Amidst the risk of losing the demographic bonus and the opportunity of development  

By Martín Padulla for staffingamericalatina

Thanks to an invitation from Adecco and GAN4Youth, last week I had the chance to participate in top level panel discussions on youth employment, developed in Buenos Aires, Argentina and Santiago, Chile.

In Argentina, my presentation was focused on the phenomenon of youth labour informality; while in Chile, the focus was set on the urge of inclusion. In both cases, the relevance of the subject was linked to the risk we run of losing the demographic bonus.

The demographic bonus is a phenomenon that occurs within the process of demographic transition in which the working age population is larger than the non-working population (children and elderly adults). Therefore, the economy’s productive potential is greater.

Argentina is in that phase. The country is going through a period in which there are more inhabitants that belong to the economically active population. The scenario is the following: not many children, not many elderly adults, and lots of people working. However, the demographic bonus will be over by 2035. For that reason, urgent changes are needed.

In Chile, estimations indicate that the so called magical period will be over by 2025. That is the year in which the depending population will once again outnumber the working age population. The difference is that this time it will not be due to the amount of children, but because of the amount of elderly adults. This pressing matter demands more efficiency in the investments made in education, training and employment.

If countries do not make the most of the “demographic bonus” or “demographic window of opportunity”, achieving development in the aging phase that follows surely becomes a very difficult quest.

Today, Latin America has the largest share of its population in an economically active age -15 to 59 years old-, capable of working, saving and investing.

The chance of growing during the demographic window of opportunity is possible thanks to the coincidence of two positive effects: the first is that, as there are more working age people, the GDP can grow faster; the second is that during this period there are more “primary savers”, people who are old enough to save a lot. With greater chances of saving, comes a greater capacity of accumulation.

Now then, what happens with public policies? In the attempt of summarizing this topic, the following can be said: if saving incentives are distorted, we move away from the goal; if consumption is encouraged, we will become old without becoming wealthy; if the social security and the healthcare systems are deficient, there will be problems in the aging phase, and we will be leaving liabilities to the future generations; if legal security is weak, there will be no investments. The conclusion could be the following: if we cannot properly picture the development opportunity we have, not only will we lose, but we will also leave a major liability to our children.

The G20 has three very different groups: the old countries, where the demographic window has already closed down (England, Italy, France, Germany and Japan); the countries where the window will be closing during this decade (Canada, Australia, United States, Russia and Korea); and the countries that still have a long period of opportunity ahead (China, Argentina, Brazil, Mexico, Indonesia, Turkey, Saudi Arabia, India and South Africa). This last group has the major growth potential and that is why its investment projects are the most profitable ones. The challenge these countries face is becoming wealthy before getting old. But, in order to achieve that, creating human capital is a must.

An important fact to consider is the change of paradigm. For many year talent has pursue capital, either to get a job or to develop a start-up. Today, capital pursues top talent so that it implement its’ investment projects. The jobs of the future will be where the best talent to develop them is.

If during our youth we do not prepare properly, we will not be able to face the challenge of aging societies in the future. Meanwhile, we will be witnessing scenarios of informality, exclusion and marginality.

In certain countries, such as Cuba and Chile, the dependence relationship is growing. Other countries, such as Bolivia and Guatemala, have more time left to seize the demographic bonus.

Venezuela has already wasted its opportunity. According to a survey developed by UNICEF, the first cause of death among teenagers aged 10 to 19 years old is murder. According to COFAVIC, 68% of the murders committed in this country impact people under 25 years old.

Researcher Silvia Gorgiuli, thinks that, in the case of Mexico, there were no adequate trainings for work, nor integration to the labour world, nor labour conditions that promoted savings. Another factor to consider in Mexico is the phenomenon of migration. On a global level, 7 out of 10 migrants are among 15 and 24 years old. The United States poses a great temptation for young qualified Mexicans. However, Mexico still has a chance to register an interesting economic growth due to the gender bonus, which implies increasing women’s participation in the labour market.  The country has a low female participation rate when compared to Argentina or Uruguay The gender bonus depends on the way in which women are integrated to the labour market. Policies that promote greater integration are needed.

The numbers show that the educational system in the region faces the challenge of retaining young people, particularly women. According to data from ECLAC, the percentage of teenage mothers who live in households that belong to the poorest quintile is five times higher than the percentage of those who live in the richest quintile.

In Chile, when we disaggregate many of the excellent general rates, we find there are very discouraging numbers in the first two quintiles. We are facing quite a challenge in terms of inclusion and must act really quickly.

Evidence also attests that technical education has shown better results than generalist education, as it prepares young people in a better way to get a job. One of the reasons is that it includes professional training in the education process. We need to extend professional training; secondary level education must be reshaped until the path leads to professional trainings, apprentices’ systems or apprenticeships. We must arbitrate the means so that our youth can learn to work. We must make our youngsters stronger in both, technical and socioemotional skills.

GAN4Youth can be a great tool to strengthen an apprenticeships’ network that is orientated to the market, a network that enables sharing the best global practices to generate a quality management system.

During the demographic bonus, the active population must also improve its productivity. This goal can be achieved by investing in education and promoting decent work. When we analyse the paths of young people towards decent work, we can see that very few make it there, and we come across truly embarrassing informal employment rates. This clearly is precarious work. There are effective tools to reverse this situation.

We have suggested three lines of action that we consider must be implemented as soon as possible:

• A solid network of apprenticeships that fits present and future productive needs must be established. A solid network that shares good global practices and reduces the internal inequities of the formal education system. GAN4Youth can be a key player to achieve this goal.
• Public employment services are an effective tool that needs to reach greater levels of efficiency. The articulation model with private employment services, which has been very successful in other countries, could have a positive impact on pertinence and on more and better labour intermediation. Countries in the region should ratify ILO Convention No. 181 on private employment agencies, which promotes the collaboration between both employment services, and set a common agenda.
• It is important that every social actor involved in education and labour is committed to creating a more modern, dynamic and inclusive labour market.

We still have a great opportunity. We do not have much time left…

About Martin Padulla

Founder and Managing Director of staffingamericalatina. Martin Padulla is Sociologist (USAL), MBA (UCA) and labour markets expert. He published “Flexible Work in South America” and “Regulatory framework for private employment agencies in Latin America” two books about the new realities of work in Latin America.

Follow Martín Padulla on Twitter: @MartinPadulla

mpadulla@staffingamericalatina.com

About staffingamericalatina

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