Youth underemployment: a major bottleneck for poverty reduction in Nicaragua
Poverty for youth in Nicaragua follows similar trends to other low-income countries in Latin America and the Caribbean: Despite having higher levels of education than previous generations, they face higher levels of unemployment and receive lower wages. Moreover, the development of skills, access to opportunities, and exposure to risks among young people are highly segmented by income level, and by sex, race/ethnicity, and rural/urban residence.
According to official data, between 2009 and 2014 general poverty in Nicaragua dropped from 42.5 percent to 29.6 percent; in the same period extreme poverty dropped from 14.6 to 8.3 percent. According to official data disaggregated by age, the demographic group with the highest levels of poverty are individuals ages 0 to 17. In addition, 10.0% of boys and girls ages 0 to 5 and 10.7% of girls ages 6 to 12 years live in extreme poverty. For adolescents ages 13 to 17, those in extreme poverty are 9.6%. As the range of ages rises, we observe a reduction in poverty levels. For example, the cohort with ages ranging from 56 to 65 is the population category with the lowest level of extreme poverty (5%).
The cycle of poverty states the following: high levels of poverty at an early age place an individual in a condition of social and economic exclusion, which at the same time limits her or his capacity to obtain a quality job. Low-income jobs result in limited capacity to obtain human capital and productive assets, which are also defined as “living assets”. Having no regular source of income inhibits the capacity of individuals access basic needs such as food, clothing, shelter, healthcare and education. For a young person, the lack of skills to secure basic living assets for themselves or for their families often has disastrous long-term consequences on their human development. Providing youth with the required human capabilities to access living assets in a self-sustainable way is one of the most powerful strategies for breaking the cycle of poverty.
According to a field-research conducted by IEEPP, 31.1% of children ages 10 to 18 are working. Among child workers, 36.9% are rural children and 26.2% are children from urban areas. Child labor is directly associated with extreme levels of poverty, and underemployment is a major bottleneck for youth development, a fact recognized by youth and youth development experts.
Based on the analysis above, it is evident that productive employment at the appropriate age is the key to breaking the cycle of poverty and allow youth to acquire not only human capital and living assets, but also an active participation in education, sports, extracurricular activities, and civic life. Studies have shown that concentrated poverty and child labor have harsh impacts on young people. It limits the level of outdoor activity; it restricts young peoples’ access to local facilities and sports; it is strongly linked to poor health, disability, inactivity and weight problems. Low incomes also restrict the amount of participation that children and young people experience, including most sports and community activities.
Even when the official unemployment rate as a percentage of total labor force is as low as 5.3%, approximately 48.3% of employed individuals in 2013 (the last year for which official data is available) were underemployed. As will be further discussed, according to IEEPP’s estimates underemployment for youth ages 18 to 29 is much higher than officially acknowledged. Over 60% of youth interviewed who have some type of work admitted working in low paying jobs or are workers who are highly skilled—i.e. hold university degrees or higher—but are working in low skill jobs. Of those underemployed, 43% are men and 57% are women.
Youth poverty and unemployment are directly related and should be analyzed jointly. Unfortunately, since 2012 the Government of Nicaragua has not presented disaggregated data on youth employment. The last comprehensive analysis of youth unemployment using official data was prepared by the UNDP in 2009 and at the time it revealed the following:
The high rates of informal labor are also a major problem for positive youth development. These day-to-day jobs do not offer upward mobility to an increasing number of young people who enter the workforce. Based on a recent regional assessment conducted by IEEPP in December 2016, poverty and unemployment are particularly widespread among vulnerable sectors such as rural populations, indigenous people, afro-descendant communities, and youth. The report “Generaciones para la Paz: Juventudes, diálogos y propuestas para Centroamérica" recently published by IEEPP found that 7 out of 10 young men and women who receive some type of income in Nicaragua are in the informal labor market as of 2016. Youth who work under “informal labor market conditions” do not have access to social security, technical or vocational training, and/or social protection under current labor laws.
The online survey conducted by IEEPP in the context of this study shows even more troubling data. Over 60% of youth with university degrees—or in the process of obtaining an undergraduate degree—received monthly net salaries below $300. Only 16.2% admitted receiving net salaries above $500. This data—although it does not represent a comprehensive sample of Nicaraguan youth—indicates that underemployment is more severe amongst the general population in working age groups, given that university students were overrepresented in this sample (62% of respondents have university degrees or are in the process of completing an undergraduate education).
Of the percentage of young people currently active in the labor system:
● 21.1% receive an average monthly remuneration of $ 133.
● 20.6% receive an average monthly salary of $ 200.
● 23.5% receive an average monthly salary of $ 300.
● 16.2% receive an average monthly salary of $ 560.
● 11.8% average monthly salary of $ 850.
