IMDS study identifies long-term impacts of the Young Apprentice program on employment and income

New work by the institute aims to generate evidence to support public management decisions and the debate on the benefits and costs of active labor policies

Hello Leitor,

The transition from school to a world of work and to the productive inclusion of youth have been central themes for IMDS since its creation. In the past, we have addressed the subject in discussion texts, indicators and dashboards, and pages on public policies and social programs on the Impact Platform (see examples here and here). Now, IMDS adds to this set of studies an assessment of the impacts of an old and important Brazilian public policy, the Young Apprentice Program.

The Technical Note “Jovem Aprendiz Program, Employability and Formal Income from Labor” brings together the main conclusions of a study of the first generations exposed to the Apprenticeship Law and was co-authored by Sergio Guimarães (former research director), Flavio Riva (IMDS researcher), Matheus Leal (MDS) and Raphael Corbi (Department of Economics, University of São Paulo).

Enacted in 2000, the law established quotas and tax incentives for companies to hire young people under the age of 18 as apprentices in their professional staff, enrolling them in technical and vocational education courses aligned with the exercise of the function.

The regulation had marked effects on the country’s economy: from 2001 to 2005, the number of apprentices in formal jobs grew more than 10 times. However, this expansion did not occur homogeneously in the different Brazilian labor markets. While some places replaced a large portion of their formal temporary contracts with apprentices, others remained very close to the pre-reform situation.

The IMDS note explores the significant variation over time and the heterogeneity of the expansion of the Young Apprentice Program in the Brazilian territory to investigate the effects of participation in the program on employment and formal income. For the research, the trajectories of about 155 thousand workers who entered the labor market between 1998 and 2005 as apprentices or through other temporary contractors were reconstructed using administrative data from the Annual Report of Social Information (RAIS) from 1998 to 2019.

The sample included individuals born from 1985 to 1988, and who therefore started their careers under the new legislation, and individuals born from 1982 to 1984, who were not directly affected by the change. To construct a control group, the analysis compares the differences between these cohort groups in micro-regions with high and low temporal variation in adherence to learning contracts.

The results of the natural experiment indicate that participation in the program generated an increase of 7 to 10 percentage points in the formal employment rate, as well as increases of 24% to 35% in income between the ages of 25 and 29, thus about 10 years after participation in the program. These significant gains suggest an important role for access to formal job opportunities at the beginning of life, coupled with qualification and certification.

We hope that this evidence can support public management decisions and, more generally, the debate on the benefits and costs of active work policies aimed at youth and their importance for trajectories marked by greater social mobility.

See you in the next "IMDS Letter"!

Paulo Tafner

CEO