostatistical and territorial process. These growth poles will connect more underrepresented areas, therefore, capitalize more on the wealth and resources Honduras has to offer (see Figure 2). By design, through spillover effects the growth poles can produce about 350,000 direct jobs and 800,000 indirect jobs, contributing to inclusive and sustainable economic growth.

Figure 2: Proposed Change to T-Shape Territorial Economic Model

Source: IDB, 2019

The two types of intervention from the IDB proposed economic model that can benefit youth unemployment are: Product Development and Education and Training. Product development targets product expansion and diversification, specifically with the expansion of product crops and “promotion and linking of tourism products” (IDB, 2019). As well as the diversification of agricultural products. The education intervention would focus on “1) Training programs, including bilingual programs for Business Process Outsourcing/Information Technology Outsourcing (BPO/ITO) services and tourism, as well as training in different sectors (agricultural-technical, manufacturing, forest management and the Indigenous population); and 2) Improvements to educational facilities, where the focus is on improving existing facilities and, in exceptional cases, proposed building of new educational facilities.”( IDB, 2019). Public policy intervention must also be considered to strengthen the regulatory framework and public institutions.

TMS MARKET DIAGNOSTIC SURVEY (2018)

The TMS diagnostic informs the question, “What drives job creation in Honduras?”. The diagnostic is a survey of a statistically representative sample of enterprises across diverse market functions in the agroindustry and distribution, and the tourism sectors that, in aggregate, allows for industry‐wide observations.

Moreover, it “measures slow‐and‐fast‐paced variables collected annually on competitiveness (e.g. sales growth, export diversification, customer retention, pricing power); inclusion (e.g. marginalized ownership, quality of work, diverse hiring); and resilience (e.g. occurrence of shocks, degree of recovery, supply chain redundancy)” (("Diagnosing Honduran Market Systems," 2018). The diagnostic

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 7 also assessed key enterprise behaviors and market structures that relate to growth, specifically business norms, cooperation, diversity, connectivity and power (“power is concentration and exercise of influence over the business enabling environment established by political, social and market institutions” ("Diagnosing Honduran Market Systems," 2018).

Selected findings that relate to the ability of the economy to create large scale employment for youth include:

Job creation. “Enterprises reported the number of permanent, full‐time persons employment unchanged between 2017 and 2018” (("Diagnosing Honduran Market Systems," 2018). There was a positive change of 0.03 increase to permanent, full-time employees that Honduran enterprises reported for 2018. About 66.94 percent of enterprises reported no change at all, whereas, 16.12 percent and

16.94 percent reported an increase and a decrease in the number of permanent, full‐time employees, respectively (("Diagnosing Honduran Market Systems," 2018). This information demonstrates that within the market systems analyzed, full-time jobs are not being created. It is predicted that more jobs will be generated in Honduras though younger and small enterprises that have faster-growing sales.

Competitiveness and Resilience. From 2017 to 2018 there was a decrease in percentage sales as reported by the average enterprises. Furthermore, shocks and stressors in 2018 affected enterprises and were not able to fully recover. Therefore, it is clear that there is low resilience capacities and high levels of vulnerability for enterprises.

Inclusion. “Enterprise ownership and employment of persons from vulnerable groups are lower than the national representation of these groups in the working age population for the market system. Tourism is more inclusive of women and value‐added agriculture is more inclusive of youth” (("Diagnosing Honduran Market Systems," 2018). The following can increase inclusion of vulnerable groups (e.g. youth, women, and indigenous persons) and economic participation: increased enterprise ownership by vulnerable groups (aside from just employment), improved quality of employment, and increased interactions with government institutions

The diagnostic key enterprise behaviors and market structures previously discussed also relate to broad-based, long-term economic growth, that were predictive of inclusive economic growth that can be useful to USAID in selecting which businesses might be more worthwhile to work with.

EMPLEANDO FUTUROS, LABOR MARKET SURVEY (2017)

USAID through Empleando Futuros conducted a labor market study to identify opportunities and challenges in the labor market for youth from vulnerable areas. The study was conducted between July and September of 2017 and focused on the project’s five target municipalities: Distrito Central, San Pedro Sula, Choloma, Tela and La Ceiba and sought to address questions of employment tendencies and opportunities in key sectors of the Honduran economy for youth coming from vulnerable areas, and the main competencies and skills the market required and the corresponding gaps in young people’s skills.