● 3.9% receive an average monthly salary of $ 1160.
● 2.9% receive a salary above $ 1,500.
The findings from the online survey are compatible with estimates from Acevedo (2015) and FUNIDES (2014), which found that once employed, the probability of losing a job within the next two years is 50%. For unemployed youth, the average time to find a new job is over 21 months. Acevedo also estimates that the average salary of an employed person ages 15 to 29, is less than $200 per month.
An important finding from the online survey is that as your educational level rises, the prevalence of unemployment is much higher. From our sample of 830 people, youth with graduate degrees (112 people) are four times (14%) more likely to be unemployed than youth with lower educational backgrounds (3.5%).
These findings are compatible with results from other focus groups conducted by IEEPP in 2016:
● Those with more advanced degrees expressed that the waiting time to secure a job is between 4 to 6 months, which is much higher than waiting times between jobs for the general population.
● There is a strong positive correlation between youth with higher levels of education and the propensity to migrate. The tendency to migrate is much higher among those who are unemployed or underemployed.
● Youth who have a high command of English as a second language had considerably lower probabilities of unemployment. In fact, from the focus groups conducted in the Pacific, all bilingual participants admitted being employed.
● During various consultations—including a two day “youth camp” which was not part of the original research plan—employment consistently ranked among the top three most significant problems identified by youth.
● “Promoting entrepreneurship” consistently ranked as one of the most popular policies or youth development programs suggested by youth.
● Youth who had a positive experience with their first job, tended to have much more stable jobs as well as higher salaries.
● Youth who had considerable experience as volunteers during early youth were less likely to be currently unemployed.
Findings on youth underemployment from Acevedo (2016) and the National Youth Platform (2017) are also compatible with our findings. For example, "between October and December of 2012, a total of 1,237,297 people between 15 and 29 years old were occupied" in the following categories: employee, family worker without pay, self-employed, day laborer, employer, and non-family worker without pay.
There is a close correlation between years of schooling and level of employment qualification. In Nicaragua, people with at least 6 years of education tend to access average qualification jobs and elementary occupations which are characterized by low wages. Those with 7 to 9 years of schooling have a much higher opportunity to access high-grade jobs. The population segment with 10 to 11 years of study are employed in jobs and are considered professionals and technicians. Those with more than 11 years of schooling are mainly possess managerial jobs.
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This is a fragment of the study Youth Analysis for Strategic Planning, written by Maradiaga et. al in 2017.
According to official data, between 2009 and 2014 general poverty in Nicaragua dropped from 42.5 percent to 29.6 percent; in the same period extreme poverty dropped from 14.6 to 8.3 percent. According to official data disaggregated by age, the demographic group with the highest levels of poverty are individuals ages 0 to 17. In addition, 10.0% of boys and girls ages 0 to 5 and 10.7% of girls ages 6 to 12 years live in extreme poverty. For adolescents ages 13 to 17, those in extreme poverty are 9.6%. As the range of ages rises, we observe a reduction in poverty levels. For example, the cohort with ages ranging from 56 to 65 is the population category with the lowest level of extreme poverty (5%).
The cycle of poverty states the following: high levels of poverty at an early age place an individual in a condition of social and economic exclusion, which at the same time limits her or his capacity to obtain a quality job. Low-income jobs result in limited capacity to obtain human capital and productive assets, which are also defined as “living assets”. Having no regular source of income inhibits the capacity of individuals access basic needs such as food, clothing, shelter, healthcare and education. For a young person, the lack of skills to secure basic living assets for themselves or for their families often has disastrous long-term consequences on their human development. Providing youth with the required human capabilities to access living assets in a self-sustainable way is one of the most powerful strategies for breaking the cycle of poverty.
According to a field-research conducted by IEEPP, 31.1% of children ages 10 to 18 are working. Among child workers, 36.9% are rural children and 26.2% are children from urban areas. Child labor is directly associated with extreme levels of poverty, and underemployment is a major bottleneck for youth development, a fact recognized by youth and youth development experts.
Based on the analysis above, it is evident that productive employment at the appropriate age is the key to breaking the cycle of poverty and allow youth to acquire not only human capital and living assets, but also an active participation in education, sports, extracurricular activities, and civic life. Studies have shown that concentrated poverty and child labor have harsh impacts on young people. It limits the level of outdoor activity; it restricts young peoples’ access to local facilities and sports; it is strongly linked to poor health, disability, inactivity and weight problems. Low incomes also restrict the amount of participation that children and young people experience, including most sports and community activities.
Even when the official unemployment rate as a percentage of total labor force is as low as 5.3%, approximately 48.3% of employed individuals in 2013 (the last year for which official data is available) were underemployed. As will be further discussed, according to IEEPP’s estimates underemployment for youth ages 18 to 29 is much higher than officially acknowledged. Over 60% of youth interviewed who have some type of work admitted working in low paying jobs or are workers who are highly skilled—i.e. hold university degrees or higher—but are working in low skill jobs. Of those underemployed, 43% are men and 57% are women.
