Better understanding of skills mismatch is essential to finding effective policy options
Evidence suggests that productivity would be much higher and unemployment much lower if the supply of and demand for skills were better matched. As a result, skills mismatch between workers (supply) and jobs (demand) commands the ongoing attention of policymakers in many countries. Policies intended to address the persistence of skills mismatch focus on the supply side of the issue by emphasizing worker education and training. However, the role of the demand side, that is, employers’ rigid skill requirements, garners comparatively little policy attention.
Cost–benefit surveys of employers help design
more effective training policies
Apprenticeship training programs typically last
several years and require substantial investments by training firms, largely
due to the associated labor costs for participants and instructors.
Nevertheless, apprentices also add significant value in the workplace. One
tool to measure the costs and benefits of training for firms is employer
surveys, which were first introduced in the 1970s in Germany. Such
cost–benefit surveys (CBS) help to better understand a firm's demand for
apprentices and to identify market failures. Therefore, CBS are an important
tool for designing effective training policies.
Job search training and occupational skills
training are both effective
Time plays an important role in both the design
and interpretation of evaluation studies of training programs. While the
start and duration of a training program are closely linked to the evolution
of job opportunities, the impact of training programs in the short and
longer term changes over time. Neglecting these “dynamics” could lead to an
unduly negative assessment of the effects of certain training schemes.
Therefore, a better understanding of the dynamic relationship between
different types of training and their respective labor market outcomes is
essential for a better design and interpretation of evaluation studies.
Training programs that meet the learning needs
of older workers can improve their employability
The labor market position of older workers is
cause for concern in many industrialized countries. Rapid population aging
is challenging pension systems. The recent economic crisis has forced many
older adults out of the workforce, into either pre-retirement or
non-employment. Encouraging people to work longer and fostering the
employability of older workers have become priorities for policymakers.
Training specifically designed for older workers might help attain these
goals, since it may refresh human capital and reduce the pay–productivity
gap. Training older workers might also benefit employers and society as a
Firm-sponsored training benefits both workers
and firms through higher wages, increased productivity and innovation
Workers participating in firm-sponsored training
receive higher wages as a result. But given that firms pay the majority of
costs for training, shouldn’t they also benefit? Empirical evidence shows
that this is in fact the case. Firm-sponsored training leads to higher
productivity levels and increased innovation, both of which benefit the
firm. Training can also be complementary to, and enhance, other types of
firm investment, particularly in physical capital, such as information and
communication technology (ICT), and in organizational capital, such as the
implementation of high-performance workplace practices.
Why spending on occupational skills can yield
economic returns to employers
Economists have long believed that firms will not
pay to develop occupational skills that workers could use in other, often
competing, firms. Researchers now recognize that firms that invest in
apprenticeship training generally reap good returns. Evidence indicates that
financial returns to firms vary. Some recoup their investment within the
apprenticeship period, while others see their investment pay off only after
accounting for reduced turnover, recruitment, and initial training costs.
Generally, the first year of apprenticeships involves significant costs, but
subsequently, the apprentice's contributions exceed his/her wages and
supervisory costs. Most participating firms view apprenticeships as offering
certainty that all workers have the same high level of expertise and
ensuring an adequate supply of well-trained workers to cover sudden
increases in demand and to fill leadership positions.
Young people experience worse labor market
outcomes than adults worldwide but the difference varies greatly
In Germany, young people are no worse off than
adults in the labor market, while in southern and eastern European
countries, they fare three to four times worse. In Anglo-Saxon countries,
both youth and adults fare better than elsewhere, but their unemployment
rates fluctuate more over the business cycle. The arrangements developed in
each country to help young people gain work experience explain the striking
differences in their outcomes. A better understanding of what drives these
differences in labor market performance of young workers is essential for
policies to be effective.
While mostly missing their primary objectives, adult
literacy programs can still improve key socio-economic outcomes
In addition to the traditional education system
targeting children and youth, one potentially important vehicle to improve
literacy and numeracy skills is adult literacy programs (ALPs). In many
developing countries, however, these programs do not seem to achieve these
hoped for, ex ante, objectives and have therefore received less attention,
if not been largely abandoned, in recent years. But, evidence shows that
ALPs do affect other important socio-economic outcomes such as health,
household income, and labor market participation by enhancing participants’
health knowledge and income-generating activities.
Secondary and higher education are windows of
opportunity for boosting students’ life skills
Life skills, sometimes referred to as
noncognitive skills or personality traits (e.g. conscientiousness or locus
of control—the belief to influence events and their outcomes), affect labor
market productivity. Policymakers and academics are thus exploring whether
such skills should be taught at the high school or college level. A small
portfolio of recent studies shows encouraging evidence that education could
strengthen life skills in adolescence. However, as no uniform approach
exists on which life skills are most important and how to best measure them,
many important questions must be answered before life skill development can
become an integral part of school curricula.