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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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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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Penalties may last ten years or more, especially
for high-educated youth and in rigid labor markets
The Great Recession that began in 2008–2009
dramatically increased youth unemployment. But did it have long-lasting,
adverse effects on the careers of youths? Are cohorts that graduate during a
recession doomed to fall permanently behind those that graduate at other
times? Are the impacts different for low- and high-educated individuals? If
recessions impose penalties that persist over time, then more government
outlays are justified to stabilize economic activity. Scientific evidence
from a variety of countries shows that rigid labor markets can reinforce the
persistence of these setbacks, which has important policy implications.
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On-the-job learning is more important for
workers’ human capital development than formal training
Although early human capital theory recognized
the relevance of workers’ experience, its focus was on education and formal
training. Recent studies find that much of the performance of newly hired
workers is driven by learning by doing or learning from peers or supervisors
in the workplace. Descriptive data show that workers learn a lot from the
various tasks they perform on the job. Informal learning at work seems to be
relevant for all age groups, although it drives more of the performance of
younger workers. Informal learning is far more important for workers’ human
capital development than formal training courses.
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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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Systems combining structured learning on the job
with classroom training can ease youth unemployment
Youth unemployment has increased in many
industrialized countries following the recent global recession. However,
this reflects not only the cyclical shock, but also the crucial role of
institutions in structuring the transition from school to work. Vocational
training, in particular in a dual form combining vocational schooling and
structured learning on-the-job, is often considered to be one of the most
important policy solutions in combating youth unemployment. The evidence
available supports this perception, but the institutional requirements of a
successful training system also have to be taken into account from a policy
perspective.
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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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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.
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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.
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