Politics & Policies

Public Employment Service (PES) in Colombia – Increases the probability of having a formal job

Active labour market policies (ALMPs) have gained increasing importance in Latin America and Colombiathe Caribbean (LAC) since the beginning of the 2000s as helpful policy instruments to sustain productive employment. This reflects a policy shift by governments in the region to complement traditional interventions aimed at poverty reduction (such as conditional cash transfers, CCTs), with policies targeted at increasing the employability of the labour force. As a result, a variety of ALMPs has emerged in the region that does not strictly reflect the experience of developed economies. Indeed, ALMPs in LAC tend to have a generally broader focus (i.e. combine together different interventions such as training and public works) and a wider target group (i.e. eligibility requirements are rather low) (ILO, 2016). Colombia represents a paradigmatic example of this policy approach and recent evolution. Indeed, public spending on ALMPs has increased from 0.001 to 0.317 per cent of GDP between 2000 and 2010. At this level, spending on active interventions in Colombia is comparable with spending on CCTs (0.347 per cent of GDP) and is more than ten times higher than spending on unemployment benefits (Cerutti et al., 2014). Public expenditure on ALMPs is still lower in Colombia than in Argentina, Brazil and Chile (all countries with higher levels of GDP per capita); but it is higher than in any other country in the region with available information. The bulk of public expenditure in Colombia is devoted to training (86.9 per cent), followed by expenditure on labour market services (10.8 per cent), start-up incentives (2.2 per cent) and public works schemes (0.1 per cent).

This paper assesses the effects of participation in the Public Employment Service (PES) in Colombia. The results show that participating in the PES increases the probability of having a formal (rather than informal) job. Around two thirds of this effect is related to the fact that PES participants are generally placed in larger companies. By contrast, participation in the PES has a negative effect on hourly wages. This derives from a positive effect on the wages of the low-skilled and a negative effect on the wages of the high-skilled. For both formal employment and wages, the PES has a more positive effect when the services are provided face-to-face rather than online. The results are robust to (i) changes in the matching algorithm; (ii) modifications in the area of common support; and (iii) possible presence of unobserved heterogeneity.

Chosen excerpts by Job Market Monitor. Read the whole story at Do Public Employment Services improve employment outcomes? Evidence from Colombia


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