Labor Market Policies and Youth Employment Prospects

Explores the labor market policies shaping incentives for Brazil’s young people to look for work and for firms to hire youth—policies which also help to determine the quality of matches between firms and young workers—by (1) arguing that Brazil’s labor market policies have long privileged (mainly older) “insiders” at the expense of opportunities for young people with little or no prior experience; (2) pointing to policy solutions to this problem; (3) recommending structural changes to improve the efficiency of the labor market; and (4) discussing reforms to the 2017 labor code legislation. The 2017 reforms constitute an ambitious step in the right direction that could lower insider advantages, increase the share of formally employed young people, and improve the quality of labor market matches, but they still create perverse incentives constraining human capital creation and negatively affecting the rate of Brazil’s economic growth already hindered by an aging population.