Comprehensive programs that focus on skills can
reduce unemployment and upgrade skills in OECD countries
Reducing youth unemployment and generating more
and better youth employment opportunities are key policy challenges
worldwide. Active labor market programs for disadvantaged youth may be an
effective tool in such cases, but the results have often been disappointing
in Organisation for Economic Co-operation and Development (OECD) countries.
The key to a successful youth intervention program is comprehensiveness,
comprising multiple targeted components, including job-search assistance,
counseling, training, and placement services. Such programs can be
expensive, however, which underscores the need to focus on education policy
and earlier interventions in the education system.
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.
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.
Vouchers can create a market for training but
may lengthen participants’ unemployment duration
The objective of providing vocational training
for the unemployed is to increase their chances of re-employment and human
capital accumulation. In comparison to mandatory course assignment by case
workers, the awarding of vouchers increases recipients’ freedom to choose
between different courses and makes non-redemption a possibility. In
addition, vouchers may introduce market mechanisms between training
providers. However, empirical evidence suggests that voucher allocation
mechanisms prolong the unemployment duration of training participants. But,
after an initial period of deterioration, better long-term employment
opportunities are possible.
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.
Jobs require skills, but they also build skills
and create a demand for them
Skills are widely regarded as being necessary
for boosting productivity, stimulating innovation, and creating new jobs,
while skill mismatches are often cited as being responsible for a lack of
dynamism in the labor market. However, heavy investments in technical and
vocational training programs are seldom a “silver bullet.” Recent evidence
on skill building not only points to the core importance of foundational
skills (both cognitive and social) for success in the labor market, but also
emphasizes how jobs themselves can lead to learning and shape social
competencies that, in turn, ignite innovation and create more jobs.
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.