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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.
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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.
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Cognitive skills are more relevant in explaining earnings,
socio-emotional skills in determining labor supply and schooling
Common proxies, such as years of education, have been shown to
be ineffective at capturing cross-country differences in skills acquisition, as well as the
role they play in the labor market. A large body of research shows that direct measures of
skills, in particular cognitive and socio-emotional ones, provide more adequate estimations of
individuals’ differences in potential productive capacity than the quantity of education they
receive. Evidence shows that cognitive skills in particular are quite relevant to explain
wages, while socio-emotional skills are more associated with labor force and education
participation decisions.
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A financially literate workforce helps the
economy, but acquiring the needed skills can be costly
The level of financial literacy in developed
countries is low and contributes to growing wealth inequality. Benefits from
increasing the level of financial literacy include more effective saving for
retirement and better debt management. However, there are significant costs
in terms of time and money of acquiring financial literacy, which imply that
the net value of acquiring financial literacy is heterogeneous in the
population. This potentially makes designing effective interventions
difficult.
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Increasing the availability of high-quality job
opportunities can reduce recidivism among released prisoners
The majority of individuals released from prison
face limited employment opportunities and do not successfully reintegrate
into society. The inability to find stable work is often cited as a key
determinant of failed re-entry (or “recidivism”). However, empirical
evidence that demonstrates a causal impact of job opportunities on
recidivism is sparse. In fact, several randomized evaluations of
employment-focused programs find increases in employment but little impact
on recidivism. Recent evidence points to wages and job quality as important
determinants of recidivism among former prisoners.
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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’ wage-setting practices, garners comparatively little policy
attention.
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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.
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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.
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Moonlighting responds to economic needs, but can
generate new skills and careers
Multiple job-holding, or “moonlighting,” is an
important form of atypical employment in most economies. New forms of work,
driven by digitalization, may enable its future growth. However, many
misconceptions exist, including the belief that multiple job-holders are
low-skilled workers who moonlight primarily for financial reasons, or that
the practice increases during economic downturns. Recent literature
highlights the significant links between moonlighting and job mobility.
Multiple job-holding allows for the development of workers’ skills and spurs
entrepreneurship.
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Broadband infrastructure has differing effects
on workers of different skills
Broadband infrastructure enables fast access to
the internet, which, evidence suggests, has significant effects on economic
growth. However, labor market related issues have not received as much
consideration. These include quantifying employment effects of broadband
infrastructure roll-out and questions about who exactly are the winners and
losers in the labor market, and whether skills in information and
communication technologies (ICT) are reflected in labor market outcomes such
as wages. Understanding these complementary issues allows for policy
conclusions that go beyond simply encouraging the subsidization of broadband
internet infrastructure.
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