OECD Economic Surveys: Colombia 2019

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OECD Economic Surveys: Colombia

21 December 2019

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Chapter 2. Fostering high-quality jobs for all in Colombia

Abstract

Colombia has achieved important social and economic improvements in recent years. Employment grew at an average annual rate of 3% between 2008 and 2018. Thanks to Government efforts to fight against informality, the informal employment rate decreased substantially in the last decade. However, many jobs are still of relatively low quality, affecting well-being and productivity. More than half of employment is informal and many vulnerable groups, notably youth, ethnic minorities and women are out-of-work. A high share of the population lacks basic skills and the mismatch between the supply and demand of skills is widespread. Overcoming these challenges will require actions in several policy areas as indicated by the implementation of the OECD Jobs Strategy for Colombia developed in this chapter. Effective actions include lowering the costs of formalisation for workers and firms, enhancing enforcement, better training and labour intermediation, and a better functioning unemployment benefit system. Greater efforts to make the education and training system more responsive to labour market needs by improving relevance would help. In particular, enhancing an apprenticeship system linked to formal education and encouraging more work-based learning would improve quality employment opportunities. Better skills assessment and anticipation information as well as greater efforts to involve employers in the education and training system would also help. Policies to boost female employment, such as expanding opening hours of childcare centres and continued efforts towards a universal early education, are also needed to reduce gender gaps. Reforms to boost export performance and enhance productivity can help to support business growth and employment and lay the foundations for more and better quality jobs (Chapter 1). All these policies can create a virtuous cycle between labour productivity and equity, increasing access to higher quality jobs, higher wages, and coverage of pensions, training and unemployment benefits.

Setting the scene: Job quality in Colombia

Colombia has achieved important social and economic improvements in recent years. Inequality and poverty have been reduced markedly and employment grew at an average annual rate of 3% between 2008 and 2018. Thanks to Government efforts to fight against informality, the informal employment rate decreased by 5 percentage points to 53% between 2008 and 2017. However, further progress is needed to address remaining structural issues to make the labour market more inclusive, including in rural areas.

Strengthening job quality can foster productivity growth and increase workers’ well-being while reducing inequalities in the labour market. The new government identified fostering the creation of formal jobs as one of its key priorities (Box 2.1), which will boost job quality. While the employment rate is at similar levels to the average OECD country, Colombia performs relatively poor in a range of other labour market indicators (Figure 2.1). Labour informality remains high, with one third of employees not contributing to the health system. In addition, more than half of the employed population works as self-employed and largely outside the formal labour market. Among employees, 28% have a temporary contract, the highest share among OECD countries and nearly three times the OECD average, and 36% have a tenure of less than one year, compared with 19% in the OECD on average. About 40% of all part-time workers would prefer to have a full-time job, 2.5 times the OECD average though not as high as in Spain, Italy or Greece where more than 60% of the part-time work is involuntary. The combination of all these indicators illustrate the challenges ahead to make the labour market more inclusive. This chapter provides detailed recommendations in a range of policy areas to boost job quality and make the labour market more inclusive.

Figure 2.1. Colombia underperforms on a range of labour market indicators

Box 2.1. Government priorities for a more inclusive labour market

The government is giving high priority to the reduction of informal jobs, as it considers it has a critical and large detrimental impact on productivity, inequality, tax revenues and access and financing of pensions.

The promotion of sustainable growth will be key for creating the best conditions for the formalisation of employment. The National Development Plan 2018-2022 envisages a module of firm formalisation including measures to decrease indirect and direct costs of formalisation. Other policy actions to promote the formalisation of employment also include supporting business development programmes, apprenticeships and vocational education and training, and mechanisms to engage with regions and local employers to ensure that the supply and demand of skills match.

Proposed policy actions to tackle inequality and create a more inclusive labour market include a deepening of social security protection on health, education and pensions, and helping the most vulnerable to transition into the middle class. The government plans to advance a pension reform that concentrates on equity, to focus subsidies on the most vulnerable, eliminating distortions in the contributory pension system. Finally, emphasis is placed on a better inclusion of minority groups in employment, education and the society as a whole.

Implementing the new OECD Jobs Strategy

A well-functioning labour market is a key condition for achieving inclusive growth and rising levels of well-being. As discussed in the new OECD Jobs Strategy (Box 2.2), the main challenge for policy makers is to reconcile the ability of an economy to sustain aggregate productivity gains with the capacity to generate jobs with good working conditions (both monetary and non-monetary) as well as ensuring that the gains from growth are fairly shared. To support countries in this difficult task, the new OECD Jobs Strategy provides a comprehensive set of policy recommendations organised around: i) the quantity and quality of jobs; ii) labour market inclusiveness; and iii) resilience and adaptability (OECD, 2018[1]).A comparison of labour market outcomes in Colombia with those in OECD countries (see the OECD Jobs Strategy dashboard in Annex Table 2.A1) highlights the country’s challenges in terms of both job quality and skills (Figure 2.2). Reforms and policy actions should therefore focus on improving these two labour market outcomes. The remainder of the chapter will discuss each of the policy areas in detail.

The OECD Jobs Strategy stresses that policy reform strategies need to be adapted to the specific characteristics of a country in terms of its institutional set-up, social preferences, administrative capacity and social capital. Hence, policy recommendations in this chapter closely follow the OECD Jobs Strategy framework but they are adapted to Colombia’s specific situation. Labour market outcomes do not only depend on labour market policies but also on a range of other policies, including sound macroeconomic policies, productivity-enhancing policies in product markets and social policies. Policy recommendations in these areas are discussed in the Key Policies Insights section of this survey and in Chapter 1.

Box 2.2. Good jobs for all in a changing world of work: The OECD Jobs Strategy

Low productivity growth, high levels of income inequality in many countries, as well as rapid economic change related to technological progress, globalisation and demographic changes raise new policy challenges for good labour market performance. The aim of the new OECD Jobs Strategy is to help countries addressing these challenges.

The OECD Jobs Strategy goes beyond job quantity and considers job quality and inclusiveness as central policy priorities, while emphasising the importance of resilience and adaptability for good economic and labour market performance in a changing world of work. It recognises that flexibility-enhancing policies in product and labour markets are necessary but not sufficient. Policies and institutions that protect workers, foster inclusiveness and allow workers and firms to make the most of ongoing challenges are also needed to promote good outcomes.

The OECD actively supports countries with the implementation of the OECD Jobs Strategy through the identification of country-specific policy priorities and recommendations, for example, through the preparation of chapters in the OECD Economic Surveys, like the current chapter for Colombia. The process will be concluded with a synthesis report that will draw lessons from the country reviews and highlight good practices across the full range of policy tools identified by the OECD Jobs Strategy.

For further details, see http://www.oecd.org/employment/jobs-strategy/.

Curbing informality

Improving the job quality of Colombian workers hinges to an important extent on further reducing informality. Informal workers are beyond the reach of the state with respect to provision, protection, and redistribution. As put forward by the new OECD Jobs Strategy, a comprehensive strategy is required, with actions needed in several policy areas, such as tax and non-tax costs, enhanced enforcement, business and labour regulations or skills development. Policies to curb informality can reduce the incidence of low quality jobs and, in turn, improve labour market inclusiveness.

Learning from recent reforms

Over the past decade, the government has promoted labour formalisation through a series of structural reforms. The 2012 Tax Reform was particularly important in pushing formalisation by cutting payroll taxes from 29.5% to 16% of gross wage earnings for workers earning less than 10 minimum wages (OECD, 2016[2]). Available impact evaluations suggest that the reduction in payroll taxes led to a 2-to-4 percentage points reduction in the informality rate, with a stronger effect among employees than among self-employed workers (Kugler et al., 2017[3]; Morales and Medina, 2016[4]; Fernández and Villar, 2016[5]; Bernal et al., 2017[6]). Whereas Morales and Medina (2016[4]) found only a small effect on wages, Bernal et al. (2017[6]) estimated a positive effect of 2.7% on average firm wages. (Garlati-Bertoldi, 2018[7]) shows that the reform had long-term impact and it was broad-based, with manufacturing, services and agricultural experiencing reduced informality rates.

Between 2007 and 2017, the share of employees not contributing to social insurance declined from 43.0% to 30.8% of all employees (Figure 2.3). The decline among self-employed over the same period was negligible and in 2017, just one in four self-employed were registered. Overall, the gains in labour formality are in line with the general trend in Latin America where strong GDP growth and favourable labour market dynamics had a positive impact on labour formalisation (International Monetary Fund, 2018[8]).

Figure 2.2. Colombia should focus on improving job quality and skills

Standard deviations across OECD countries

In addition, the government managed to reduce the misuse of service contracts through several legislative initiatives and stronger controls by the labour inspectorate. Companies have been misusing legal constructions like associated work cooperatives or union service contracts to circumvent labour rights. By subcontracting workers (often former employees) through such service contracts, workers are considered as services providers and no longer as employees. As such, they are not entitled to social insurance or other labour rights even though they (continue to) perform the same tasks (see OECD (2016[2]) for further details). The number of newly registered associated work cooperatives declined drastically between 2010 and 2017 (Figure 2.4, Panel A) and the rise in union service contracts reached a turning point in 2014 when both the number of contracts and workers covered started to decline (Figure 2.4, Panel B).

To tackle the remaining barriers to formalisation, further efforts and measures are needed. The OECD Jobs Strategy identifies four elements of key importance for labour formalisation: (1) low costs for employers and self-employed to formalise their business and labour; (2) clearly visible benefits of formalisation for firms and workers; (3) strong enforcement methods; and (4) promotion of skills development (see last section of the chapter and the Key Policy Insights chapter). Reforms to enhance productivity and boost export performance are also needed to support business growth and formal employment, laying the foundations for more and better quality jobs (Key Policy Insights and Chapter 1).

Figure 2.3. The decrease in informality has been much stronger among employees than among self-employed

Figure 2.4. Declining use of non-standard contracts, 2010-17

Lowering the costs of formality while enhancing its benefits

Promoting productivity growth hinges partly upon an efficient business environment that keeps the cost of being formal reasonable. Burdensome regulations, which remain prevalent in Colombia as indicated by the product market regulation indicator ranking (see the Key Policy Insights chapter), hold back competition, productivity growth and the creation of formal jobs. Complex procedures for the registration of companies can also discourage start-ups and formalisation. To facilitate the creation of formal firms, the government needs to simplify and possibly unify several procedures (e.g. commercial, tax and social security procedures) to reduce the time needed to start a formal business towards OECD practices (see Table 2.1 and Key Policy Insights chapter). After years of planning, a one-stop shop pilot exercise has started in Bogotá in 2018 for the registration of companies. It is planned to be extended to other cities and to include as well the affiliation of workers to social security.

