Youth Out of School and Out of Work in Latin America

This paper examines the phenomena of high rates of youth that are out of school and out of work in Latin America. The analysis pursues a dynamic approach by constructing a pseudo-panel from 234 household surveys for 18 countries in the region that allow tracing the life cycle trajectories of different cohorts over time. The trajectories are associated with a series of variables characterizing the household, community, and macro environment in which schooling and labor market participation decisions take place. The most important result obtained is that the persistently high rates of being out of school and out of work among males are strongly associated with greater labor force participation by women, which can be generating a “crowding out” effect against men, given slow job creation rates across the region. The analysis also explores the possibility of scarring effects, and finds that higher shares of out of school and out of work youth at ages 15–20 years are associated with lower wages for the same cohorts later in life, at ages 35–40 years, for males and females. As for employment prospects, the analysis finds scarring effects only for females, with greater out of school and out of work youth shares being related to lower proportions of women in the labor market later in the life cycle.