“Friends and Family”: The Dominant Job Search Method in Developing Countries: ... Works Well Only with the Right Friends and Family

Developing countries with very different kinds of job markets vary in how much formal or informal search methods are used, although informal methods usually dominate, particularly in countries where most of the jobs are informal. In Latin America and the Caribbean, we know informal job search dominates every country (Graph 1.1). For emerging and developing countries, we know about job search methods only if the labor force is asked this question regularly in a labor force survey. “Friends” is also the overwhelming response in the Middle East and North Africa when workers are asked how they found a job - from over 70% in Lebanon, over 60% in Syria (2010), and over 30% in Yemen and Egypt.2

Graph 1.1 “Friends and Family” - the dominant job search method in Latin America

(Source: Calculations from annual labor force surveys, various years 2007-2010. Jacqueline Mazza, FastTrackingJobs: Advances and Next Steps in Labor Intermediation Services in Latin America and the Caribbean, Inter-American Development Bank, Washington, DC, 2011.)

As Graph 1.1 shows, the proportion of informal search in Latin America and the Caribbean can vary greatly from just over 50% in a growing, middle-income country like Panama with comparatively better secondary education to more than 90% in Paraguay, a country where most employment is informal and poverty is comparatively high. Despite higher formality and income, informal job search still dominates in middle-income developing countries like Colombia (92%) and Mexico (91%). The efficiency and effectiveness of using informal “friends and family” to find work depends on how good those contacts are - and here is the core problem for the poor in developing countries. The poor know only other poor who have low-wage or survival employment, hence a few more fire eaters and garbage pickers. When a poor nurse in Nigeria just recently lost her job, she turned not to looking for a job in another clinic but to selling peanuts where she had immediate contacts.3

It is the less educated overall who rely disproportionately on informal job search and have the contacts for poorer jobs. Survey data for Latin America and the Caribbean shown in Graph 1.2 confirms that those with

Graph 1.2 Informal job search greater for the less educated (percent of informal job search by level of education)

(Source: Calculations from annual labor force surveys, various years 2007-2010. Jacqueline Mazza, FastTrackingJobs: Advances and Next Steps in Labor Intermediation Services in Latin America and the Caribbean, Inter-American Development Bank, Washington, DC, 2011.) primary education or less used informal job search the most, across developing countries of varied income levels.

Garcia and Nicodermo found that it is not just “friends and family” that matters for informal job search, but neighborhoods (a wider circle of friends).4 What did they find for the difference between those who lived in poor neighborhoods versus wealthier neighborhoods? They found using data from Colombia that the chances of finding a job - whether by informal or formal methods - increased depending on how your neighborhood looks for work. People tended to use the methods most used by other employed people in the neighborhood, and workers referred to job opportunities in poor neighborhoods earned less due to the nature of their contacts.5 Job search methods and contacts reinforced existing income inequality with strong “informational asymmetries” depending on where you lived.

Informal job search has another disadvantage for those already in the informal sector - it has also been found to increase the probability that you will find informal, low quality work. Gustavo Marquez and Cristobal Ruiz-Tagle found in Venezuela that workers coming from the formal sector were more likely to use formal methods, and informal workers or the self-employed, informal methods.6 Marquez and Ruiz-Tagle’s study found that it was this informal or formal labor market history - more than education, age or gender - that determined the search strategy.7 They found that it was the use of formal employment agencies - regardless of labor market history - that was the most effective in getting a job, followed second by informal methods and last by use of the media. Research from Great Britain similarly confirmed that it was low-skilled workers and the long-term unemployed - those with poor contacts - who benefitted the most from a formal public employment service.8

The “friends and family” model in the developing world also reinforces discriminatory practices well beyond economic, education and work status, reinforcing gender, ethnic and cultural stereotypes that keep people from being considered for more productive and more formal jobs. Women and indigenous groups are more likely to have even poorer job contacts. In a literature review of developing countries, a job search advantage for men was found in having a wider range of more work-centered networks.9 Even in using formal methods, women, ethnic groups, and castes as in India were referred to jobs that the referrer considered culturally appropriate, reinforcing severe occupational segregation and low pay levels. A labor market survey of Bolivia, a country where there is a majority of indigenous peoples, found that women work in jobs with less socio-economic status and more domestic responsibilities; this constrained their ability to create the social networks and channels needed to find salaried employment.10 In many Middle Eastern and African countries, political parties, tribes are among the distinct social groups that can control distinct government ministries and private firms making employment more of a patronage system, institutionalizing discrimination.

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