Youth poverty and unemployment are directly related and should be analyzed jointly. Unfortunately, since 2012 the Government of Nicaragua has not presented disaggregated data on youth employment. The last comprehensive analysis of youth unemployment using official data was prepared by the UNDP in 2009 and at the time it revealed the following:
● In 2008, youth unemployment in individuals ages 14 to 30 was 9%.
● Youth unemployment tended to increase.
● Unemployment in individuals ages 14 to 30 was 2.3 times higher than those within older cohorts.
● Unemployment and underemployment is higher among urban youth.
● 31.7% of youth (ages 14 to 30) were underemployed.
● Underemployment affects women more than men.
The high rates of informal labor are also a major problem for positive youth development. These day-to-day jobs do not offer upward mobility to an increasing number of young people who enter the workforce. Based on a recent regional assessment conducted by IEEPP in December 2016, poverty and unemployment are particularly widespread among vulnerable sectors such as rural populations, indigenous people, afro-descendant communities, and youth. The report “Generaciones para la Paz: Juventudes, diálogos y propuestas para Centroamérica" recently published by IEEPP found that 7 out of 10 young men and women who receive some type of income in Nicaragua are in the informal labor market as of 2016. Youth who work under “informal labor market conditions” do not have access to social security, technical or vocational training, and/or social protection under current labor laws.
The online survey conducted by IEEPP in the context of this study shows even more troubling data. Over 60% of youth with university degrees—or in the process of obtaining an undergraduate degree—received monthly net salaries below $300. Only 16.2% admitted receiving net salaries above $500. This data—although it does not represent a comprehensive sample of Nicaraguan youth—indicates that underemployment is more severe amongst the general population in working age groups, given that university students were overrepresented in this sample (62% of respondents have university degrees or are in the process of completing an undergraduate education).
Of the percentage of young people currently active in the labor system:
● 21.1% receive an average monthly remuneration of $ 133.
● 20.6% receive an average monthly salary of $ 200.
● 23.5% receive an average monthly salary of $ 300.
● 16.2% receive an average monthly salary of $ 560.
● 11.8% average monthly salary of $ 850.
● 3.9% receive an average monthly salary of $ 1160.
● 2.9% receive a salary above $ 1,500.
The findings from the online survey are compatible with estimates from Acevedo (2015) and FUNIDES (2014), which found that once employed, the probability of losing a job within the next two years is 50%. For unemployed youth, the average time to find a new job is over 21 months. Acevedo also estimates that the average salary of an employed person ages 15 to 29, is less than $200 per month.
An important finding from the online survey is that as your educational level rises, the prevalence of unemployment is much higher. From our sample of 830 people, youth with graduate degrees (112 people) are four times (14%) more likely to be unemployed than youth with lower educational backgrounds (3.5%).
These findings are compatible with results from other focus groups conducted by IEEPP in 2016:
● Those with more advanced degrees expressed that the waiting time to secure a job is between 4 to 6 months, which is much higher than waiting times between jobs for the general population.
● There is a strong positive correlation between youth with higher levels of education and the propensity to migrate. The tendency to migrate is much higher among those who are unemployed or underemployed.
● Youth who have a high command of English as a second language had considerably lower probabilities of unemployment. In fact, from the focus groups conducted in the Pacific, all bilingual participants admitted being employed.
● During various consultations—including a two day “youth camp” which was not part of the original research plan—employment consistently ranked among the top three most significant problems identified by youth.
● “Promoting entrepreneurship” consistently ranked as one of the most popular policies or youth development programs suggested by youth.
● Youth who had a positive experience with their first job, tended to have much more stable jobs as well as higher salaries.
● Youth who had considerable experience as volunteers during early youth were less likely to be currently unemployed.
Findings on youth underemployment from Acevedo (2016) and the National Youth Platform (2017) are also compatible with our findings. For example, "between October and December of 2012, a total of 1,237,297 people between 15 and 29 years old were occupied" in the following categories: employee, family worker without pay, self-employed, day laborer, employer, and non-family worker without pay.
There is a close correlation between years of schooling and level of employment qualification. In Nicaragua, people with at least 6 years of education tend to access average qualification jobs and elementary occupations which are characterized by low wages. Those with 7 to 9 years of schooling have a much higher opportunity to access high-grade jobs. The population segment with 10 to 11 years of study are employed in jobs and are considered professionals and technicians. Those with more than 11 years of schooling are mainly possess managerial jobs.
------
This is a fragment of the study Youth Analysis for Strategic Planning, written by Maradiaga et. al in 2017.
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