Idle Youth in Latin America: A Persistent Problem in a Decade of Prosperity

INTRODUCTION

The widely mentioned and studied demographic “window of opportunity” seems to be reaping some of its benefits during the first years of the 21st century in Latin America. As predicted, since the 1990s and in some countries a decade earlier a historic sharp decline in economic dependency rates started with the acceleration in the growth rate of the 15 to 24-year-olds, as compared to those under 15 and the over 65. This means that the share of the working age population (and the potential of increasing productivity) is close to maximum levels. Furthermore, the patterns imply that the situation will prevail for about 20 years until the 65 and over age group begins to grow faster, which will bring new challenges to the region.

After the “window” opened, the 2000s have witnessed the highest real gross domestic product growth rates since the 1970s, reaching rates of over 4 percent on average in 2008. At the same time, there have been important reductions in poverty from almost 40 percent in the year 2000 to 30 percent in 2009 As predicted, since the 1990s and in some countries a decade earlier a historic sharp decline in economic dependency rates started with the acceleration in the growth rate of the 15 to 24-year-olds, as compared to those under 15 and the over 65. This means that the share of the working age population (and the potential of increasing productivity) is close to maximum levels. Furthermore, the patterns imply that the situation will prevail for about 20 years until the 65 and over age group begins to grow faster, which will bring new challenges to the region.

However, this more prosperous environment has not been free of problems. One widely recognized challenge is that if the region is not able to invest in generating enough educational and employment opportunities for the fast growing 15 to 24 age group, the “window” will not be fully capitalized and the possibilities of producing enough resources to support those over 65 in the future will be considerably hindered.

This is especially sensitive for those in the 15 to 24 age range who are neither in school nor in the labor market. If this situation is not addressed soon, Latin America will not be able to seize the demographic opportunity, which will have devastating development consequences. This group of individuals, which we refer to as “idle youth” for the purposes of this paper, is subject to increasing vulnerability and lack of opportunities, and can become a source of potential risks for society at large in areas such as crime, addiction and insecurity.

Within this group, those between 15 and 18 years of age are particularly worrisome. At this stage of the life cycle, as compared with those 19 to 24, there is no ambiguity that being in the formal education system is the most desirable and socially productive activity. In most countries, those 18 and under are still in school age and supposed to be attending high school or its equivalent; furthermore, those under the age of 18 have not reached the legal working age and their physical, mental and emotional development process is still underway. In this sense, being in school in a protected and constructive environment is determinant for developing individual personality and a capacity for decision-making, constructing behavioral patterns, accumulating human capital, acquiring capabilities for social interaction, conforming one´s personal identity and relationship toward peers, and developing civic values, among others.6 These are also critical years for integration into the community, for acquiring social values, and for building trust in institutions and the rule of law. Without the adequate protection, support and integration mechanisms, idle youth are totally exposed to situations that may affect their future development prospects negatively and threaten others in their societies.

This paper aims at improving our understanding of idle youth in Latin America, with special attention to those in the 15 to 18 age range, in order to identify adequate policies for supporting them and reintegrating them into society. According to our calculations with the most recent data available, 18.5 percent of Latin American youth in this age group (9.4 million individuals) are currently idle. During the last 20 years, their share of the population has been reduced by less than 6 percentage points but the absolute number of individuals belonging to it has remained practically unchanged due to demographic growth.

Apart from characterizing the idle youth, we present an analysis of the patterns of their evolution in 18 countries across the region, identifying the set of micro and aggregate variables that are correlated with their dynamics. We explore the relationship with the household’s socioeconomic characteristics (including income) and with the structure and evolution of labor markets. We identify the links with the schooling system and school dropout patterns; we verify whether the group responds to changes in the environment, including overall GDP growth and economic shocks. We also explore the possibility that the idle youth are simply a demographic transient phenomenon. We perform our analysis for the 15 to 18 and 19 to 24 age groups separately to capture the possibility that school dropouts and labor market participation decisions are of a different nature in each one of the subgroups.

In order to perform our analysis, we process micro data in 215 household surveys for 18 Latin American countries spanning from the early 1980s to 2010 and build a panel of 215 observations on the proportion of idle youth that we later relate to aggregate variables for the same countries and years. The countries included represent 96 percent of the total population in the region. The characterization of the phenomenon is of interest in itself as it leaves little doubt of the urgency of institutionalizing policies for supporting and re-engaging idle youth into society. Ignoring the issue is likely to generate future risks and the need for more costly and elaborate public interventions in the future.

The paper is organized in six sections. Section 1 presents the data as well as a characterization of idle youth across Latin America. We identify the main characteristics and recent changing pattern over two decades, which offers a clear image of the threats of not addressing the issue in the following years. Section 2 sets out our main hypothesis on the factors associated with the affluence and persistence of idle youth during the past decades. Section 3 explores the importance of micro factors by estimating the probability of being in the idle youth group and a series of household characteristics. We explore the differences across countries as well as variations in the probabilities over time. Section 4 presents our econometric analysis using the panel constructed from household surveys, which is lined to data on aggregate indicators from various sources. Section 5 engages in a discussion of the policy alternatives for addressing the problem of persistent idle youth in the region based on our results. Section 6 discusses our conclusions.