Indicator	Colombia	OECD	Latin America and Caribbean
Starting a business (rank)	96	49	116
Procedures (number)	8.0	5.0	8.4
Time (days)	11.0	9.2	31.7
Cost (as a % of per capita income)	14.0	8.7	37.5
Minimum capital required (as a % of per capita income)	0	9.6	2.7

Source: OECD compilation based on information from the World Bank (2018[9]), Doing Business 2018: Reforming to Create Jobs, http://dx.doi.org/10.1596/978-1-4648-1146-3.

The high and binding minimum wage is also an important cost factor that reduces formal employment (Arango and Flórez, 2017[10]; Olarte Delgado, 2018[11]) as shown in Box 2.3. At 87% of the median wage of full-time formal employees, the minimum wage is higher in relative terms than in any other OECD country (Figure 2.5). Almost half of the total workforce earns less than the minimum wage. The high minimum wage reduces employment prospects for low-skilled workers, youth and people located in less developed regions (OECD, 2015[12]). Nevertheless, as argued in OECD (2016[2]), the high minimum wage should also be seen in the context of the limited role of collective bargaining in Colombia. Since the minimum wage is one of the few ways for trade unions to ensure decent working conditions for their affiliates, they tend to put strong pressure on raising its level. However, the high minimum wage has pushed many workers into informal employment and self-employment without any protection.

Limiting increases to inflation for some time would help the minimum wage to return gradually to a more job friendly level (OECD, 2015[12]). Other possible options include differentiating the minimum wage by age (OECD, 2015[12]) or by region (OECD, 2017[13]) or establishing an hourly minimum wage, which would avoid the current penalisation of part-time employment, given the need to contribute to the social security system on a weekly or full time basis. These measures would particularly help formalisation in the rural areas.

Further reductions in non-wage labour costs may also help formality (Box 2.3). Despite the 2012 reform, non-wage labour costs remain almost 50% of the salary, (Figure 2.8). Especially the transportation subsidy (7.5%) and the pension contributions (16%) are high compared with other Latin American countries. Employers also pay a 4% contribution to finance the family compensation funds (Cajas de Compensación Familiar), which offer not only a wide range of services from housing and training programmes to sports and entertainment for affiliates, but increasingly also benefits and services to the rest of the population (OECD, 2016[2]).

Figure 2.5. The minimum wage is high relative to the median

As a percentage of median wages of full-time workers in 2017

Box 2.3. Drivers of informality in Colombia

Analysis based on microdata from the Colombian household survey (GEIH) for 2010-2017 allows gauging the drivers of informality in the labour market. A probit model for the probability of working informally (measured as those not contributing to the pension system) is used. It includes individual characteristics (such as age, gender, education, married, having children), firm characteristics (industry, firm size, rural area dummy and region) and labour market variables: minimum wages (relative to the median wage in the rural or urban area in each region ) and non-wage labour costs as percentage of wages (including transport subsidy and contributions to family compensation funds, pensions, health and risk insurance).

Education is one of the most important determinants of the probability of working informally. Workers that attained higher education (tertiary or post-secondary education) show a 25 percentage points lower probability than those that attained upper-secondary education (Figure 2.6). Labour market policies are also important drivers. Reducing the ratio of the minimum wage relative to the urban or rural regional median wage by 10 percentage points would decrease the chances of working informally by 8 percentage points. Reducing non-wage labour costs by 4 percentage points would lead to average reduction of 9 percentage points in the probability of working informally (Figure 2.7).

Figure 2.6. Studying longer radically reduces the chances of working informally

Estimated average marginal effect of each educational level with respect to the baseline (primary education or less) on the probability of working informally.

Figure 2.7. Lowering non-wage labour costs and the relative minimum wage could significantly reduce informality

Estimated effects on the probability of working informally of reducing the ratio of the minimum wage to the regional median wage and non-wage labour costs.

Figure 2.8. There is room to reduce non-wage labour costs in Colombia

The disconnection between the mandatory contributions that employers pay and the benefits their employees receive can also have negative effects on labour formality (Frölich et al., 2014[14]). For instance, part of the formal workers’ contributions to health care and family compensation funds are used to finance benefits and services for which formal workers are not eligible (Box 2.4). Because of their unintended consequences of such taxes on formal job creation, it is important to broaden the sources of funding for general social services and benefits in order to reduce formal-sector employee contributions.

Finally, the financing of the family compensation funds should be reviewed, as recommended in previous OECD Economic Surveys (OECD, 2015[12]; OECD, 2013[15]). Many of their services, such as recreational and commercial activities, are not paid from employer contributions in other OECD countries and should be made optional for employers.

Box 2.4. Two examples of distortions between social contributions and entitlements in Colombia

Workers have limited incentives to formalise and pay into the contributory health care system (4% contribution for employees and 12.5% for self-employed) because: 1) the subsidised health care system offers nearly the same services and is free of charge; 2) part of the formal workers’ health care contribution is used to finance the subsidised system and thus it acts as a tax; and 3) there is a temporary discontinuity in health care coverage when an individual changes health care system as a result of a change in employment status.

To stimulate the formalisation of labour without jeopardising universal health care coverage, it would be important to broaden the sources of funding for the subsidised health system. Additional resources would allow the government to gradually reduce the share of total health funding coming from formal-sector employee contributions and increase funding from the general budget. Expanding the use of mechanisms such as co-payments and moderating fees, without diminishing the access of people with fewer economic resources, would help. Rising formality will also be key to rising revenues.

Second, there is an important disconnection between the 4% employer contributions and benefits of the family compensation funds. Many of the funds’ services (such as cultural and recreational services, training and education) are located in the regional capitals and are unavailable to formal employees in smaller cities or those living at the other side of town. The government should make these services optional to allow employers to opt out from the contribution to family compensation funds.

In addition, family compensation funds have increasingly been mandated by the government to provide benefits and services to non-affiliates. As such, an increasing part of the contribution is in reality a tax to finance social policy programmes for which formal workers are not eligible. Substantial variation in the quality of services offered by the different funds, with less developed regions lagging behind, further exacerbates inequalities. To reduce the negative effects of the payroll tax on labour formality and to improve the quality of services in all regions, the social services provided by the Family Compensation Funds should be provided through different institutional arrangements (Arango and Flórez, 2016[16]).

Source: OECD (2016[2]).

Ensuring effective labour law enforcement

Tackling informality also requires a better labour law enforcement through an effective judiciary and well-equipped labour inspectorate. In the past few years, Colombia has taken an impressive amount of measures to improve the labour inspection system (OECD, 2016[2]). In particular, the number of labour inspectors more than doubled between 2011 and 2015, the budget significantly increased and the fines collection system has been revised and strengthened (see Box 2.5). The government also raised salary scales for labour inspectors to attract better candidates and organised a civil career exam to improve job security and limit job staff turnover. However, recent information suggests that the collection of fines is weakening again (Figure 2.10) and illegal subcontracting persists (Ministerio del Trabajo, 2018). Increased rural actions are also necessary to inform employers and workers about the benefits of formalisation and stimulate formal employment.

Social dialogue and social norms should also play a key role in ensuring effective labour law enforcement. In particular, trade unions can provide a voice to workers and support them in their complaints against non-compliance. However, significant changes in the Colombian collective bargaining system are needed to allow for an increase in trade unionisation and improve the respect of trade union rights in the country (see section on Sharing gains with workers). Social norms, for instance in the form of the OECD Guidelines for Multinational Enterprises and the National Contact Points, are equally important tools to promote responsible business conduct of firms (see OECD (2018[17]) for a specific example on Colombia).

Box 2.5. Significant improvements have been made in the Colombian labour inspection but continued efforts are needed

In 2018, 8 000 million Colombian pesos were assigned to labour inspection, surveillance and control, nearly three times the budget that was available in 2017 (3 000 million Colombian pesos) and a multitude of the budget of 2015 (468 million Colombian pesos) (Figure 2.9). The large increase in the budget is the result of a co-operation programme with the United States and the ILO aiming at the systemic improvement of labour law enforcement. The co-operation focuses on frequent training of labour inspectors and the development and implementation of an electronic case management system in all regions to facilitate the supervision of cases and collection of sanctions.

In 2017, a total value of 13 700 million Colombian pesos of fines were collected, 38% more than a year earlier (Figure 2.10). The progress was largely the result of an effective collaboration with CISA, a for-profit public entity under the Ministry of Finance specialised in collecting debts. However, recent information suggests that the collection of fines is weakening again. The total value of fines collected during the first eight months of 2018 is only about one third of the value of 2017. Extrapolation over the full year would suggest a fine collection similar to 2014. Even so, the total value of imposed fines is at the highest level since seven years, indicating that employers continue violating the labour law and renewed efforts are needed to ensure an adequate collection of the outstanding fines.

Figure 2.9. The budget for labour inspection has seen an exponential increase in recent years

Figure 2.10. The improvement in fines collection seems to have been reversed in 2018

Ensuring adequate support for workers in a flexible labour market

Finding the right balance between employment flexibility and job stability

An important challenge facing governments is to nurture labour market dynamism while keeping the adjustment costs borne by workers as low as possible. Employment protection legislation is the policy instrument most commonly used to limit overuse of economic dismissals. Mandatory severance payments and some other procedural requirements (e.g. reinstatement procedure) increase employer-borne costs associated with job displacement discouraging layoffs. However, experience has shown that employment protection needs to be used cautiously because it can hinder efficiency-enhancing labour mobility and possibly generate dual labour markets if there is a strong gap in the stringency of regulations for permanent versus other contracts (OECD, 2013[18]). Employment legislation may also fail to provide adequate protection to job losers if firms renege on their severance pay commitments at the time of dismissal (OECD, 2011[19]).

Employment protection regulations in Colombia are rather flexible for individual dismissals and there are very few restrictions on the use of fixed-term contracts. Only temporary work agencies are heavily regulated (OECD, 2016[2]). However, rather than restricting employment protection regulation, workers would be better supported through a well-functioning unemployment compensation system (Vodopivec, 2013[20]) and job-relevant training.

Reorganising unemployment insurance

Colombia already has the basis of an individual unemployment savings account system for formal workers, but would need to improve the system to provide proper income protection to unemployed workers. In 1990, Colombia transformed its traditional system of severance pay into a system of individual severance accounts (Kugler, 2002[21]). Instead of having to pay one month per year of service at the time of dismissal, employers are mandated to make an annual deposit equivalent to one month’s salary to a severance fund (an independent financial institution) on behalf of every employee. In addition, employers pay 12% of interest on the annual amount of severance pay into the employee’s severance account (PricewaterhouseCoopers, 2018[22]). In 2018, there were around 8 million people affiliated to the individual severance accounts (cesantías), corresponding to 90% of all formal workers and 36% of both formal and informal workers.

However, over the years, the system has lost its purpose of income protection in the event of unemployment as workers can cash the savings before job loss for a variety of reasons – for instance, to finance education, purchase a house or undertake house renovations. In 2017, two thirds of the funds were withdrawn for reasons other than unemployment (ACRIP and Fedesarrollo, 2018[23]).

