Latin American Youth in Transition: A Policy Paper on Youth Unemployment in Latin America and the Caribbean

The school-to-work transition provides the central context in understanding youth unemployment in LatinAmerica. Youth unemployment is not a transitory state to employment, rather it is a very lengthy process where youth move from unemployment, schooling, unpaid unemployment, and low-wage unskilled employment—all of which have low opportunity costs. The youth transition process, including that of youth unemployment, largely reflects that of larger labor market trends —the large informality of the labor market, the growing skills-wage gap between workers in the formal-informal sector; and falling incomes of informal workers, moving precariously toward the income poverty line. This policy analysis looks at the economic relationships between sectors: where formal and informal sectors are intimately linked in terms of youth and adult workers, where skilled workers and their shortages exist throughout all sectors of the economy, and where downsizing and technical change shed large numbers of unskilled labor to the informal sector. Youth unemployment lives in the shadows of the broader labor market demand and wage dynamics, whereby youth unemployment is simply a fractured reflection of larger labor market issues. Moreover, the impact of labor market policies and programs for youth is largely tied to broader labor market dynamics.