Labor market insertion of young adults in chile

Labor Market Insertion of Young Adults in Chile

Marina Bassi+

Inter American Development Bank

Sebastian Galiani*

Washington University in St. Louis

Abstract

This study analyzes the labor market dynamics of youth in Chile. We review relevant issues -not previously assessed in the literature for a developing country-, which are mainly: i) the factors affecting the educationchoices of youngsters, including parental background and quality of education; ii) the transition from school-to-work; iii), the labor market insertion of youngsters and their work trajectories, and, iv) the incidence of cognitive and non-cognitive skills in wages. We use a longitudinal dataset constructed through the national Employment Dynamics of Young People Survey held in Chile by theInter-American Development Bank (2009).

+Marina Bassi, Inter Amercian Development Bank, email: marinab@iadb.org. Sebastian Galiani, Washington University in St. Louis, email: galiani@wustl.edu. We acknowledge the excellent research assistance of Laura Jaitman.

Introduction

There is a unanimous view in the labor literature that youth constitutes a vulnerable segment of the society. When comparingthe youth labor market outcomes to those of the adults’, we can see that youth is a period of higher unemployment rates, lesser participation in the labor force, lower wages and grater job instability. These results apply both for developed and developing countries, as the statistics on youth provided by diverse organizations and institutions’ reports (OECD 2007, UN 2007 and ILO 2008).Furthermore, youth insertion in the labor market is a crucial issue worldwide for the society as a whole because of the consequences that the initial job search and working period have in their income trajectories in adulthood and, as a result, in future economic development. In addition to these, youth are the most vulnerable and affected by the business cycle downturns; which makes mandatory a thoroughanalysis of their situation in volatile countries, such as those in the Latin American region.

Although youth labor market constitutes a relevant issue in the public policy agenda, and LAC is the region of the developing world where the most amount of programs targeting at youth have been held[1], our knowledge about the dynamics of the labor market during the transition fromschool-to-work is really scarce. Most of the studies focus on developed countries, mainly because of the availability of longitudinal data that enables researchers to track individuals through time (for example, many use the National Longitudinal Survey of Youth for US, like Heckman et al, 2008). As regards Latin America, Bassi and Galiani (2009) provide a comprehensive descriptive study of countries in theregion, which sheds light on important issues, such as the evolution of the youth labor market in the last three decades, the situation of the region in the context of the developing world, or the impacts of business cycle downturn on youth. However, at the best of our knowledge, we could not find a rigorous assessment of the labor market dynamics, based on representative samples.Motivated by the relevance of youth as drivers of economic development, in this study we try to fill that gap, analyzing the labor market dynamics for youth in Chile. With this study, we pursue to review relevant issues -not previously assessed in the literature for a developing country-, which are mainly: i) the factors affecting the education choices of youngsters, including parental background andquality of education; ii) the transition from school-to-work; iii), the labor market insertion of youngsters and their work trajectories, and, iv) the incidence of cognitive and non-cognitive skills in wages.

For this purpose, we use a longitudinal dataset constructed through the Employment Dynamics of Young People Survey (EDYPS) held in Chile by the Inter-American Development Bank (2009)....