To redirect the system of individual severance accounts towards income support provision in the case of unemployment, the government introduced in 2013 a bonus proportional to the savings amount for those who keep at least 10% of their savings in the fund, 25% for those who earn more than twice the minimum wage (OECD, 2016[2]). However, it may be worth restricting withdrawal from the fund altogether, or increase the minimum savings level to ensure sufficient protection during periods of unemployment.

By restricting withdrawal, the individual severance account system can regain its role of income protection during periods of unemployment and function as an individual unemployment savings account system, like in Chile (Robalino, 2014[24]). The advantage of individual unemployment savings accounts over other unemployment insurance systems is that they significantly limit the risk of moral hazard. By allowing workers to run down their personal savings accounts during periods of unemployment, workers internalise the cost of unemployment benefits, thus strengthening the incentives of the employed to prevent job loss and those of the unemployed to return to work quickly. This feature is particularly relevant in developing countries with a large informal sector where monitoring the behaviour of unemployed people is complicated (Sehnbruch and Carranza, 2015[25]). Individual unemployment savings accounts can also strengthen incentives for working formally since social security contributions are less seen as a tax on labour and more as a delayed payment (OECD, 2018[1]).

In the medium term the government may also want to add a solidarity element to the individual savings accounts to pool risks across workers and redistribute across income groups, similar to the Chilean unemployment insurance system (Acevedo, Eskenazi and Pagés, 2006[26]). Indeed, without a solidarity fund, the system provides less protection to those who need it most: workers who experience frequent and/or long lasting spells of unemployment.

Ensuring better regional coverage of the unemployment protection mechanism

As a complement to the individual savings accounts, the government introduced in 2013 a “protection mechanism for dismissed workers” (mecanismo de protección al cesante). The system ensures continuation in family subsidies and health and pension contributions, provides access to public employment services and vocational training and offers, since 2017, a food voucher. Only formal workers whose employer contributed 4% of their payroll to a family compensation fund for at least 12 months in the three years before job loss occurred (24 months for independent workers) are eligible for benefits and services.

Since the introduction of the unemployment protection mechanism, both the expenditure and number of beneficiaries multiplied by four (Figure 2.11). About half of the budget is devoted to benefit payments; 32% is spent on training programmes and the remaining 16% goes to the provision of placement services and overall management. Despite the substantial increase, the total number of beneficiaries (167 thousands in 2017), remains only a fraction (7.2%) of the 2.3 million people who were unemployed in 2017 according to data of the Colombian Statistical Office. Most unemployed people do not qualify as they have been working in the informal sector or their employer did not contribute long enough.

Figure 2.11. Substantial expansion of the protection mechanism for dismissed workers

Spending is expressed in million pesos, 2014-2017

Improving public employment services

As part of the protection mechanism for dismissed workers, the government created in 2013 the national public employment service (OECD, 2016[2]). The PES operates through a national network of approved but independent front line service delivery agencies that meet specific standards. Public employment services include vacancy registration and job matching for employers and job seekers supplemented by career workshops and, for some clients, more in-depth orientation and assessment. All unemployed people, regardless whether they contributed or not, can use services of the PES network. However, PES providers have considerable flexibility about which employers and jobseekers they work with and in how they deliver services (Finn, 2015[27]).

The number of public employment service providers has rapidly increased over the past few years and currently there are 260 PES providers spread out over the country (even though coverage remains restricted to the main cities), including 66 public providers and 193 approved private providers, and there are 140 virtual spaces were jobseekers can consult information. In 2017, the public employment services registered more than one million CVs and 1.6 million vacancies. Employers are required by law to notify their vacancies, which are posted on an easily accessible website that has more than six million visits per month. Vacancies for salespersons and services account for one third of the vacancies, while engineers, technicians, lawyers and social workers are also frequently requested (Table 2.2). According to the figures of the Ministry of Labour, around 650 000 people found a job through the public employment services in 2017 and 256 000 unemployed people have been trained. While initially there was a general perception that these services mainly served low-skilled people (International Labour Organization, 2016[28]), four in ten users now have a higher education degree and an equal share is younger than 28 years.

	Number of vacancies	Percentage in total	Growth %, 2016-17
Salespersons	25 407	18.2	-0.3
Services	20 815	14.9	88.4
Technicians and middle-level science and engineering professionals	8 721	6.3	>100
Science and engineering professionals	7 860	5.6	>100
Professionals in law, social sciences and culture	6 501	4.7	>100
Garment and food processing officers and operators, carpenters and the like	6 477	4.6	>100
Accounting clerks and registration officers	6 346	4.6	-21.7
Technicians and middle-level finance and administration professionals	4 598	3.3	-33.5
Personal service workers	3 890	2.8	75.9
Health professionals	3 786	2.7	59.5
Other	30 492	32.3	-

Source: Data provided by the Colombian Ministry of Labour.

To address strong variation in the service quality across regions and providers, the Ministry of Labour set up in 2018 a team of regional officials who visit regional offices and verify their infrastructure, human resources, planning and user satisfaction. A technical quality standard has also been developed to standardise services and quality across providers in terms of basic management, placement services (reception and registration, occupational guidance, pre-selection and referral) and user satisfaction.

To further improve labour market support for jobseekers, the public employment services could expand the range of services and active labour market programmes it offers. When doing so, it is important to maintain a close co-operation with employers, as they are a crucial partner for the good functioning of employment services (Finn, 2015[27]; Mazza, 2017[29]). The National Training Service (Servicio Nacional de Aprendizaje, SENA) is also a public employment agency having a wide range of short-term and longer-term training offers (see last section on Promoting skills development).

Public employment services can also enhance the information they provided to employers and workers. For instance, information on reservation wages and labour market wages should be published, as well as information that allows workers to move to other cities (such as living costs across cities and provision of public services) (Arango and Flórez, 2016[16]).

Focusing on active labour market programmes proved to work

Before expanding active labour market programmes, it is important to carefully evaluate existing and potential programmes. As discussed in the new OECD Jobs Strategy, experiences with active labour market programmes in OECD and developing countries show mixed results (Betcherman, Olivas and Dar, 2004[30]; Brown and Koettl, 2015[31]; Escudero et al., 2017[32]; McKenzie, 2017[33]; OECD, 2015[34]). In particular, the large informal sector and weak capacity to implement active programmes in developing countries may limit its impact. However, well-designed and targeted measures can increase the employability of jobseekers and their employment opportunities in a cost-effective manner. Improving governance would also help, with the Ministy of Labour having a greater role in overseeing the quality of the different stakeholders providing active labour market programmes. Several Latin American countries managed to make labour market policies more effective by adding an active labour market component, such as training, to existing conditional cash transfer programmes (Cecchini and Madariaga, 2011[35]; López Mourelo and Escudero, 2017[36]). Cash transfers provide income support in times of need but become more effective if supplemented by a training component that improves participants’ chances to find more autonomous and sustainable income generation opportunities.

Spending on active labour market programmes is low in Colombia compared with other countries in the region and in the OECD (Figure 2.12) and few in-depth evaluations exist of the different programmes. While some programmes have shown long-term positive effects, for instance Youth in Action (Attanasio et al., 2017[37]), it would be good to invest in systematic impact assessments to focus funding on those interventions that are cost-efficient and limit deadweight, substitution and displacement effects on non-participants (see, for instance, Mazza (2017[29]) for concrete guidelines).

Figure 2.12. Spending in active labour market policies is low

An interesting and innovative approach is the recent introduction of a Social Impact Bond (see Box 2.6 for further details about the pilot). Social Impact Bonds follow a pay-for-success approach to finance social programs where private investors provide up-front capital for social services and are repaid by the government on the achievement of agreed-upon results. This approach seeks to increase the effectiveness of social investment and innovation in the public sector, promote flexibility to solve social problems and better allocate public resources (Inter-American Development Bank, 2017[38]).

Box 2.6. The Colombia Workforce Development Social Impact Bond

The Colombia Workforce Development Social Impact Bond is the first social impact bond launched in a developing country1.The social impact bond is a pilot, targeting vulnerable, unemployed individuals in Bogotá, Cali, and Pereira, with a particular focus on extreme poor and persons displaced due to the internal conflict. The SIB finances employment measures such as skills training, psychosocial support, and intermediation services for formal job placement and retention for vulnerable individuals. Just under half of the outcome payment is provided by Department for Social Prosperity, with the remaining payment made by the Inter-American Development Bank, which channels the funds provided by the Swiss State Secretariat for Economic Affairs. The contract was signed in March 2017 and ended in July 2018.

The social impact bond is structured so that its investors, Corona Foundation, Mario Santo Domingo Foundation, and Bolivar Davivienda Foundation, are repaid only if the participants find stable, formal employment. In particular, there are three outcome metrics for this social impact bond: job placement, three-month job retention and six-month job retention. For each individual who is placed in a job, the outcome funders will pay 50 percent of the total per capita payment, with another 50 percent if an individual retains the job for three months, for a maximum of 514 individuals. For individuals who are still in a job after six months, the Inter-American Development Bank, with funds from Switzerland, will pay an additional bonus of 10 percent.

Preliminary results show that, by May 2018, 1 300 workers were trained, 605 participants were employed, of which 330 participants for 3 months and 131 for 6 months. However, it is too early to understand the full impact of the programme.

1. While two development impact bonds have been implemented in Peru and India, a distinguishing feature of the Colombian social impact bond is that the outcome funder is a government entity, and not a donor or foundation as in Peru and India.

Source: Based on Gustafsson-Wright et al. (2017[39]).

Strengthening equal opportunities

Promoting female employment opportunities

As stressed in the OECD Jobs Strategy (OECD, 2018[1]), equal participation of both genders in the economy is crucial for economic growth and well-being of the population. Increasing women employment rate can have a significant impact on productivity, economic growth and contribute to reducing income inequality (OECD, 2017[40]; Causa, de Serres and Ruiz, 2015[41]).

Political, social and economic empowerment of women has seen remarkable progress in Colombia over the past few decades (OECD, 2016[42]). However, gender gaps still remain. The employment rate of women has increased substantially in the past decade but the difference with the male employment rate is one of the largest among OECD countries (Figure 2.13, panel A). The gender wage gap has increased in recent years although is below OECD average (Figure 2.13, Panel B). There is also strong evidence of wage gap heterogeneity among the main cities in Colombia (Arango, Flórez and Olarte-Delgado, 2018[43]; Galvis, 2010[44]). OECD calculations indicate that wage gap increases to levels above OECD average after controlling for education, age, occupation and industry. Hence, women with the same age, education, occupation and industry as men occupy job positions with relatively lower pay than men do. This sheds light on the importance of other factors such as higher probability of career interruptions, discrimination or the long-working hours’ culture that prevents mothers from participating in highly paid positions (OECD, 2016[45]).