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 8

The key sectors assessed (300 enterprises surveyed, 74 FGD with microentrepreneurs, 11 labor union interviews, as well as literature review) were BPO/ITO, agribusiness, tourism, intermediate manufacturing, and textiles (Empleandos Futuros, 2017).

Five Key findings include:

Among the 300 companies surveyed, the recruitment projections for 2018 were estimated at 3,290 hires for new positions and an estimate of 3,982 hires because of turnover (with a total of 7,272)1.

The skill gap in young women and men who try to enter the labor market seems to be related to the level of education, especially for the tourism, textile and BPO/ITO sector (over 50 percent of businesses report that skills/education level is a limiting factor to growth) (Empleandos Futuros, 2017). This survey highlighted BPO/ITO and textiles as the sectors with a greater probability of generating employment opportunities in the coming years and also indicated BPO/ITO and agribusiness are the sectors that require a greater number of people with university education. The majority of companies surveyed stated the need for employees with at least a secondary education. Nonetheless, the study also seems to indicate that if a youth has the interpersonal and intrapersonal skills that the company requires, she or he can be taught the technical skills once hired (especially for unskilled positions in agribusiness and intermediate manufacturing) and hiring largely depends on personal references from trustworthy people or contacts known to the company.

Section Summary. The current Honduran economic context is one of limited new job opportunities in the sectors studied, including agriculture and distribution/agro-industry, tourism, textiles, intermediate manufacturing BPO/ITO. Those sectors considered to have the most potential for growth are those who report that education level/skills are a constraint to growth, for example, BPO/ITO and textiles in the EF study. Targeting efforts towards value‐added agriculture/product expansion and diversification, a sector more inclusive of youth, is recommended by both TMS and IBD. Tourism is recommended as it has high potential and it is more inclusive of women and women-owned businesses are more inclusive of youth. The TMS study also recommends targeting new and smaller enterprises as those are most likely to create new jobs. Investment in education which will only have a longer-term impact is crucial to the transformation of the economy that will create more jobs.

The next part of this literature review provides an overview and analysis of three large-scale interventions that address youth employment challenges in low-income countries. The findings from these case studies are then considered within the Honduran economic context to provide overall conclusions and recommendations for successful strategies for large-scale interventions targeting youth employment in Honduras.

1 The study was completed from July-September 2017, before the elections and consequent unrest that seems to have affected overall competitiveness in 2018.

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LARGE-SCALE YOUTH EMPLOYMENT/LIVELIHOOD INTERVENTIONS

EVIDENCE FROM UGANDA

Background

Youth employment barriers are acutely felt in Uganda, a nation with the world’s second youngest population and an annual rate of at least 400,000 youth entering the market to compete for only 80,000 formal-sector job opportunities. Additionally, the economy remains reliant on the traditional sector of agriculture for economic growth and stability (Shadravan, 2018).

USAID/Uganda designed the Feed the Future Uganda Youth Leadership for Agriculture (YLA) activity to address barriers to youth entering the labor market in the agricultural sector. To program targets males and females ages 10 to 35 seeking agriculture-related jobs, aiming to increase wages, building entrepreneurial and leadership skills, and increase workforce readiness (“Feed the Future,” 2018).

Program Methodology The main focus of the activity is to increase youth learning and earning in the agricultural sector through the development of productive partnerships with the private sector. These partnerships bridge the gap between private sector (including firms looking to fill workforce needs and growing businesses in emerging and underserved markets) and youth looking to increase income and overcome barriers to accessing employment opportunities (“Feed the Future,” 2018).

Three important components of the activity include developing partnerships using a business-approach to development, leveraging partnerships for investments, and increasing skills development for youth (“Feed the Future,” 2018). YLA uses a business approach by ensuring the program can add value to partner needs, and utilize a Collaborate, Learn, and Adapt (CLA) strategy, which requires activity design for continuous evaluation, learning, and adaptive management for implementation improvement based on new and changing market information, as well as learning from improved business practices enterprise use in responses to those changes (Shadravan, 2018). The program uses a ‘design in reverse’ approach to structure activities as more responsive to partner needs. This strategy designs partnerships according to needs and intended outcomes of both parties in partnerships, rather than according to how agreements can fit into programmatic objectives. These partner-led collaborations help to identify barriers holding partners back from engaging youth at scale, as well ensures YLA adds value to partner needs to encourage continued engagement (“Feed the Future,” 2018).

