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Today's babies, tomorrow's jobs

What causes unemployment? Most discussions focus on macroeconomic factors--interest and foreign exchange rates, gdp growth or the minimum wage--that lead companies to hire or fire employees. Education, labor regulations and technology are also invoked as possible causes of unemployment.

But what about birth rates? At a recent seminar at the IDB's Washington, D.C., headquarters, IDB economists Suzanne Duryea and Miguel Székely presented a paper where they argue that trends in reproductive behavior can have a significant delayed impact on unemployment.

Consider the role of young people aged 15 to 24 who are hunting for jobs for the first time or looking for new jobs. Unemployment is typically highest in this age group, which has limited skills and experience to sell on the labor market. So if the proportion of 15-to-24-year-olds to all other working age groups increases, overall unemployment tends to rise as well.

In Latin America, evidence of this factor turns up in surprising places. Argentina, a country that has long had one of the region's lowest birth rates, has recently seen a noticeable surge in the proportion of its working-age population made up by 15-to-24-year-olds (see graphic below). The reason? Between 1967 and 1975, Argentina experienced a modest "baby boom" equivalent to a 10 percent rise in the fertility rate. The rate subsequently returned to its previous level, but the bumper crop of babies born in that period all started looking for work in the early 1990s. Between 1990 and 1996, the proportion of 15-to-24-year-olds in Argentina's labor market jumped from 37 percent to 41 percent. Even if all other factors are excluded, Duryea and Székely calculate that this surge in the supply of workers would have increased unemployment in Argentina by a full percentage point between 1990 and 1996. A similar but less pronounced process is evident in neighboring Uruguay.

In Brazil and Colombia, by contrast, the proportion of young people in the work force has been dropping steadily in recent years, after peaking in the 1980s. This reflects the steep decrease in these countries' fertility rates that began in the late 1960's and has continued ever since. Although unemployment in these two countries has not dropped in the 1990s (because other macroeconomic factors have pushed it up), it would be higher if the proportion of 15-to-24-year-olds weren't decreasing, according to the authors. Although it is impossible to predict employment trends in the future, current fertility trends indicate that all four countries in the graph will experience less pressure to provide jobs for young people in the years ahead.

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