Gender equality is increasingly a priority on the Government’s agenda. The National Development Plan for 2014-2018 included the formulation and implementation of the National Public Policy on Gender Equity, including a plan on participation of rural women in the formulation of the comprehensive rural women's public policy and the creation of a rural women's directorate within the Ministry of Agriculture.

Figure 2.13. Gender gaps remain sizeable

The over-representation of women out-of-work and in precarious jobs (Figure 2.14) is, at least in part, a consequence of the unequal gender distribution of unpaid work. Since 2013, a time use survey helps to gather information on upaid work. Colombian women carry out at least four times more unpaid household and care work than men (Amarante and Rossel, 2018[46]). This inequality affects women’s ability to obtain and remain in high-quality jobs – given the hours and availability that some jobs require. Policies to promote flexible work arrangements, shared mother and father parental leaves together with incentives to allow fathers to take parental leave are needed. Sharing the costs of raising children is especially important since evidence in Colombia indicates that increases in the maternity leave has led to an increase in women inactivity, informal and self-employed jobs (Ramírez, Tribin and Vargas, 2015[47])

Figure 2.14. The gender gap on high-quality employment and participation is sizeable

The participation of women in the labour market or in good-quality jobs is also held down by employment barriers related to childcare (Figure 2.15). Motherhood typically implies negative effects on workforce participation, pay and career advancement, reflecting women's disproportionate responsibility for unpaid caregiving (OECD, 2017[40]; Castellani et al., 2017[48]). Efforts towards expanding early education have raised coverage to 48% and 75% for 3 and 4 year olds in 2015, still below the OECD averages of 70% and 82%, respectively. For children aged 5 the coverage is 54% (OECD, 2016[49]). In rural areas, the coverage is only 45%. The government has made Early Childhood Education and Care (ECEC) a priority with its Early Childhood Comprehensive Care Strategy: De Cero a Siempre. However, the educational component of early childhood education remains underdeveloped and there are challenges to articulate provision and resources between two existing different systems: the Ministry of Education and the Colombian Institute of Family Welfare (Instituto Colombiano para el Bienestar Familiar, ICBF) which manages early childhood services for 0-5 year-olds.

Measures such as continuing to expand access to early high-quality public childcare education and enlarging opening hours are needed to facilitate quality employment for mothers, notably for the poorest children and in rural areas. The Government has incentivised enrolment in early childhood through the expansion of the conditional cash transfer programme More Families in Action, by covering children of 5 years-olds. Further expanding coverage in rural areas and providing full-day school for 5-years-olds would help increase coverage for children in the transition year to school. Funding can be obtained through a reallocation of resources from ill-targeted benefits for households and firms, pro-growth reforms and a rebalancing of the tax-mix (see Key Policy Insights chapter).

Figure 2.15. Employment barriers in Colombia

Cultural and social factors play also a significant role explaining the low female labour force participation (Bernal, 2014[50]). Parents need to understand the importance of sending the children to early education, and centres need to be near the house or work with available transport and compatible opening hours.

A large share of women work part-time and informally. In 2017, 85% of women working part-time were holding an informal job. This is driven by a legal disincentive to part-time employment in the formal economy in which contributions should be made for at a full-time or weekly minimum wage. Allowing social security contributions proportional to the hours worked would increase formalisation among female workers.

Red Unidos, United Network, the government strategy to eradicate extreme poverty can do more to tackle female employment barriers (Martínez-Restrepo, Mejía and Enriquez, 2015[51]). The Red Unidos strategy includes three components: psychosocial support for families and the community; supply management and preferential access to social services. Evidence shows that the programme had a positive impact on the probability of finding jobs for men, but not for women, especially in rural areas. Strengthening the coverage and delivery of social services in rural areas, particularly to develop income generation strategies for women will be crucial to help them participate in the labour market. Due to the lack of employment opportunities in rural areas, this could be achieved by offering access to financial services including strong financial planning and financial education components to help women develop their own entrepreneurial activities. Implementation of the measures included in the peace agreement incorporating the gender perspective in the promotion of access to and use of unproductive lands, the formalisation of property, the delimitation of the agricultural frontier and the protection of reserve zones will be key for rural women employment.

Gender inequalities in academic performance have important consequences for women´s careers and their role in society. In Colombia, girls underperform boys in science and math according to PISA. Factors such as attitudes, academic environment, and differences in the roles played by men and women in Colombian society are contributing to explain part of this gap (Karime Abadía and Bernal, 2017[52]).

Girls’ underperformance reduces their access to available opportunities for higher education. For example, women are underrepresented in the national scholarship programme Ser Pilo Paga that gives access to higher education to good students from vulnerable backgrounds. In 2015 the programme awarded 43% of females, although 54 % of students taking the qualifying exam were female. When women lack skills and knowledge in math and reading, they have fewer opportunities to attend college in areas such as science, technology, engineering, and math (STEM) or other fields that “pay-off”. Combating sexism and gender stereotyping since young age is key. Encouraging women’s access to these fields should be encouraged by increasing information on the field labour market outcomes. In addition, developing training programmes in fields that pay-off for women, belonging to the poorest households, and with low or weak formal labour force participation should be encouraged trough Red Unidos or Más Familias en Acción.

Boosting job-quality of ethnic minorities

Colombia has a wide ethnic diversity. According to OECD calculations using the Colombian Household Survey, 11% of the population identified herself as an ethnic minority, with 8% being afro-descendants, 2% as indigenous and the rest raizales, palenqueros and Rrom origins. According to the National Land Agency, as of July 2018, Colombia has 38 000 hectares entitled to ethnic groups, representing nearly 33% of the country's surface. Ethnic status is often associated with less favourable welfare conditions. Ethnic minorities are more concentrated in rural areas and poverty among these groups is more frequent. In 2016, multidimensional poverty reached 33% among the ethnic population, affecting more severely indigenous groups (46%).

Ethnic groups often face barriers to access high-quality jobs. People with an ethnic background suffer higher rates of unemployment, face more barriers to work and receive lower pay than non-ethnic groups. Not in Employment, Education or Training (NEET) rates are especially higher among youth with ethnic background. Informality accounts for 72% of employed among ethnic minorities, 14 percentage points above non-ethnic groups. When in employment they occupy positions requiring lower qualifications and are often paid less than non-ethnic groups (Table 2.3). Access to high-quality jobs will hinge on implementing and strengthening income generation productive community projects and providing technical and social support to these communities, such as relevant education and training. The successful resolution of land rights for minorities and promoting rural development, as foreseen by the peace agreement, will be key for the inclusiveness of this group and the reduction of inequalities.

	Without ethnic background	Ethnic background
Unemployment rate	8.8	10.9
NEET	26.5	34.2
Employment rate	53.4	51.0
If employed:
Informal	57.8	71.6
Low earnings	31.6	45.2

Note: Informality is defined as not contributing to a pension system. Low earnings refers to those that earn less than 60% the minimum wage.

Source: OECD calculations based on GEIH (2017).

Sharing gains with workers

Collective bargaining and social dialogue can help promote a broad sharing of gains, including with those at the bottom of the job ladder. Recent empirical analysis by the OECD demonstrates that there is a wage premium for workers who are covered by firm-level bargaining compared with those not covered or those covered only by sector-level bargaining (OECD, 2018[53]). Moreover, the work environment tends to be of higher quality in firms with a recognised form of employee representation and collective bargaining is associated with lower levels of inequality.

Colombia has ratified all fundamental ILO conventions and the Constitution and Labour Code recognises freedom of association. However, important challenges for the enforcement of trade union rights and a constructive social dialogue persist (see OECD (2016[2]) for an extensive discussion). With trade union density estimated at 9.5% of salaried workers (formal and informal) in 2017, Colombia is at the lower end of the OECD ranking and considerably below Chile and Mexico. Despite low trade union density, important progress was made in collective bargaining for public sector employees. The coverage of collective bargaining expanded from 3.9% of all formal employees in 2011 to 22% in 2014, corresponding to 11% in the private sector and 70.4% in the public sector.

Progress in collective bargaining coverage has been remarkable (Figure 2.16). However, it should be kept in mind that formal employees account for only one third of the total workforce in Colombia. In addition, about half of the collective agreements in the private sector are either union services contracts or collective pacts with non-union workers, which have both received a lot of critic in recent years as they have been undermining workers’ rights rather than enhancing them, see (OECD, 2016[2]) for a discussion.

Figure 2.16. Collective bargaining coverage in Colombia has significantly increased

As discussed in OECD (2017[54]), the level of co-operation and trust between social partners in a country is the result of decades of history and is deeply rooted into broader social and cultural factors. Colombia is a country with anti-trade union culture and violence history (see Box 2.7 for a discussion on violence against trade unionists). While the Peace Agreement signed in 2017 will most likely further improve the security conditions in the country, the situation of violence against trade unionists requires a proactive strategy by the government to eliminate all violence through an adequate plan of further reforms and actions.

In addition, the government can play an active role to speed up the process by promoting co-operation between social partners at different levels to improve the quality of labour relations. For instance, involvement in committees, reforms, and institutions at higher levels, together with the expansion of sectoral bargaining helps building trust and a common understanding of challenges, solutions and positions. As a starting point, the regulations on sectoral collective bargaining should be developed in the Labour Code to stimulate sectoral negotiation on, for instance, working conditions and lifelong learning.

The presence of an independent body to mediate and settle disagreements can also contribute to improve labour relations, as is the case with the positive experience with the tripartite Special Committee for the Handling of Conflicts referred to the ILO (CETCOIT), which receives the confidence of both the employers’ federations and trade unions federations. To further improve collective dispute settlement, the government made the process of convening arbitration tribunals more efficient, through the enactment of Decree 17 in 2016. The decree reduced the terms for convening courts by (1) establishing the documents that are required to request the convening of an arbitration tribunal; (2) determining the rules to group different conflicts within the same enterprise in a single arbitration tribunal; (3) describing the different steps to appoint arbitrators in case of reluctance of the parties involved; and (4) enabling the use of electronic means in the whole process.

Box 2.7. Reduced but persistent violence against trade unionists

In the last decade and a half, the overall homicide rate in Colombia went down from 66.5 per 100 000 population in 2000 to 26.5 in 2015, just above the average homicide rate of 23.7 in Latin America (UNODC, 2018[55]). Homicides of trade unionists also dropped considerably from over 200 per year in the 1990s to 20 in 2014, but have stagnated in the past four years (Figure 2.17). While other types of violence, such as threats, forced displacement and disappearances, also drastically declined between 2011 and 2018, they continue affecting a significant number of trade unionists.