In terms of leveraging investment, YLA considers and targets opportunities to co-design, co-finance, and share risks with private firms to facilitate business evolution and growth within the partnerships (“Feed the Future,” 2018). For example, YLA partnered with Ngetta Tropical Holdings (NTH) in April 2017 to strengthen supply chain management of 13 cooperatives with 6,000 youth oilseed sunflower growers.

After NTG invested in increasing to 24,000 growers and more than 40 cooperatives, YLA responded with a $64,000 value-added proposition leveraging $1.3M from NTH to expand the partnership to include a digital payment gateway called Mobipay (Shadravan, 2018). Use of this technology had twofold benefits in allowing NTH to trace youth farmer production and reducing risks and costs of payment processing through single-entry transactions.

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Key Findings Through the first three years of implementation, YLA reached 177,218 youth divided fairly evenly by gender, with about 51 percent female and 49 percent male (“Feed the Future,” 2018). A total of 89,027 youth received access to agricultural-economic opportunities through partnerships with 23 private sector actors, resulting in the creation of 25,621 new jobs and 5,602 full-time equivalent positions for youth (“Feed the Future,” 2018). These partnerships increased overall income for participants through improved agricultural production, and trained 94,928 youth in market-driven skills identified by firms.

Youth also benefited from increases in financial services and credit in the form of farm inputs and loans, with the program helping to provide $333,284 in FY2018 alone (“Feed the Future,” 2018).

Additionally, the YLA uses surveys to measure the impact of social indicators, such as literacy, marital status, and number of members in a household, on likelihood for engagement in activity. These surveys have allowed for YLA to estimate the activity influences an average of six additional members of a household per participating youth, and then applied to the 117,218 youth engaged to date at the end of year 3, that estimate indicates 1,063,208 individuals have been impacted both directly and indirectly from YLA interventions (“Feed the Future,” 2018).

Benefits and Implications for the Future This program has great significance as it has proven successful strategies for increasing youth employment at scale, and combines components of education and skills building with both practical application of work experience and private sector investment to decrease barriers with access to credit for youth in the agricultural sector. Despite the great success, however, another key finding to consider is that 44 percent of the 80,115 youth that completed surveys are illiterate, and when applied to the 99,999 out-of-school youth engaged in the activity through the first three years of implementation (56 percent of total participants), this figure could point to particular youth employment challenges with illiteracy preventing the maintenance of accurate records necessary for running productive enterprises (“Feed the Future,” 2018). These percentage of out-of-school youth fell above that project life average at 72 percent for FY2018, Considering that only 32 percent of 50,048 survey respondents had secondary education, and 65 percent had primary (“Feed the Future,” 2018), supplementing the strategies of this activity with greater quality and access to education may have significance for future programs aiming to increase youth employment.

The key lessons learned by the CLA experience with YLA are to tap into youth entrepreneurship and teach market adaptation, embrace opportunities for innovation provided by private partnerships, maintain open discussions for collaborative learning, and ensure partnerships make practical business sense for economic return so that limited resources are focused on scalable efforts.

Despite the positive implications of the program on youth employment development, there is a cost to the success of YLA. For best outcomes, time and resources are needed to train staff on specific skills like efficient deal making, performance management, and mentorship (Shadravan, 2018)

EVIDENCE FROM LATIN AMERICA

Latin America’s widely used approach to labor training programs shifted dramatically in 1990s from state-led, supply-driven model to a to demand-driven model which was still state-financed, but market-driven (Jaramillo, 2013). This shift was significant, as it signaled adaptation to changing market demands

Monitoring & Evaluation Support for Collaborative Learning and Adapting (MESCLA) 11 that still prove a useful concept to consider presently. As economic frameworks across Latin American countries transformed to an increase in smaller firms and informal sector jobs, state-led industrialization proved unsuitable to respond to the needs of an economy where the labor supply kept expanding, but demands had shifted to microenterprise and self-employment opportunities (Jaramillo, 2013).

The key focus of the demand-driven approach was to address structural unemployment, or the mismatch between supply of skilled workers and labor demand in the form of jobs. Interventions following this model provided subsidies to firms as users on the demand side, rather than institutions as suppliers, creating demand-driven training programs (Jaramillo, 2013). These programs were designed to respond to the needs of productive sectors, and strengthen collaboration between private enterprises and training centers, and reduce the cost of training.

A key characteristic to of these models involved the use of market mechanisms for resources allocation.

