Skills as an engine for development
The skills gap is one of the greatest bottlenecks for the growth of Latin American and Caribbean.
9 out of 10 businesses in countries such as Argentina, Brazil and Chile are not able to find workers who possess the skills they require to be productive at a competitive level. The problem is not a shortage of workforce, since the region is home to 22 million youths who are not in employment, education or training (NEET). The jobs often exist but there are not enough workers trained to be productive.
In the region, one in four youths aged 15-24 are not working nor studying.
Employment in Latin America looks like a puzzle in which the pieces do not match: on one side, we have skills possessed by workers, and on the other, the needs of the productive sector. Meanwhile, the productivity of the region is much lower than in countries with comparable development levels.
What are the effects of a skills gap?
In the productive sector:
- Business are limited in terms of innovation and process enhancement, which impacts their productivity
- Businesses are forced to import talent: one third of the vacancies with highest qualifications are filled with foreign workers
- It is hard to attract foreign investment: for more than half of international investors, the low level of the skills of the workforce is the most important barrier to investment in the region
Among workers, the young people are the most affected:
- The youth unemployment rate nearly triples that of adults 25 to 64 years
- 2 out of 3 employed youths have a precarious job
- The precariousness of employment is one of the causes of social marginalization and adoption of risky behaviors such as violence and criminality.
The solution is to invest more and better
Latin American governments invest very similar percentages in education as other OECD countries like Germany, France or Sweden, and even more than Belgium and Switzerland. Nevertheless, the region lags behind in academic performance, according to PISA scores.
The 8 Latin American countries that participate in the PISA tests are ranked among the 20 with the lowest results, from a total of 65 countries.
According to the OECD, 48% of students of the region who enter the labor market experience difficulties to understand a basic text, and 62% are not able to perform basic number calculations. Currently, vocational training systems fail to remedy the weaknesses of the education system. This is why it is important to invest more and better in vocational training, to complement skills learned at school with the ones required by businesses.
TransForming Training Systems
In order to increase employability levels of Latin American and Caribbean workers, we require new vocational training systems which match the needs of the productive sector.
To achieve this goal, an active implication of the private sector is essential: the involvement of businesses, trade unions and professional associations, which must work hand in hand with public institutions. In order to become competitive businesses in a new economy, traditional training models based on rigid and uniform study plans, must be gradually substituted with mechanisms of continuous feedback between employers and the training sector; for instance, with the implementation of programs combining classroom instruction with internships at companies, or with direct on-site training. A high quality vocational training is related to better educational study plans, better prepared teachers and adequate institutional arrangements. Furthermore, there is the need for a continuous review, monitoring and assessment of outcomes, with the aim of incorporating enhancements and producing evidence from experiences that truly work.
Several studies confirm that the skills –and not the number of years spent in a classroom– account for 50 to 65% of differences in labor income.
Quality and relevance are key elements of vocational training. This is the reason why countries with education systems which are better connected to the workplace obtain better results in youth employment rates. Without doubt, technical education is more effective as it focuses on the skills demanded by the market, when curricula are updated and when growing occupations or sector are prioritized.
The IDB wants to be part of the solution
Closing the skills gap is not an exclusive challenge of our region. Many countries all over the world have pursued innovative solutions, in many cases with excellent results. Through “TransFormation: skills for productivity”, the IDB, in a joint effort with strategic stakeholders at the international level, wishes to share the best global experiences, with the aim of learning the most useful aspects from each of them. It’s not a matter of copying, but rather of adapting successful elements from existing models to the needs and peculiarities of each coutry. With this in mind, the IDB provides background studies for each country, and the support required for these transformation processes.
This is a fundamental challenge for the region. The longer it takes for the region to close the skills gap, the bigger the distance separating us from the more productive economies, and the greater the lag of the region. The development of our countries and the generation of more opportunities of growth for our people is in our hands.