Figure 2.17. Violence against trade unionists has diminished but is still present, 2010-18

The National Protection Unit, assigned to the protection of trade unionists, has undertaken an impressive range of measures to improve the protection programme for trade unionists and to tackle in-house corruption. As a result of the improved security conditions, the total number of protected trade unionists declined from 677 in 2014 to 370 in 2017. Meanwhile, the total budget for trade union protection decreased only slightly, implying an increase in the budget per trade unionist from COP 90 million in 2014 to COP 144 million in 2017. While all trade unionists covered by the programme have been successfully protected, a more pro-active prevention strategy may be needed.

Important steps have been taken in the past two years to address the low conviction rate for crimes against trade unionists in Colombia. Information provided by the Prosecutor General’s Office shows that out of the 171 homicides of trade unionists that were reported to Prosecutor General’s Office between 2011 and 2017, 26 cases have led to convictions and 112 persons have been jailed. Nearly two-thirds of those convictions happened in the past two years. In addition, 375 judgements have been handed down for crimes that occurred prior to 2011. It will be important to further build on these advances and ensure prosecution of all outstanding cases.

The Colombian Criminal Code (Art. 200) also allows for criminal sanctions against employers who undermined workers’ rights to freedom of association and collective bargaining – see (OECD, 2016[2]) for a discussion. Even so, not a single conviction has been pronounced. Out of a total of 2 233 complaints submitted between 2011 and May 2018, 92% were closed without conviction by February 2018. To a large extent, the lack of convictions resulted from the impossibility to prove the existence of a crime or conduct leading to a crime. Furthermore, conciliation between the complaining worker(s) and the employer, a mandatory step in the judicial process of Art. 200 cases, is frequently used, with 127 cases settled in conciliation in the past 7 years. It would be worth to evaluate the effectiveness of such mandatory conciliation phases.

Promoting skills development

Low skill levels and accumulation of human capital or not possessing the right skills for the labour market are key drivers of the high share of low quality and informal jobs in Colombia. Education, from children’s first years to the university, and training policies should ensure that workers are equipped with the right skills to thrive in the labour market and get high-quality jobs.

Access to high-quality education is a powerful tool to increase access to high-quality jobs (OECD, 2018[1]). Evidence shows that a change in labour force composition, toward a higher share of more-educated workers, has been an important driving force behind reduced informality rates in Colombia (International Monetary Fund, 2018[8]). A more-educated labour force increases the relative wages of low-skilled workers, reducing their incentives to work in the informal sector (Haanwinckel and Soares, 2017[56]). While the Key Policy Insights chapter addresses policy recommendations on how to increase attainment and quality from early childhood education to post-secondary education, this section will focus on how Colombia can develop skills for the labour market to help youth and older people who are struggling to catch up on the necessary skills to transition to high-quality jobs.

The Colombian vocational education and training system is offered under different modalities and stakeholders, which differ in terms of their governance and funding scheme. It is not framed in a single institutional environment (Figure 2.18). The main Vocational Education and Training provider is the National Training Service (Servicio Nacional de Aprendizaje), SENA, offering courses at formal (upper-secondary and tertiary) and complementary education. SENA depends on the Labour Ministry and operates under an institutional framework that is largely independent of that of the other providers of the job training system. SENA has a large budget of around 0.5% of GDP, bigger than similar institutions in the region (Huneeus, De Mendoza and Rucci, 2013[57]).

Figure 2.18. Vocational education and training system (VET) in Colombia

Expanding and upgrading upper-secondary Vocational Education and Training

Improving Vocational Education and Training (VET) can substantially enhance skills, inclusiveness and avoid skill mismatches for a large share of the population. Vocational programmes expanded in recent years in Colombia. However, quality and relevance remain key issues (OECD, 2016[49]). In 2017 about 1.4 million youth were enrolled in upper secondary education in Colombia, 63% of the youth aged 15-16 years old. More than three-quarters (76%) were enrolled in general academic programmes (bachillerato académico), and the remainder in programmes offering vocational education and training (VET) options (bachillerato técnico).

VET students perform relatively well in aptitude tests in comparison with students in general education. In PISA 2015 students enrolled in vocational programmes score 27 points higher in science than students in general programmes, after accounting for socio-economic status. However, the share of students at the secondary levels enrolled in professional and technical degrees is low (Figure 2.19) and dropout rates are high, especially in rural areas.

Strengthening VET offer and improving its quality would help the most disadvantaged groups of the labour market to get quality jobs providing them with the right balance of technical and broader skills. The general and the technical options are often offered in different institutions although students follow most of the same subjects. For the majority of students dependent on the public school system, however, the actual choice available is limited. In 2014, around two-thirds of schools offered only general academic courses. The schools that offer only vocational options are heavily concentrated in rural areas, where local government capacity is weak and SENA might be the only institution with the resources to provide courses at upper-secondary level (OECD, 2016[49]).

Figure 2.19. Enrolment in VET degrees at secondary level education is low although performance is good

Ensuring the quality of VET programmes should be priority. All institutions providing courses at upper-secondary VET courses (SENA and tertiary institutions) and the regional secretaries of education have considerable autonomy. The mechanisms for ensuring the quality of technical and vocational programmes are weak. This is a concern given the limited capacity of local governments, secretaries of education and schools in Colombia to assess the quality of programme providers, the ability to build relations with employers and the absence of any information on the labour-market outcomes of secondary-level vocational courses (Radinger et al., 2018[58]).

A national qualifications framework, currently under development with 10 catologs of qualitifactions already elaborated, should be fully implemented. The national qualifications framework differentiates and classifies distinct qualifications issued by different types of providers. It can help promote greater coherence, transparency and student mobility across all levels of the education system. A well-designed qualifications framework and credit transfer system, with adequate engagement by employers, can help students improve transition to the labour market and to other learning tracks. Such systems could also help to facilitate the re-entry into upper secondary of the large number of students who dropout of the education system and enable the recognition of skills they may have acquired in the workplace. Improvements in assessment and certification would also help to ensure that what students learn in upper-secondary is recognised by tertiary institutions and employers.

Strengthening workplace experience in professional and technical degrees is an important instrument to increase relevance (Box 2.8). The provision of work placements in Colombia is left to the initiative of schools and there is evidence that only few provide students with such opportunities and they are mainly private schools (OECD, 2016[49]).

Boosting the relevance of vocational education at higher education

Colombia has seen a dramatic increase in higher education coverage. Gross enrolment rate in tertiary education is around 50%, double that of a decade ago, and 22% of 25-64 year-olds had attained a tertiary-level education. However, attainment is still low compared to the OECD average of 38%. Around half of tertiary students have graduated from vocational tertiary programmes. SENA provides the majority (58%) of technical and technological programmes at the tertiary level, but universities and technical and technological institutes complement the offer.

The government is strengthening VET at higher education by expanding a successful programme, Youth in Action (Jóvenes en Acción), to support income generation activities and boost employability for disadvantaged youth. Evidence indicated the programme has good results on employability and earnings (Attanasio et al., 2017[37]; Attanasio, Kugler and Meghir, 2011[59]; Florez et al., 2018[60]). The programme provides monthly allowance for study and living expenses to participate of in-classroom training and on-the-job training to young people between the ages of 16 and 25 in the lowest socioeconomic strata of the population.

Colombian tertiary graduates, including from vocational and technical programmes, are more likely to be in formal employment, which is better paid and more secure, than those who did not progress beyond school (Figure 2.20). Evidence indicates that workers with technical or technological training from SENA are between 7 and 10% more likely to find employment than similar people who have not participated in these programmes (Estacio et al., 2010[61]). However, the net returns to higher education have a large dispersion, being negative for a significant share of students. This means that these students net earnings (after paying for their studies) might have been higher if they had not earned a higher education degree (González-Velosa and Rosas Shady, 2016[62]). This negative result is particularly severe for higher technical degrees that are typically accessed by more disadvantaged students. This is at least partly explained by a disconnection with labour market needs and to the proliferation of low quality programmes and institutions (the so-called “garage universities”).

Figure 2.20. Higher education leads to formal jobs

The disconnection of the education offer and labour market needs is evident in the skills and educational mismatch (Figure 2.21), contributing to the high wage inequality. The World Bank Enterprise Survey reveals that, in 2017, 38% of firms identified as a major constraint for operation an inadequately educated workforce, in contrast to 32% in Latin America. Other sources indicate that 65% of firms have problems to find workers with the right competences (OECD, 2018[63]). According to Lora (2015[64]) there is a deficit of higher education VET students, since it is the level of education that shows the greatest gap between supply and demand. Although Colombia has made good efforts in setting up information systems, like the ministry of education’s labour market observatory, more accessible job market information and adequate student counselling and mentoring to support students in their decisions would help to increase relevance in their decisions.

Strengthening quality assurance would require to take steps to develop an effective and mandatory accreditation system for all tertiary VET programmes and institutions. Colombia has a quality assurance system based on licensing, registration, and accreditation processes. Licensing and registration is mandatory for all programmes and institutions that are required to meet the minimum standards for their operation. However, the accreditation process, peer-review based, is voluntary. SENA has still considerable autonomy in relation to the national government, although recent systems for accreditation and certification are intended to improve its integration into the tertiary sector. In 2017, only 44 institutions were accredited being only 12 non-universities. Accreditation should also include an assessment of the labour market outcomes of the graduates or take into account any other dimension associated with the relevance of skills in the productive sector.

Figure 2.21. Skill mismatch is high in Colombia

Percentage of mismatched workers

Colombia has recently developed useful tools that help monitor the quality of learning consisting of compulsory standardized tests (SABER-PRO) for higher education graduates. They may also be used to guide the accreditation system. However, information on graduate job performance has been absent from the evaluation and quality assurance processes. Thus, the government often designs policies and allocates public funds without taking into account the labour market relevance of the education projects or their private and social economic returns. This weakness is particularly costly in the case of technical degrees with the objective to train for work, which should be evaluated on their relevance and capacity to generate good quality jobs.

Ser Pilo Paga, an innovative programme has helped increase coverage in higher education among the vulnerable population. The programme provides good students from vulnerable backgrounds with college loans that are forgiven if they complete the degree in any private or public accredited tertiary education institutions. It has been successful in offering incentives for students to stay in high school and graduate. Preliminary results show improvement in the test performance of secondary school students, particularly among students from the lowest socioeconomic backgrounds (Londoño-Velez, Rodriguez and Sánchez, 2017[65]; Alvarez-Rivadulla et al., 2017[66]). Although the programme has been interrupted, more emphasis will be put to promote VET options trough Youth in Action (Jovénes en Acción) programme for students from vulnerable backgrounds. There is a need to make sure that good students from vulnerable backgrounds have the incentives to follow up higher education studies.

Strengthening on-the-job and for-the-job learning

Lifelong learning policies should allow vulnerable workers to acquire and maintain relevant skills. Policies to develop skills beyond the formal education system, through on-the-job training, work-based learning, and informal learning schemes are increasingly important. This is especially the case of Colombia, giving the difficulties youth face to find a first high-quality job, and the need of adults to adapt to the changing needs of the job market in terms of the type of skills demanded and provide them with the skills that would allow them to make the transition to a formal job.