Training institutions now competed as private actors for state resources to provide training, which increased quality, cost-efficiency, and relevance of training (Jaramillo, 2013). The demand-driven models used collaboration with private and public sector partners to identify labor force demands and form programs with a combination of school-based training and on-the-job practical work experience. These programs aimed at increasing employment rates, quality of employment, and wages. Two of these programs, Joventud y Empleo (JE) in the Dominican Republic, and Projoven in Peru, are detailed in case studies of key findings from evaluations below.

DOMINICAN REPUBLIC: JUVENTUD Y EMPLEO

Background For this study, a team of economic and labor market researchers from the Inter-American Development Bank designed an impact evaluation for a revitalized version of the Dominican Republic’s youth training program Juventud y Empleo (JE) to measure the effect of training programs that offer real-life job experience on improving youth WFD.

The JE program is a Dominican active labor market program (ALMP) aimed to improve employment entry opportunities for youth between the ages of 16 and 29 who did not complete secondary education. JE provides 255-hour job training courses for a wide spectrum of positions across sectors, ranging from administrative assistant to auto mechanic (Ibarraran et al., 2014). These trainings, operated by private training institutions known as Centros de Operadores de Sistema (COS), include 75 hours of basic life skills training and 150 hours of technical or vocational training. Following the training, participants complete an internship at a private sector firm that has coordinated with the COS from the start to develop a training program tailored to the firm’s labor demand (Ibarraran et al., 2014).

The program design operates from the hypothesis that basic skills strengthen self-esteem and work habits, and vocational training addresses technical training needs of local employers. The innovative emphasis on socio-emotional skills in a systemized manner is the result of more recent evidence from econometric and qualitative analyses indicating the importance of non-cognitive skills on success in the labor market, as research has found employers value traits linked to high-productivity workers, and some value job readiness over technical training (Ibarraran et al., 2014).

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Study Methodology The research team based their evaluation around the program’s hypothesis that assuming an economy is in the progress of creating economic opportunities on the demand side, increasing basic technical skills and human capital for targeted youth results in better traditional labor market outcomes, as well as outcomes related to youth behaviors, expectations, and socio-emotional skills (Ibarraran et al., 2014).

For each program course evaluated, the COS provided data for 35 eligible and interested youths within the cohort of applicants, and then a program coordinating unit randomly selected 20 individuals for the program and 15 to the control group. Baseline data was collected at the registration stage for each COS, and the research team collected follow-up data from a household survey conducted from November 2010 through February 2011 (18-24 months post-program completion) on a random sample of 5,000 people from the cohort of 10,309 initially registered. This representative sample included 3,250 from treatment group and 1,750 from control group (Ibarraran et al., 2014).

Key Findings The researchers grouped findings according to three categories: traditional labor outcomes; outcomes related to youth behavior, perceptions, and expectations; and socio-emotional life skills. The evaluation also estimated program impacts according to gender, age, education level, region, and the course taken.

For the labor market outcomes, the data showed mixed results. There was no overall impact from the program on employment rate, however it did positively affect job formality for men by 17 percent, which the research team measured as better qualities in job like existence of a written contract or employer provided benefits such as health insurance (Ibarraran et al., 2014). In terms of measurements for wage increase, the results indicate that the program has no impact on monthly earnings for the sample population as a whole, however with monthly earnings results conditional being employed, there is statistical significance for those assigned to the treatment group with seven percent higher monthly wages for both men and women employed (Ibarraran et al., 2014).

It is also interesting to note the relationship between duration in unemployment and program participation for males, as those in the treatment group have longer periods of unemployment. This finding may reflect participants in the program searching for better quality jobs or having higher reservation wages to fall back on in times of unemployment resulting from higher wage jobs prior to unemployment status (Ibarraran et al., 2014).

For the second category of analysis, the program produced positive impacts on youth perceptions and expectations for the future. On average, those assigned to the treatment group, especially females, reported higher expectations for the future quality of life related to living in a better environment, becoming an entrepreneur, and increasing overall wealth (Ibarraran et al., 2014).

One key factor related to higher rate of positive perceptions and expectations that the training had an impact on was the reduction in pregnancy rate. Evidence across LAC suggests that teenage pregnancy negatively impacts socioeconomic variables by limiting schooling and lowering average income. The data from the evaluation found that female participants ages 16 – 19 were five percent less likely to be pregnant at the time of the follow-up survey, which resulted in 45 percent overall drop in pregnancy rate for the treatment group (Ibarraran et al., 2014).

