Relation to IDB’s Institutional Priorities

Education is one of the IDB Presidential Initiatives. School-to-Work transition was recognized as one of the main priorities in the sector in the Region, and it is one of the 3 strategic areas of the Education Division, together with Teacher Quality and Early Childhood Development.

The coverage of education in the region has increased enormously during the last twenty years; however, the quality of the education seems insufficient for providing the skills needed to productively enter the workforce, and lags behind other regions of the world with similar levels of education investment. The conclusions of this research agenda will contribute to better understand how youth employability problems are related to poor education quality and to the lack of skills provided by the education system.

Objectives and Expected Results

The main question that this research agenda addresses is to what extent there is a gap between the skills (as opposed to credentials) that the education system generates and those that the firms demand. The main objective is to develop analytical elements to base our proposals of policies, programs and interventions to the formal education systems in the Region (at both secondary and post-secondary levels) aimed at improving their relevance in terms of youth labor market insertion and career development.

Although youth employability has been a policy priority in several countries in the Region and although the quality of education has been recognized as one of the factors behind the employability problems of the youth, there is little quantitative evidence documenting the gap of skills demanded and those supplied, as opposed to the US. Moreover, there is limited analytical work in Latin America and the Caribbean (LAC) studying this gap’s relationship with youth employability problems.

So far, the approach to address employability problems of youth in LAC, has been youth training programs. The IDB approved this type of program in 11 countries, several of which included good impact evaluation strategies. In general, results are mixed. The challenge is to identify alternative interventions in technical and general secondary and postsecondary education that have higher impact and returns, as well as to inform some policy options, among them: (i) how can schools be more effective in producing the skills demanded by firms?; (ii) general secondary education or vocational/technical education?, which provides better skills? Under what conditions? (iii) How to connect schools to firms?

On-going achievements

Several surveys and studies of this research agenda will be finalized by 2009. These include: (i) A paper on youth labor market in LAC, using household surveys of seven LAC countries to analyze labor market indicators for different cohorts to understand the trends of employability problems of the youth; (ii) A paper and a survey on employment dynamics of young people, using the data from a survey to a sample of 4,500 young individuals in Chile to identify the main factors affecting the school-to-work transition of youth and their early labor market trajectories; (iii) A paper on the institutional organization of the education systems in seven LAC countries in terms of their technical/vocational education and labor market training for the youth, complemented by a study on the vocational courses and qualifications available in each of the five industries of the three countries covered by the survey on employer’s demands for skills; (iv) A paper on Firm’s training to workers in LAC, using existing industry data to understand firm’s training practices in the Region and to what extent the lack of skills is perceived as an obstacle to firms growth; and (v) A survey in three LAC countries and five industries to collect original hard data on employers’ demands for skills. These surveys will be complemented by some case studies.

Activities and methodological framework

This research agenda was organized in three main parts: employability of youth and its relationship with education indicators, education systems and skills production, and skills demand by the productive sector.

The first part attempts to document the employability problems of the youth in the Region. The second addresses the organization of the education systems (institutions and subsystems directly linked to vocational training and technical education) and on the skills (cognitive and non-cognitive) provided by the education systems in Latin America. Finally, the third part collects information on the skills demanded by employers offering good jobs in growing industries to workers with secondary or little post-secondary education.

Each of these parts will result in a chapter of a publication which will be completed and disseminated in 2010. During 2008 and 2009, intermediate products were developed as input for these chapters.

Specifically, the methodological approach for each intermediate product is as follows:

Youth labor market in LAC: Household surveys of seven countries in LAC will be analyzed to study labor market trajectories of comparable cohorts and transitions between different labor market status (using panel data, when available). The cohort analysis will include the description of the evolution of several labor market indicators (unemployment, employment, labor force participation, informality, and wages) and results will be compared to conclusions that result from cross section analysis. For the labor market transition analysis, young people will be classified according to the following states of labor market: out of the labor force, employed in the formal sector, employed in the informal sector and unemployed. The study will consider the transition of each individual between the different states of the labor market after one year. The analysis covers two periods of time, from May 1993 to May 1998 and from May 1998 to May 1999.

Employment dynamics of young people: Details of the sampling methodology and survey design of the studies were determined using the international experiences as references, which include the National Longitudinal Survey of Youth – 1997 (NLSY97) developed by the US Department of Labor, the Education Longitudinal Study 2002 (ELS:2002) developed by the US Department of Education, the British Cohort Study 2004 (BCS 2004) developed by the Centre for Longitudinal Studies at the University of London, and the Encuesta de Transición Educativo Formativa e Inserción Laboral (ETEFIL 2005) developed in Spain by the Ministry of Education and the Ministry of Labor and Social Issues. In addition, a survey developed by CEDLAS (Centro de Estudios Distributivos, Laborales y Sociales, at La Plata University) was considered as an input for this project). The sample includes 4,500 individuals and is representative of urban areas in Chile. The questionnaire includes innovative instruments to measure interpersonal and intellectual abilities of youth. The study will relate labor market dynamics of young people with different factors, including experience at school, family and community background and abilities.

Institutional organization of the Education Systems: This is a comparative study using interviews in Argentina, Brazil, Chile, Mexico and Colombia, and secondary sources of information in Dominican Republic and Peru. The comparative analysis has focused, among other aspects on: common patterns in the developing of labour training systems; main stakeholders; the links between the training and education systems with the productive sector; the financing of the labour training system; and some promising approaches aiming at improving the connection among schools, training and jobs in LAC. This comparative study will be complemented by an analysis of the main features of vocational courses and qualifications available for each of the five industries in three countries in which the employer’s demands for skills surveys will be covered (Argentina, Brazil (Sao Paulo), and Chile). The study will account for differences in the proportion of individuals with vocational qualifications between the samples of each industry in the three countries, as well as how vocational qualifications affect working practices.

Firm’s training to workers: The main source of information has been available data from the World Bank Enterprise Surveys, which will be complemented by information macroeconomic, financial, labor market and educational sectors for each country in order to carry out an international comparative analysis.

Employer’s demands for skills: The first input used in the design of this survey was the experience on research/surveys on employer’s training practices. The survey will be complemented through the development of case studies of sector/countries in order to deepen the findings from statistical instruments. The survey will be applied to five industries in three countries (Argentina, Brazil (Sao Paulo) and Chile) and will cover al least the following areas: products and services provided; technologies used by industries; industrial organization; employment organization; recruitment, training and external institutions; competitive and technological environment, regulatory structure; and details on employment and compensation patterns. The design of the questionnaire has benefited from industrial profiles from each of the five industries considered in for the survey.