Colombia lacks a lifelong learning system with a clear national regulatory framework and a clear national plan. Most expenditure on training programmes are channelled into job training courses and executed by SENA, which is almost the only institution that reaches the most remote places of the country. The system is formed by: i) short-duration VET programmes (known in Colombia as Formación Complementaria in SENA and education for work and human development in other institutions) to develop, update and recognise individuals’ knowledge and skills, ii) training programmes targeted primarily at vulnerable youth (e.g. Jóvenes en Acción) and iii) apprenticeships contracts.

The offer of courses by SENA has tripled in the last decade, showing the increased importance the government assigns to skills development. There are 4 400 institutions offering these types of trainings. However, only 9.7% of the working age population received training courses in 2015 and 85% of those were living in urban areas. Publicly funded training programmes are poorly targeted at those who need it most, such as low-skilled workers and those facing labour market difficulties receive the least training (Figure 2.22).

The job-training offer is fragmented and complex, lacks quality certification and shows great heterogeneity in terms of quality and relevance. Colombia offers a multiplicity of diplomas and certifications for training programmes that are not part of a coherent framework of learning pathways (González-Velosa and Rosas Shady, 2016[62]). The offer is not complementary and there is a lack of mechanisms to certify and validate learning in a uniform and coherent way. SENA has an independent financing and regulation scheme, and the quality assurance of a large part of its training offer is different from those applied to the rest of the training providers and is usually not regulated by external organisations. Other institutions offering these type of courses include compensation funds, non-governmental or private organisations, regulated by the Ministry of Education and its regional Secretariats. According to the Information System of Education for Work and Human Development (SIET), the country has 17 630 programmes, of which only 10% have a quality certificate, while from the 3 700 institutions 10% have a valid quality certificate. Fragmentation is a problem for students, who need to make decisions of programmes and for employers, since quality assurance, relevance of the studies and skills recognition remains heterogeneous.

Governance challenges are not unique for Colombia. Common challenges for VET governance in many OECD countries include institutional fragmentation, ineffective involvement of social partners and other non-state stakeholders, weak engagement of regional and local actors. The number of stakeholders VET serves, and the rapid changes to which it needs to adapt, result in a strong imperative for good governance models that ensure effective participation, leadership and coordination. In Colombia, moving towards effective governance, allowing the articulation of the system and establishing unified criteria for evaluation and financing is needed. A national system of quality and relevance assurance using unified criteria for all suppliers would help increase transparency and quality of the system. The training offer should be externally evaluated in terms of relevance and job market performance of its students. This will help to allocate resources in programmes that work best. A systematic assessment of the labour market impact of training programmes is needed. Even if there are some experiences with impact evaluations, rigorous evaluation mechanisms should be implemented to identify what works better for firms as well as workers, particularly in terms of earnings quality and job security.

Figure 2.22. Extending coverage of training courses to the most vulnerable is needed

Box 2.8. Learning from well-performing dual-VET Systems in OECD countries

Some OECD countries such as Austria, Germany and Switzerland benefit from a very well developed vocational education and training (VET) system. In those countries, VET is a common pathway to stable and well paid jobs and it is well appreciated by students, enterprises and governments. It is a way to have skilled workers and avoiding young people failing out of the education system and the labour market. An analysis of their systems brings up four major points. In a first place, there is a strong stakeholder involvement; all parties are participating in the establishment of programmes. Secondly, countries help matching students and apprenticeship places by means of specifics programmes. Thirdly, they also give incentives to firms for hiring trainees. Finally, they monitor apprenticeship places by providing licences and staff training.

Austria, Germany and Switzerland have set up specific organisations to manage the dual-VET system and to make it responsive to labour market needs. Those organisations regroup social partners and VET teachers in order to build a system working for all parties involved. In Austria and Switzerland, social partners are responsible for introducing and updating ‘ordinances’. Ordinances usually define the profile of the post, competencies that need to be acquired and set out final examination requirements. In Switzerland, employers are the only one entitled to initiate reforms procedures for VET ordinances. Germany has implemented an “Innovation Circle on VET” where employers, trade unions, academia and regions work together to think about upgrading the VET system.

Career guidance is used to ensure that the VET system is in concordance with labour market needs. It helps students to choose apprenticeships that best suit their interests and which correspond to employer demands. Switzerland has developed a good career guidance system. It is mandatory for students in compulsory secondary education. Counsellors are trained by the Swiss Federal Institute for Vocational Education and Training about VET courses and the associated labour markets in order to be perfectly informed. Career guidance offices are independent from schools.

In order to help apprentices to find a place where to train, countries have developed different strategies. In Germany, the Federal government has concluded an ‘Apprenticeship pact’ with the Chamber of Commerce and Industry to increase the number of apprenticeship places. They also started a new programme called JOBSTARTER which is supposed, among others things, to help students finding an apprenticeship place. In Switzerland, twice a year, the Link Institute for Market and Social Research conducts a survey for the Federal Office for Professional Education and Technology (OPET), called “apprenticeship barometer”, in order to estimate demand and supply for apprenticeships. When there is a mismatch, the OPET takes measures; it finances the set-up of a host company network and takes initiative to help weakest students to find an apprenticeship place. In some sectors, when firms are too small or too specialised to train an apprentice, alliances are created. Firms work together in the training programme. Moreover, funds are developed to share costs of apprenticeships between all companies of a certain sector. In Switzerland, 13 funds have been made mandatory.

Besides, in Austria and Germany, governments provide subsidies or tax reliefs for enterprises participating in apprenticeship schemes to incite companies to take apprentices and for students to benefit from more apprenticeship places. In Austria, there is a tax exemption for training relationship and financial incentive for the creation of additional apprenticeship places per company. Training enterprises receive EUR 1 000 per apprentice and apprenticeship year and a lump-sum for every additional apprentice (EUR 400/month during the first apprentice year, EUR 200/month during the second, EUR 100/month during the third). In Germany, for students who have not found an apprenticeship place by the end of September, who are socially disadvantaged or have a learning disability, an internship programme has been implemented. It covers the intern’s wages and social contributions for the company which takes the apprentice on probation for 6 to 12 months.

Quality is assured by a strict monitoring system on companies employing apprentices. In Austria and Switzerland, training firms have to obtain a licence to train apprentices. In Austria, the license is delivered by the Apprenticeship Office. It proceeds, with the help of the Federal Economic Chamber, at an examination of enterprises. In order to obtain the certificate of apprenticeship, enterprises have to fulfil some prerequisites: firms have to carry out the activity in which the apprentice is to be trained, need to be equipped and managed in a way that it is a position to impart to the apprentice all the knowledge and skills included in the occupation profile and have a sufficient number of professionally an pedagogically qualified trainers must be available in the company. In Germany, Austria and Switzerland, trainers in companies have to complete a formation to be allowed to train apprentices.

Source: Learning for Jobs, OECD Reviews of Vocational Education and Training for Austria, Germany and Switzerland.

Enhancing apprenticeships

Developing an apprenticeship system would improve youth’s opportunities to get better quality jobs (Kuczera, 2017[67]), avoid skill mismatches and enhance productivity (Fazio, Fernández-Coto and Ripani, 2016[68]). Apprenticeships can help young people to maintain the link with the labour market, gain useful work-relevant skills, reduce school dropout rates, improve employment opportunities and have a first formal job (OECD, 2015[34]; Dema et al., 2015[69]). In Brazil, for example, 80% of those who complete apprenticeship programmes find a formal job within two years. Yet, their effectiveness depends on ensuring access to high quality programmes, making apprenticeships valuable to youth and attractive to employers. Some vocational training programmes involving internships, such as Jóvenes en Acción, are proving good results on employability and earnings (Attanasio et al., 2017[37]; Attanasio, Kugler and Meghir, 2011[59]; Florez et al., 2018[70]), and including apprenticeships as part of the on-the-job training could help strengthen the positive impact.

Colombia has an incipient system of apprenticeship. Law regulates apprenticeships contracts combining on-the-job and off-the-job training. Firms of at least 15 employees need to hire an apprentice for every 20 employees or pay a fee to finance an entrepreneurship fund (equal to 5% of the total number of full-time employees times the value of the minimum wage). The law stipulates that the apprentice should receive a living stipend of approximately 50% of the minimum wage during the classroom-training phase and 75% of the minimum wage if the national unemployment rate is above 10%, and 100% of the minimum wage if the unemployment rate is below 10% during the on-the-job training phase. In the case of university students, the law states that they should always receive at least 100% of the minimum wage. In other OECD countries apprentices’ wages can be between 25% and 60% of wage of skilled workers and tend to vary largely across sectors and increase over the duration of the apprenticeship programme (Kuczera, 2017[67]).

The apprenticeship system is developed (Figure 2.23) with 345 thousand apprenticeships contracts signed and 31 thousand firms hiring in 2016 (SENA, 2017[71]). SENA is in charge of providing the technical training. A number of governance issues could be improved. There are no mechanisms to ensure the quality of training and regulate it in terms of content and learning objectives. A national system of control and monitoring of the training provided by firms, the crucial element of the apprenticeship contract, needs to be set up. It is also key to develop an assessment and industry recognised certification of acquired competencies/qualifications. Also, offering the possibility to link it to formal education creating a dual-VET system (at upper-secondary and tertiary education) can increase work-based learning in formal education while making it more relevant for youth and employers, as done in other OECD countries (Box 2.8). Necessary resources could come from reallocation of resources from ill-targeted benefits for households and firms, pro-growth reforms and a rebalancing of the tax-mix (see Key Policy Insights chapter).

Figure 2.23. The apprenticeship system is well developed in Colombia

Engaging small and medium-sized firms is key to increase apprenticeship opportunities. SMEs can be sensitive to the risks of engaging in this form of training, especially if they are unsure of what will be expected of them in the course of training an apprentice, or whether they will be able to retain the apprentice post-training. SMEs may need not only financial incentives, but also a supportive business environment offering practical assistance. To create such an environment, a coordinated strategy involving all stakeholders in a sector or community is paramount. A good example is the Australia’s group training organisations (GTOs). GTOs recruit apprentices and sign the apprenticeship contract and place apprentices into host employers. It is attractive to SMEs as the administrative costs are reduced. GTOs also provide additional services such as broking vacancies for apprenticeship and candidates and reviewing the quality of training (OECD, 2016[72]).

Getting skills right

Improving labour market information on skill needs and ensuring that this information is used effectively to develop the right skills across formal and complementary education and training policies is paramount to increase relevance of the educational offer and reduce skills mismatches and shortages. This can be done by promoting skills assessment and anticipation (SAA) exercises. Typically, the results of assessment and anticipation exercises produce information on where (i.e. in what economic sectors, occupations, or geographic areas) and when (i.e. now, in the future, or both) the demand and supply of skills are (mis)aligned. It is useful for policy makers to steer policy action (e.g. in education, employment, and migration policy areas), and by individuals (e.g. students and jobseekers) to support their employment or education choices. In particular, it could be used to link formal and complementary education and training to the needs of the labour market.