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For the final category for analysis, the evaluation team found that the program had a statistically significant and positive impact on non-cognitive skills. The team used a Social and Personal Competencies Scale, known as Escala de Competencias Personales y Sociales (CPS) developed in July 2010 by a team of experts to evaluate the impact of training on six basic competencies, which included:

leadership, behavior in situations of conflict, self-esteem, abilities to relate with others, order, and empathy and communication (Ibarraran et al., 2014). They also used other standard methodologies for measuring personality traits and socio-emotional competence, however the further analyses showed no correlation between some of the measures and the probability of employment.

Cost Benefit and Future Implications The average cost of the program reached about $700 per participant, $200 which was used as stipends for transportation and meals to participants. Assuming no opportunity cost during training and if impacts on income stay at 8 percent, the cost of implementation would be recovered in about 50 months, as the average income of the control group was $130 (Ibarraran et al., 2014). The cost impact of the program must also be considered in terms of the program’s effect on teen pregnancy. The program’s reduction of pregnancy in one in every twenty females ranges in cost societal cost savings between $10,000 to $66,000 (Ibarraran et al., 2014).

Ultimately, the overall program findings do not show huge increases in measured outcomes, but in the long-run there are positive impacts, such as higher quality of employment for males, higher wages for employed individuals, increase in positive perspectives for the future, and increase in non-cognitive skill abilities. These findings suggest the need for further research and evaluation for optimal use of this type of intervention (Ibarraran et al., 2014).

While the program design incorporated lessons learned from the previous evaluation, a few limitations exist for the present evaluation. For the methodology of selection, there is potential selection bias due to a flaw in compliance to randomization protocol (Ibarraran et al., 2014). If those randomly selected for the treatment group did not consistently show up, individuals assigned to the control group were chosen to then participate. For future evaluation, it would be helpful to have a third waitlist group to pull from in order to keep the control group completely separate.

Another limitation to the findings is the fact that it is hard to interpret the practical significance of results for the non-cognitive skills, as evidence is very limited. Further research is needed on the relationship between non-cognitive skills and labor market performance, as well as on how to best measure these skills. Currently, empirical evidence is limited to mostly in the education sector.

PERU: PROJOVEN

Background As part of the international organization Practical Action Consulting’s Evidence and Lessons from Latin America (ELLA Project)2, researchers have conducted two case studies on Peru’s Projoven program to gauge the impact of the intervention on youth employment.

2Evidence and Lessons Learned from Latin America (ELLA) is a project run by Practical Action Consulting that reviews and compares evidence across Latin American countries’ experiences with policies and practices on issues

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At the start of the 1990s, Peru’s economy suffered from stagnation and hyperinflation along with stressors from internal violence and conflict. The government attempted to gain economic stability through structural reform policies, such as cutting tariffs to open the economy and removing price controls (Practical Action Consulting, 2013). By 1995, the reforms proved successful for economic growth and recovering access to credit markets abroad, however the rate of unemployment and underemployment remained high and unequally distributed across the population. Youth existed as one of the most disadvantaged groups in the labor market with double the unemployment rate as adults, despite people ages 15 to 24 comprising 30 percent of the total population and more than 24 percent of the labor force (Practical Action Consulting, 2013).

In response to criticism of both the educational and public training systems abilities to prepare youth for a changing labor market, the Ministry of Labour conducted a nationwide survey of 1,112 graduates from 123 urban Technical Institutes, or Institutos Superiores Tecnologicos (IST) in 1996 (Practical Action Consulting, 2013). The study proved the wide speculation had validity, as it found large variability in institutional quality within the post-secondary education system and the training programs. In one comparison, graduates from a high-quality IST in Lima earned 46 percent more than graduates from lower quality ISTs, while other cities outside the capital still showed a different of 17 percent between high and low-quality institutes. Other studies confirmed the related trend that youth with higher socioeconomic status attended better quality institutions, contributing to the divide in economic prosperity across economic classes within the population (Practical Action Consulting, 2013).

Projoven was thus designed to address both the structural unemployment challenges of mismatch between supply and demand of skilled labor with greater collaboration between training programs and the productive sector, as well as to specifically target disadvantaged youth and women facing greater barriers to entry for quality jobs in the labor force. The program funded vocational training for disadvantaged youth ages 16 to 24 that included: a three-month learning phase with training-institution-led courses ranging from clothing manufacturing, to IT support, to construction and sales; and a consequent three-month internship phase for participants to gain on-the-job experience at a private firm.