Colombia has 85 sectoral round-tables (mesas sectoriales) including employers representatives. However, there is no clear evidence that the work of these roundtables feeds the development of courses (González-Velosa and Rosas Shady, 2016[62]). There are no national level exercises and the existing exercises rely on the analysis of labour market statistics. Colombia should develop a national and better-integrated skills assessment and anticipation exercise and use it to inform education, employment, and migration policy as well as students and jobseekers. This would help, particularly training systems and technical education, to become more attuned to employers’ skill needs.

Box 2.9. Main recommendations for fostering good jobs for all in Colombia

Key recommendations for boosting formality

Establish a comprehensive strategy to reduce the cost of formalisation by:
- Reducing non-wage labour costs;
- Reviewing the minimum wage to achieve a more job-friendly level;
- Reducing firms’ registration costs and simplifying the registration of workers.

Other recommendations:

Enhance the benefits of formality by avoiding the use of formal workers’ contributions to finance social services for non-affiliates.

Ensuring effective labour law enforcement

Ensure sufficient resources to the labour inspectorate and improve its presence in rural areas.
Stimulate social dialogue and effective collective bargaining to provide a voice to workers.
Ensure prosecution of crimes against trade unionists.

Ensuring adequate support for workers

Restrict the withdrawal from the funds of individual severance accounts or increase the minimum savings level to ensure unemployment insurance.
Implement systematic impact assessments of active labour market programmes to focus funding on those that are performing well.

Promoting gender equity

Promote shared mother and father parental leaves together with incentives to allow fathers to take parental leave.
Increase affordable, good-quality childcare.

Promoting skills development

Reduce fragmentation and improve the governance in vocational education and training by developing a single institutional framework with a clear national objective and regulatory framework.
Fully implement the national qualification framework.
Develop a mandatory accreditation system for all tertiary vocational education and training programmes and institutions.
Develop work-based learning programmes based on apprenticeships across all levels of education and training.
Foster the creation of group training organisations for SMEs.

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Annex 2.A. The OECD Jobs Strategy dashboard

	Panel A. Dashboard of job quantity, job quality and inclusiveness
	Quantity						Quality						Inclusiveness
	Employment		Unemployment		Broad labour underutilisation		Earnings quality	Labour market insecurity			Quality of working environment		Low-income rate	Gender labour income gap		Employment gap for disadvantaged groups
	Share of working-age population (20-64 years) in employment (%) (2017)		Share of persons in the labour force (15-64 years) in unemployment (%) (2017)		Share of inactive, unemployed or involuntary part-timers (15-64) in population (%), excluding youth (15-29) in education and not in employment (2016)		Gross hourly earnings in USD adjusted for inequality (2015)	Expected monetary loss associated with becoming and staying unemployed as a share of previous earnings (%) (2016)			Share of workers experiencing job strain (%) (2015)		Poverty rate after taxes and transfers, poverty line 50%, working-age population (18-64) (%) (2015)	Difference between average annual earnings of men and women divided by average earnings of men (%) (2015)		Average employment gap as a percentage of the benchmark group (prime-age male workers) (2016)
OECD countries
Iceland	87.2		2.9		12.6		22.7	2.2			23.8		6.5	35.3		9.2
Switzerland	82.1		5.0		18.3		28.4	1.7			..		6.4	48.3		14.6
Sweden	81.8		6.8		19.5		20.3	3.8			23.6		8.4	25.6		13.3
New Zealand	81.3		4.9		21.4		16.8	4.4			21.6		9.7	..		17.7
Japan	80.3		3.0		24.0		16.1	1.6			31.2		14.5	57.7		24.7
Germany	79.2		3.8		21.0		25.0	1.9			28.5		10.0	42.6		20.2
Estonia	78.7		5.9		21.9		7.5	5.2			23.0		12.9	30.4		22.1
Czech Republic	78.5		2.9		20.7		9.0	1.8			25.4		5.8	44.3		30.3
Norway	78.3		4.3		19.2		29.0	1.9			13.8		9.3	35.0		16.0
United Kingdom	78.1		4.5		23.5		17.7	2.7			20.7		10.1	42.6		22.9
Netherlands	78.0		4.9		22.9		28.7	1.9			23.4		8.8	46.2		22.2
Denmark	76.9		5.9		21.0		29.8	3.1			18.2		7.0	29.8		16.7
Canada	76.3		6.4		26.0		19.6	3.8			..		14.1	38.7		19.3
Lithuania	76.0		7.3		23.5		7.5	..			30.8		14.7	26.9		17.6
Australia	76.0		5.8		28.5		21.9	3.8			25.6		10.2	41.5		21.4
Israel	75.5		4.3		24.0		8.7	3.5			25.1		14.3	..		14.6
Austria	75.4		5.6		25.4		23.0	2.6			28.5		8.7	47.8		21.6
Latvia	74.7		8.9		26.8		6.4	..			30.3		13.0	24.9		17.7
Finland	74.3		8.8		26.6		21.2	2.0			16.3		6.8	21.4		18.6
United States	73.6		4.4		25.7		17.7	3.7			25.8		15.5	39.5		25.4
Slovenia	73.4		6.7		27.6		14.2	3.5			31.8		8.7	22.8		27.4
Portugal	73.4		9.2		29.8		8.7	7.0			33.2		12.3	29.0		22.0
Hungary	73.3		4.2		26.8		7.2	3.2			36.4		10.0	29.3		33.6
Ireland	72.7		7.0		33.5		19.3	3.1			23.9		9.9	39.9		26.3
Korea	71.6		3.8		..		9.9	2.4			..		8.5	61.0		31.8
Luxembourg	71.5		5.5		27.5		28.8	2.2			23.1		10.9	31.9		24.0
Slovak Republic	71.1		8.2		29.7		8.8	6.4			32.0		7.6	31.7		33.5
France	71.0		9.2		32.7		21.9	4.4			25.8		8.3	34.6		27.8
Poland	70.9		5.0		29.4		7.6	4.0			30.0		11.0	35.5		31.5
Chile	69.1		7.0		33.2		6.6	7.1			28.2		14.2	46.4		27.5
Belgium	68.5		7.1		30.0		29.3	2.4			25.8		9.5	33.3		30.0
Mexico	66.6		3.6		..		4.6	4.0			28.9		13.9	54.5		40.4
Spain	65.5		17.3		39.3		17.5	17.5			35.0		15.9	34.0		27.5
Italy	62.3		11.4		42.9		19.1	10.7			29.6		14.7	44.3		34.0
Greece	57.8		21.7		44.8		10.0	22.7			47.9		16.0	49.1		38.2
Turkey	55.3		11.2		44.2		5.8	13.0			42.9		13.5	..		47.1
OECD	72.1		5.9		27.2		16.6	4.9			27.6		10.9	38.1		24.7
Non-OECD countries
Colombia	73.1		9.7		30.2		3.7	11.0			..		..	42.5		34.3
Costa Rica	66.6		9.2		37.8		5.5	7.2			..		17.5	48.5		44.9
Argentina	69.0		8.5		36.2		7.4	7.5			..		..	45.1		38.8
Brazil	65.9		13.0		32.7		4.8	6.6			..		17.3	48.2		39.2
China	79.0		2.9		..		..	5.8			28.9		26.0	..		32.0
India	59.5		3.7		..		2.7	3.6			30.7		17.1	78.1		50.1
Indonesia	72.6		5.6		29.6		1.6	8.2			..		..	62.7		40.1
Russian Federation	74.9		5.2		23.3		6.8	5.1			33.4		12.8	33.2		35.4
Saudi Arabia	60.0		5.7		..		..	..			..		..	..		..
South Africa	49.8		27.4		50.2		2.5	22.6			26.7		23.9	50.1		50.3
Above average performers (Top-third)							About average performers (Mid-third)						Below average performers (Bottom-third)
		Panel B. Framework conditions for resilience and adaptability
		Resilience	Adaptability
		Unemployment cost of a decline in GDP	Labour productivity growth		Ability of productive firms to attract workers		Wage-productivity decoupling	Adult skills: low-skilled adults		Student skills		Non-standard workers			Regional disparities
		Average increase in unemployment rate over 3 years after a negative shock to GDP of 1%	Average annual labour productivity growth		Cross-firm employment growth differential associated with 10 pp productivity differential (%)		Difference between annual real median wage growth and labour productivity growth	Share of adults with numeracy skills below level 2 in PIAAC		Share of 15-year-olds not in secondary school or scoring below Level 2 in PISA (%)		Share of Own-account self-employed and temporary workers in total employment (%)			Coefficient of variation in regional unemployment rates (%)
		2000-16	2000-16	2010-16	2003-13	2010-13	2000-13	2010-13	2012, 2015	2015		2013			2000		2016
OECD countries
Iceland		0.1	1.5	1.4	..	..	..	..	..	28.8		20.6			15.0		22.3
Switzerland		0.4	0.4	-0.1	0.1	0.1	..	..	..	19.0		18.7			23.6		31.7
Sweden		0.3	1.3	0.9	0.2	0.3	0.4	1.9	14.7	25.9		19.0			30.9		12.2
New Zealand		0.4	0.7	0.9	..	..	0.3	-0.4	18.9	29.3		.			19.2		24.3
Japan		0.2	0.7	0.6	0.3	0.4	-0.5	0.5	8.1	15.4		20.2			18.6		13.9
Germany		0.4	0.6	0.7	0.8	0.9	-0.4	0.1	18.4	20.6		18.1			51.7		30.1
Norway		0.2	0.5	0.5	0.6	0.5	-0.5	-0.0	14.6	24.3		11.8			20.5		16.7
United Kingdom		0.4	0.8	0.7	0.1	-0.0	-0.2	-1.0	24.2	34.4		16.1			28.9		20.2
Denmark		0.6	0.6	0.8	0.1	0.2	0.1	0.8	14.2	23.1		13.6			13.0		6.6
Netherlands		0.4	0.7	0.8	1.1	0.3	-0.7	..	13.2	20.8		25.9			26.5		20.0
Czech Republic		0.3	2.1	1.2	..	..	0.3	0.3	12.9	26.8		21.2			42.9		36.2
Estonia		0.7	2.8	1.2	0.4	0.4	..	..	14.3	17.6		8.4			26.2		38.5
Canada		0.5	0.6	1.0	..	..	-0.6	-0.5	22.4	28.5		21.2			42.3		29.3
Australia		0.4	1.0	1.3	..	..	-1.0	0.9	20.1	29.3		32.1			39.7		46.0
Israel		0.6	0.7	0.8	..	..	-0.6	..	30.9	36.4		.			15.1		17.3
Austria		0.1	0.4	0.2	0.7	0.7	-0.0	0.4	14.3	34.8		15.4			32.8		46.3
Finland		0.2	0.6	0.1	0.2	0.3	1.0	0.7	12.8	15.9		21.8			62.2		13.1
Latvia		0.8	3.9	2.5	0.5	0.3	..	..	..	30.2		.			23.6		40.7
United States		0.7	1.3	0.5	0.5	0.7	-1.5	-1.0	28.7	41.0		.			23.9		21.1
Hungary		0.3	1.7	0.1	0.4	0.3	-0.6	-0.3	..	35.5		15.9			34.8		43.9
Korea		0.2	2.5	1.3	0.3	0.5	-1.1	0.8	18.9	22.5		32.7			23.7		20.1
Portugal		0.3	0.8	0.3	0.2	0.3	0.5	-1.2	..	33.2		31.0			36.0		15.0
Luxembourg		0.1	0.0	0.3	0.1	0.0	..	..	..	35.0		11.9			..		..
France		0.4	0.6	0.6	0.3	0.4	0.7	0.9	28.0	30.4		20.8			35.7		17.2
Slovenia		0.3	1.0	0.9	0.2	0.1	..	..	25.8	22.2		18.6			22.7		15.9
Ireland		0.3	3.0	5.5	0.1	0.1	-1.1	-3.1	25.2	18.0		19.5			26.5		13.6
Slovak Republic		0.5	3.1	1.5	..	..	-0.8	0.5	13.8	35.5		22.3			41.6		38.5
Poland		0.6	2.7	2.3	0.2	0.5	-1.3	-2.0	23.5	24.7		37.4			20.0		24.8
Chile		0.3	1.4	1.2	..	..	..	..	61.9	59.6		.			31.3		25.2
Belgium		0.3	0.6	0.4	0.1	-0.0	-0.3	0.9	13.4	25.7		16.9			54.8		56.1
Mexico		0.2	0.2	1.3	..	..	..	..	..	73.2		.			29.6		28.7
Spain		0.9	0.7	0.9	0.5	0.4	0.5	-0.6	30.6	29.3		32.1			35.9		28.9
Italy		0.5	-0.4	-0.4	0.4	0.3	1.0	-0.4	31.7	38.4		27.9			73.6		46.8
Greece		0.8	0.2	-1.0	0.2	0.6	1.4	-1.4	28.5	41.5		35.6			26.3		19.7
Turkey		0.2	2.6	2.6	..	..	..	..	50.2	66.0		30.2			42.0		50.3
Lithuania		0.5	4.2	2.0	..	..	..	..	17.4	32.7		..			13.1		29.6
OECD countries		0.4	1.3	0.8	0.3	0.3	-0.2	-0.1	22.5	31.3		22.0			31.6		27.4
Non-OECD countries								..				..					..
Colombia	0.2		1.9	1.7	..	..	..	..	..	74.8		..			29.7		21.9
Costa Rica	0.6		2.1	2.7	..	..	..	..	..	76.2		..			..		..
Argentina	..		0.7	-0.3	..	..	..	..	..	75.9		..			..		..
Brazil	0.3		1.5	-0.2	..	..	..	..	..	79.0		..			33.7		33.6
China	0.0		2.1	2.0	..	..	..	..	..	46.2		..			53.9		..
India	..		6.5	5.6	..	..	..	..	..	..		..			..		..
Indonesia	..		3.6	3.8	..	..	..	..	..	78.6		..			..		..
Russia	0.1		2.8	0.6	..	..	..	..	..	22.8		..			38.2		63.2
Saudi Arabia	..		-1.8	-2.7	..	..	..	..	..	..		..			..		..
South Africa	0.3		0.6	-0.3	..	..	..	..	..	..		..			14.0		20.0

Notes: Panel A: Countries are ordered in descending order by the employment rate. Dark blue stands for better performance, light blue for worse one. Youth, aged 15-29 years, in education and not in employment are excluded from both the numerator and the denominator of broad labour underutilisation. The groups considered in the last columns are youth, older workers, mothers with children, people with disabilities and non-natives. Data on job quantity refer to 2017 (2016 for broad labour utilisation) except for China (2010), India (2011-12) and Saudi Arabia (2016). Data on earnings quality refer to 2015, except for Argentina, Japan and the Russian Federation (2013) and India (11-12). Data on earnings quality for non-OECD countries are provisional estimates. Data on labour market insecurity refer to 2016 except for Israel (2015) and non-OECD countries (2013). Data for job strain are preliminary estimates for 2015. Data on low-income rate refer to 2015 except for Costa Rica, Finland, Israel, Latvia, the Netherlands, Sweden and the United States (2016); Australia, Hungary, Iceland, Mexico and New Zealand (2014); Brazil (2013); Japan (2012), China, India and Russia (2011). Data on labour income gap per capita refer to 2015 except for Argentina, Chile, Colombia, Indonesia and the United States (2016); Canada, Iceland, Ireland, Italy, Luxembourg, the Russian Federation and Switzerland (2014); Korea (2013) and India (2011-12).

Panel B: OECD unweighted average. Resilience: The indicator of labour market resilience measures the estimated average increase in the unemployment rate over the 3 years following a 1% decline in GDP. The indicator is obtained from estimating the following model: $U_{t + s} - U_{t - 1} = β_{0}^{s} + β_{1}^{s} {d l n G D P V}_{t} + β_{2}^{s} {d U}_{t - 1} + β_{3}^{s} {d l n G D P V}_{t - 1} {+ β}_{4}^{s} {d U}_{t - 2} + β_{5}^{s} {d l n G D P V}_{t - 2} + \sum_{j = 1}^{s} β_{4}^{j} {d l n G D P}_{t + j} + ε_{t + s}$ , where $U_{t}$ is the unemployment rate, ${G D P V}_{t}$ is real GDP in period t and s indicates the number of periods after the GDP shock. The model is estimated separately for each country and each s, with the estimated $β_{1}^{s}$ denoting the impulse-response function of unemployment to a 1% increase in GDP. The average change in unemployment is computed as the average of $β_{1}^{s}$ over the 3 years following a 1% reduction in GDP. Data refer to the period 2000-2016 for all countries. Labour productivity growth: Labour productivity is measured in per worker terms. Data refer to the period 2000-2016 for all countries except Colombia (2001-2016). Ability of productive firms to attract workers: The efficiency of labour re-allocation measures the elasticity of firm-level employment growth to lagged labour productivity. The baseline estimated equation is: $∆ l n L_{i, j, c, t} = \sum_{c = 1}^{26} β_{c} C_{c} l n {L P}_{i, j, c, t - 1} + {θ x^{'}}_{i, j, c, t - 1} + γ_{j c t} + ε_{i j c t}$ , where $∆ l n L_{i, j, t}$ denotes employment growth in firm i, industry j and country c; $C_{c}$ are country dummies; $l n {L P}_{i, j, c, t - 1}$ is labour productivity in gross output terms; $x_{i, j, t - 1}$ are employment and age of the firm; and $γ_{j c t}$ are industry-country-year fixed effects to control for unobserved time-varying country-industry specific determinants of employment growth. The country-specific $β_{c}$ parameters provide a measure of dynamic allocative efficiency. Data refer to the period 2003-13 for all countries except Portugal (2006-2008) and Hungary (2009-2013). To control for effects of the business cycle on the efficiency of labour re-allocation, over the sample period 2003-2013 the baseline specification is augmented with an interaction term of lagged labour productivity with a dummy variable taking the value 1 if the lagged change in the output gap is below 0. Countries omitted from the table do not have sufficient coverage of firms in the ORBIS dataset. Wage-productivity decoupling: The indicator of decoupling measures the percentage point difference between real median wage growth and labour productivity growth. Using the notation $∆ % X$ to denote the per cent growth rate of X, macro-level decoupling is defined as follows: $D e c o u p l i n g \equiv ∆ % (\frac{W^{m e d}}{P^{Y}}) - ∆ % (\frac{Y / P^{Y}}{L})$ , where $W^{m e d}$ denotes the nominal median wage, Y denotes nominal value added, $P^{Y}$ denotes the value added price and L denotes hours worked. Data refer to the period 2000-2013 for all countries except Australia, Canada, France, Italy New Zealand, Poland, Spain and Sweden (2000-2012); Greece and Portugal (2004-2013 ); Israel (2001-2011); the Slovak Republic (2001-2012). Low skills adults: Data refer to 2012 for all countries except Chile, Greece, Israel, Lithuania, New Zealand, Slovenia, Turkey and Jakarta (Indonesia). Data for Belgium refer to Flanders; data for the United Kingdom are the weighted average (2/3 and 1/3) of the data for England and the Northern Ireland; data for Indonesia refer to Jakarta. Low-performing students in mathematics: Data for China refer to Beijing-Shanghai-Jiangsu-Guangdong. Argentina: Coverage is too small to guarantee comparability. Non-standard workers: Workers on temporary contracts and self-employed (own account) workers aged 15-64, excluding employers, student workers and apprentices. Regional disparities: Data refer to the Territorial Level 2 (TL2) classification except for Australia, Estonia, Latvia and Lithuania (TL3), and to 2000 and 2016 except for Denmark (2007, 2016); Estonia, Chile, Israel., Mexico and Russia (2000, 2014); Spain (2002, 2014); Latvia and Lithuania (2000, 2015); Slovenia (2001, 2016); Turkey (2004, 2016); Brazil (2004, 2013); China (2008); Colombia (2001, 2014) and South Africa (2008, 2014).

Sources: Panel A: Chapter 1 of the 2016 OECD Employment Outlook, Chapter 1 of the 2017 OECD Employment Outlook, Chapter 1 of the 2018 OECD Employment Outlook, OECD Employment Database, OECD Job Quality Database and OECD Income Distribution Database.

Panel B: Resilience: OECD calculations based on OECD Employment Outlook 2017, http://dx.doi.org/10.1787/empl_outlook-2017-en; Labour productivity growth: OECD Economic Outlook database and WEO - IMF data; Wage-productivity decoupling: OECD calculations based on OECD National Accounts Database and OECD Earnings Database; Ability of productive firms to attract workers: OECD calculations based on the 2013 ORBIS vintage; Low-skilled adults: OECD (2016), Skills Matter: Further Results from the Survey of Adult Skills, http://dx.doi.org/10.1787/9789264258051-en; Low-performing students in mathematics: OECD (2016), PISA 2015 Results (Volume I): Excellence and Equity in Education, http://dx.doi.org/10.1787/9789264266490-en. Non-standard workers: OECD (2015), In It Together - Why Less Inequality Benefits All, http://dx.doi.org/10.1787/9789264232662-en. Regional disparities: OECD (2018), OECD Regional Statistics Database, https://dx.doi.org/10.1787/region-data-en.

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